-----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, VvOQJdGvwkI4WK55iWBRIxsQ1/ShBDe9HLkWLg7Iyp/6NMyF4Xl3rBy8x7zkNADS 1KCxqflUCFPvGBxkD6a4Xg== 0000950128-04-001077.txt : 20041108 0000950128-04-001077.hdr.sgml : 20041108 20041108164356 ACCESSION NUMBER: 0000950128-04-001077 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040930 FILED AS OF DATE: 20041108 DATE AS OF CHANGE: 20041108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BAKER MICHAEL CORP CENTRAL INDEX KEY: 0000009263 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741] IRS NUMBER: 250927646 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06627 FILM NUMBER: 041126275 BUSINESS ADDRESS: STREET 1: AIRPORT OFFICE PARK BLDG 3 STREET 2: 420 ROUSER RD CITY: CORAOPOLIS STATE: PA ZIP: 15108 BUSINESS PHONE: 4122696300 MAIL ADDRESS: STREET 1: P O BOX 12259 CITY: PITTSBURGH STATE: PA ZIP: 15231-0259 FORMER COMPANY: FORMER CONFORMED NAME: EUTHENICS SYSTEMS CORP DATE OF NAME CHANGE: 19750527 FORMER COMPANY: FORMER CONFORMED NAME: BAKER MICHAEL JR INC DATE OF NAME CHANGE: 19720526 10-Q 1 j1008401e10vq.txt MICHAEL BAKER CORP. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004 Commission file number 1-6627 MICHAEL BAKER CORPORATION ------------------------- (Exact name of registrant as specified in its charter) PENNSYLVANIA 25-0927646 ------------ ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Airside Business Park, 100 Airside Drive, Moon Township, PA 15108 - ----------------------------------------------------------- ----- (Address of principal executive offices) (Zip Code) (412) 269-6300 -------------- (Registrant's telephone number, including area code) 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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of October 29, 2004: Common Stock 8,424,706 shares PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The unaudited condensed consolidated financial statements have been prepared by Michael Baker Corporation ("the Company"), pursuant to the rules and regulations of the Securities and Exchange Commission. Although certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, the Company believes that the disclosures are adequate to make the information presented not misleading. The statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the periods presented. All such adjustments are of a normal and recurring nature unless specified otherwise. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's latest Annual Report on Form 10-K. This Quarterly Report on Form 10-Q, particularly the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section in Part I, contains forward-looking statements concerning future operations and performance of the Company. Forward-looking statements are subject to market, operating and economic risks and uncertainties that may cause the Company's actual results in future periods to be materially different from any future performance suggested herein. Factors that may cause such differences include, among others: increased competition; increased costs; changes in general market conditions; changes in industry trends; changes in the regulatory environment; changes in the Company's relationship and/or contracts with FEMA; changes in anticipated levels of government spending on infrastructure, including TEA-21; changes in loan relationships or sources of financing; changes in management; changes in information systems; and costs to comply with the requirements of the Sarbanes-Oxley Act of 2002. Such forward-looking statements are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. -1- MICHAEL BAKER CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the three months ended -------------------------------- SEPT. 30, 2004 Sept. 30, 2003 - ------------------------------------------------------------------------------------------------------ (In thousands, except per share amounts) Total contract revenues $ 140,652 $ 106,338 Cost of work performed 118,666 90,056 - ------------------------------------------------------------------------------------------------------ Gross profit 21,986 16,282 Selling, general and administrative expenses 15,992 13,605 - ------------------------------------------------------------------------------------------------------ Income from operations 5,994 2,677 Other income/(expense): Interest income 18 2 Interest expense (19) (270) Other, net (24) 99 - ------------------------------------------------------------------------------------------------------ Income before income taxes 5,969 2,508 Provision for income taxes 2,686 1,303 - ------------------------------------------------------------------------------------------------------ NET INCOME 3,283 1,205 Other comprehensive income/(loss) - Foreign currency translation adjustments, net of tax (19) (75) - ------------------------------------------------------------------------------------------------------ COMPREHENSIVE INCOME $ 3,264 $ 1,130 ====================================================================================================== BASIC NET INCOME PER SHARE $ 0.39 $ 0.14 DILUTED NET INCOME PER SHARE $ 0.38 $ 0.14 ======================================================================================================
The accompanying notes are an integral part of the condensed consolidated financial statements. -2- MICHAEL BAKER CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the nine months ended -------------------------------- SEPT. 30, 2004 Sept. 30, 2003 - ------------------------------------------------------------------------------------------------------ (In thousands, except per share amounts) Total contract revenues $ 396,259 $ 310,436 Cost of work performed 329,342 265,689 - ------------------------------------------------------------------------------------------------------ Gross profit 66,917 44,747 Selling, general and administrative expenses 49,405 41,031 - ------------------------------------------------------------------------------------------------------ Income from operations 17,512 3,716 Other income/(expense): Interest income 52 17 Interest expense (189) (584) Other, net 782 (698) - ------------------------------------------------------------------------------------------------------ Income before income taxes 18,157 2,451 Provision for income taxes 8,171 1,275 - ------------------------------------------------------------------------------------------------------ NET INCOME 9,986 1,176 Other comprehensive income/(loss) - Foreign currency translation adjustments, net of tax (9) (39) - ------------------------------------------------------------------------------------------------------ COMPREHENSIVE INCOME $ 9,977 $ 1,137 ====================================================================================================== BASIC NET INCOME PER SHARE $ 1.19 $ 0.14 DILUTED NET INCOME PER SHARE $ 1.18 $ 0.14 ======================================================================================================
The accompanying notes are an integral part of the condensed consolidated financial statements. -3- MICHAEL BAKER CORPORATION CONSOLIDATED BALANCE SHEETS
SEPT. 30, 2004 (UNAUDITED) Dec. 31, 2003 - ------------------------------------------------------------------------------------------------------------ (In thousands) ASSETS CURRENT ASSETS Cash and cash equivalents $ 11,396 $ 9,274 Receivables, net 84,393 74,940 Cost of contracts in progress and estimated earnings, less billings 61,295 51,620 Prepaid expenses and other 10,655 9,899 - ------------------------------------------------------------------------------------------------------------ Total current assets 167,739 145,733 - ------------------------------------------------------------------------------------------------------------ PROPERTY, PLANT AND EQUIPMENT, NET 17,063 17,402 OTHER ASSETS Goodwill and other intangible assets, net 9,019 9,233 Other assets 7,961 7,205 - ------------------------------------------------------------------------------------------------------------ Total other assets 16,980 16,438 - ------------------------------------------------------------------------------------------------------------ TOTAL ASSETS $ 201,782 $ 179,573 ============================================================================================================ LIABILITIES AND SHAREHOLDERS' INVESTMENT CURRENT LIABILITIES Accounts payable $ 40,662 $ 28,279 Accrued employee compensation 29,616 15,394 Accrued insurance 9,648 10,224 Other accrued expenses 22,427 20,464 Excess of billings on contracts in progress over cost and estimated earnings 12,829 16,611 - ------------------------------------------------------------------------------------------------------------ Total current liabilities 115,182 90,972 - ------------------------------------------------------------------------------------------------------------ OTHER LIABILITIES Long-term debt - 13,481 Other liabilities 2,987 2,539 Commitments and contingencies - - - ------------------------------------------------------------------------------------------------------------ Total liabilities 118,169 106,992 - ------------------------------------------------------------------------------------------------------------ SHAREHOLDERS' INVESTMENT Common Stock, par value $1, authorized 44,000,000 shares, issued 8,815,961 and 8,711,235 shares at 9/30/04 and 12/31/03, respectively 8,816 8,711 Additional paid-in-capital 39,298 38,298 Retained earnings 39,463 29,477 Accumulated other comprehensive loss (929) (912) Unearned compensation expense (82) (40) Less - 391,237 shares of Common Stock in treasury, at cost, at 9/30/04 and 12/31/03 (2,953) (2,953) - ------------------------------------------------------------------------------------------------------------ Total shareholders' investment 83,613 72,581 - ------------------------------------------------------------------------------------------------------------ TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 201,782 $ 179,573 ============================================================================================================
The accompanying notes are an integral part of the condensed consolidated financial statements. -4- MICHAEL BAKER CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the nine months ended --------------------------------- SEPT. 30, 2004 Sept. 30, 2003 - ------------------------------------------------------------------------------------------------------------- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 9,986 $ 1,176 Adjustments to reconcile net income to net cash provided by/(used in) operating activities: Depreciation and amortization 3,385 3,727 Impairment of Energy Virtual Partners - 800 Changes in assets and liabilities: Increase in receivables and contracts in progress (22,919) (23,513) Increase in accounts payable and accrued expenses 28,450 1,903 Increase in other net assets (1,397) (1,236) - ------------------------------------------------------------------------------------------------------------- Total adjustments 7,519 (18,319) - ------------------------------------------------------------------------------------------------------------- Net cash provided by/(used in) operating activities 17,505 (17,143) - ------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant and equipment (2,835) (3,900) - ------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (2,835) (3,900) - ------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES (Repayments of)/proceeds from long-term debt (13,481) 20,461 Payments to acquire treasury stock - (690) Proceeds from the exercise of stock options 933 49 - ------------------------------------------------------------------------------------------------------------- Net cash (used in)/provided by financing activities (12,548) 19,820 - ------------------------------------------------------------------------------------------------------------- Net increase/(decrease) in cash and cash equivalents 2,122 (1,223) Cash and cash equivalents, beginning of year 9,274 9,885 - ------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 11,396 $ 8,662 ============================================================================================================= SUPPLEMENTAL DISCLOSURES OF CASH FLOW DATA Interest paid $ 220 $ 571 Income taxes paid $ 1,331 $ 3,921 =============================================================================================================
The accompanying notes are an integral part of the condensed consolidated financial statements. -5- MICHAEL BAKER CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE PERIODS ENDED SEPTEMBER 30, 2004 (UNAUDITED) NOTE 1 - EARNINGS PER SHARE The following table summarizes the Company's weighted average shares outstanding for the three and nine-month periods ended September 30, 2004 and 2003. The additional shares included in diluted shares outstanding are entirely attributable to stock options.
For the three months ended For the nine months ended -------------------------- ---------------------------- Weighted average shares outstanding 2004 2003 2004 2003 - -------------------------------------------------------------------------------------------------------------------- Basic 8,414,238 8,319,998 8,379,174 8,325,858 Diluted 8,541,332 8,391,466 8,495,716 8,381,883 - --------------------------------------------------------------------------------------------------------------------
As of September 30, 2004 and 2003, the Company had 189,096 and 321,806 stock options outstanding, respectively, which were not included in the computations of diluted shares outstanding for the respective nine-month periods because the option exercise prices were greater than the average market prices of the common shares. Such options could potentially dilute basic earnings per share in future periods. NOTE 2 - CAPITAL STOCK During 1996, the Board of Directors authorized the repurchase of up to 500,000 shares of the Company's Common Stock in the open market. In the first quarter of 2003, the Company reactivated this share repurchase program and repurchased 80,400 treasury shares at market prices ranging from $7.90 to $8.81 per share, for a total price of $690,000. As of September 30, 2004, treasury shares totaling 414,689 had been repurchased under this program. In February 2003, the Board of Directors authorized the Company to repurchase up to 500,000 additional shares. As of September 30, 2004, no shares had been repurchased under the February 2003 authorization. The Company intends to use its treasury shares to fund future employer contributions to its 401(k) benefit plan and/or in connection with future business acquisitions. NOTE 3 - BUSINESS SEGMENT INFORMATION The Company's business segments reflect how management makes resource decisions and assesses its performance. The Company has the following three reportable segments: - - The Engineering segment provides a variety of design and related consulting services. Such services include program management, design-build, construction management, consulting, planning, surveying, mapping, geographic information systems, architectural and interior design, construction inspection, constructability reviews, software development, site assessment and restoration, strategic regulatory analysis, regulatory compliance, and advanced management systems. - - The Energy segment provides a full range of Total Asset Management services for operating energy production facilities worldwide. These services range from complete outsourcing solutions to specific services such as training, personnel recruitment, pre-operations engineering, maintenance management systems, field operations and maintenance, procurement, and supply chain management. Many of these service offerings are enhanced by the utilization of this segment's Managed Services (which includes services formerly known as OPCO(R)) operating model as a service delivery method. - - The Non-Core segment includes activity associated with the former buildings and transportation construction operations that are being wound down. -6- The following table reflects the required disclosures for the Company's reportable segments (in millions): TOTAL CONTRACT REVENUES/INCOME FROM OPERATIONS
For the three months ended For the nine months ended -------------------------------- -------------------------------- SEPT. 30, 2004 Sept. 30, 2003 SEPT. 30, 2004 Sept. 30, 2003 - -------------------------------------------------------------------------------------------------------------------- ENGINEERING Revenue $ 86.0 $ 62.6 $ 242.0 $ 182.9 Income from operations before Corporate overhead 8.3 4.6 23.2 10.9 Less: Corporate overhead (2.9) (2.8) (8.5) (8.7) - -------------------------------------------------------------------------------------------------------------------- Income from operations 5.4 1.8 14.7 2.2 - -------------------------------------------------------------------------------------------------------------------- ENERGY Revenue 54.7 43.7 154.2 127.5 Income from operations before Corporate overhead 2.4 1.9 6.9 5.5 Less: Corporate overhead (1.2) (0.9) (3.5) (3.1) - -------------------------------------------------------------------------------------------------------------------- Income from operations 1.2 1.0 3.4 2.4 - -------------------------------------------------------------------------------------------------------------------- NON-CORE Revenue - - - - Income from operations before Corporate overhead - 0.1 0.2 0.3 Less: Corporate overhead - - - - - -------------------------------------------------------------------------------------------------------------------- Income from operations - 0.1 0.2 0.3 - -------------------------------------------------------------------------------------------------------------------- TOTAL REPORTABLE SEGMENTS Revenues 140.7 106.3 396.2 310.4 Income from operations before Corporate overhead 10.7 6.6 30.3 16.7 Less: Corporate overhead (4.1) (3.7) (12.0) (11.8) - -------------------------------------------------------------------------------------------------------------------- Income from operations 6.6 2.9 18.3 4.9 - -------------------------------------------------------------------------------------------------------------------- Other Corporate/Insurance expense (0.6) (0.2) (0.8) (1.2) - -------------------------------------------------------------------------------------------------------------------- TOTAL COMPANY - INCOME FROM OPERATIONS $ 6.0 $ 2.7 $ 17.5 $ 3.7 ====================================================================================================================
-7-
SEPT. 30, 2004 Dec. 31, 2003 - ------------------------------------------------------------------------------- Segment assets: Engineering $ 107.1 $ 99.9 Energy 80.0 63.9 Non-Core 0.9 0.9 - ------------------------------------------------------------------------------- Subtotal - segments 188.0 164.7 Corporate/Insurance 13.8 14.9 - ------------------------------------------------------------------------------- Total $ 201.8 $ 179.6 ===============================================================================
NOTE 4 - LONG-TERM DEBT AND BORROWING ARRANGEMENTS During September 2004, the Company amended and restated its unsecured credit agreement ("the Amended Agreement") with a consortium of financial institutions. The Amended Agreement provides for an increased commitment of $60 million through September 17, 2008. The commitment includes the sum of the principal amount of revolving credit loans outstanding and the aggregate face value of outstanding letters of credit. As of September 30, 2004, there were no borrowings outstanding under the Amended Agreement, however, outstanding letters of credit totaled $7.0 million as of this date. All other terms and conditions associated with the Amended Agreement remain essentially unchanged from the Company's previous credit agreement. NOTE 5 - CONTINGENCIES Insurance coverage is obtained for catastrophic exposures as well as those risks required to be insured by law or contract. The Company requires its insurers to meet certain minimum financial ratings at the time the coverages are placed; however, insurance recoveries remain subject to the risk that the insurer will be financially able to pay the claims as they arise. The Company is insured with respect to its workers' compensation and general liability exposures subject to deductibles or self-insured retentions. Loss provisions for these exposures are recorded based upon the Company's estimates of the aggregate liability for claims incurred. Such estimates utilize certain actuarial assumptions followed in the insurance industry. The Company is self-insured for its primary layer of professional liability insurance through a wholly-owned captive insurance subsidiary. The secondary layer of the professional liability insurance continues to be provided, consistent with industry practice, under a "claims-made" insurance policy placed with an independent insurance company. Under claims-made policies, coverage must be in effect when a claim is made. This insurance is subject to standard exclusions. The Company's professional liability insurance coverage had been placed on a claims-made basis with Reliance Insurance Group ("Reliance") for the period July 1, 1994 through June 30, 1999. In October 2001, the Pennsylvania Insurance Commissioner placed Reliance into liquidation. The Company remains uncertain at this time what effect this action will have on any claim the Company or its subsidiaries may have for insurance coverage under policies issued by Reliance with respect to past years. A wholly-owned subsidiary of the Company was subject to one substantial claim which fell within the Reliance coverage period. This claim was settled in the amount of $2.5 million, and payment was made by the Company in April 2003. Due to the liquidation of Reliance, the Company is currently uncertain what amounts paid to settle this claim will be recoverable under the insurance policy with Reliance. The Company is pursuing a claim in the Reliance liquidation and believes that some recovery will result from the liquidation, but the amount of such recovery -8- cannot currently be estimated. The Company had no related receivables recorded from Reliance as of September 30, 2004. In July 2001, the Company announced that it had become aware that certain activities related to the operations of a 53% owned Nigerian subsidiary engaged in energy-related operations were the subject of an inquiry by the U.S. Department of Justice. The Company acquired the Nigerian subsidiary as part of its acquisition of the Overseas Technical Services companies in 1993. The inquiry appeared to be focused upon payments made to certain individuals in connection with the subsidiary's operations in Nigeria as they related to potential violations of the Foreign Corrupt Practices Act and other relevant statutes. There has been no activity in this matter since 2002. At this time, the Company does not expect that any remaining costs associated with this matter will have a material adverse effect on its consolidated financial statements. The Company previously disclosed its awareness of an unasserted claim to recover alleged preference payments made to the Company within 90 days prior to a customer's 2002 Chapter 11 bankruptcy filing. Such claims are not unusual in the bankruptcy context. During the third quarter of 2004, this preference claim was formally asserted against the Company. Subsequently, in late October 2004, an agreement was reached to dismiss the preference payment action against the Company in exchange for the Company's vote in favor of the current plan of reorganization and the Company waiving its entitlement as an unsecured creditor in the bankruptcy proceeding. This agreement is expected to be documented and formalized during the fourth quarter of 2004. No amounts pertaining to the preference claim were previously accrued, and neither this claim nor its settlement had any effect on the Company's results of operations for the three or nine-month periods ended September 30, 2004. The Company has been named as a defendant or co-defendant in other legal proceedings wherein substantial damages are claimed. Such proceedings are not uncommon to the Company's business. After consultations with counsel, management believes that the Company has recognized adequate provisions for probable and reasonably estimable liabilities associated with these proceedings, and that their ultimate resolutions will not have a material adverse effect on the consolidated financial statements of the Company. At September 30, 2004, the Company had certain guarantees and indemnifications outstanding which could result in future payments to third parties. These guarantees generally result from the conduct of the Company's business in the normal course. The Company's outstanding guarantees were as follows at September 30, 2004:
Maximum Related liability undiscounted balance recorded (Dollars in millions) future payments at 9/30/04 - ------------------------------------------------------------------------------------------ Standby letters of credit: Insurance related $ 6.8 $ 6.8 Other 0.2 - Sale of certain construction assets Unlimited - - ------------------------------------------------------------------------------------------
The Company's banks issue standby letters of credit ("LOCs") on behalf of the Company under the Amended Agreement discussed in Note 4 above. As of September 30, 2004, most of these LOCs were issued to an insurance company to serve as collateral for payments the insurer is required to make under certain of the Company's self-insurance programs. These LOCs may be drawn upon in the event that the Company does not reimburse the insurance company for claims payments made on behalf of the Company. Such LOCs renew automatically on an annual basis unless either the LOCs are returned to the bank by the beneficiary or the Company's banks elect not to renew them. -9- During 2000, the Company sold certain assets associated with its former heavy & highway construction business to A&L, Inc. This sale agreement provided indemnifications to the buyer for breaches of certain obligations by the Company. There was no dollar limit on these indemnifications, and the terms of the indemnifications vary but will ultimately be governed by the statutes of limitations. In October 2003, A&L filed a lawsuit against the Company and a subsidiary alleging misrepresentation and breach of warranty in connection with the asset sale. The Company believes that A&L's claims are without merit and is vigorously contesting this lawsuit. NOTE 6 - STOCK-BASED COMPENSATION During the first quarter of 2003, the Company adopted the prospective method of applying Statement of Financial Accounting Standards No. ("SFAS") 148, "Accounting for Stock-Based Compensation -- Transition and Disclosure." Under the prospective method, the Company began expensing the fair value of all stock options granted, modified or settled effective January 1, 2003. Prior to January 1, 2003, the Company utilized the intrinsic value method of accounting for stock-based compensation, as originally promulgated by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and as permitted under SFAS 123, "Accounting for Stock-Based Compensation." Accordingly, no compensation cost was recognized for stock options granted prior to January 1, 2003. If compensation costs for the Company's stock incentive plans had been determined based on the fair value at the grant dates for awards under those plans, consistent with the method prescribed by SFAS 123, the Company's pro forma net income and net income per share amounts would have been as follows:
For the three months ended For the nine months ended -------------------------------- -------------------------------- (In thousands) SEPT. 30, 2004 Sept. 30, 2003 SEPT. 30, 2004 Sept. 30, 2003 - -------------------------------------------------------------------------------------------------------------------- Net income, as reported $ 3,283 $ 1,205 $ 9,986 $ 1,176 Add: Stock-based employee compensation expense included in reported net income, net of related tax effects 10 4 69 34 Deduct: Total stock-based employee compensation expense determined under fair value method, net of related tax effects (30) (47) (144) (168) - -------------------------------------------------------------------------------------------------------------------- Pro forma net income $ 3,263 $ 1,162 $ 9,911 $ 1,042 ====================================================================================================================
For the three months ended For the nine months ended -------------------------------- -------------------------------- SEPT. 30, 2004 Sept. 30, 2003 SEPT. 30, 2004 Sept. 30, 2003 - -------------------------------------------------------------------------------------------------------------------- Reported earnings per share: Basic $ 0.39 $ 0.14 $ 1.19 $ 0.14 Diluted 0.38 0.14 1.18 0.14 Pro forma earnings per share: Basic 0.39 0.14 1.18 0.12 Diluted $ 0.38 $ 0.14 $ 1.17 $ 0.12 ====================================================================================================================
-10- NOTE 7 - GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill and other intangible assets consist of the following (in thousands):
SEPT. 30, 2004 Dec. 31, 2003 - ------------------------------------------------------------------------------------------------- Goodwill: Engineering $ 1,006 $ 1,006 Energy 7,465 7,465 - ------------------------------------------------------------------------------------------------- Total goodwill 8,471 8,471 - ------------------------------------------------------------------------------------------------- Other intangible assets, net of accumulated amortization of $1,452 and $1,238, respectively 548 762 - ------------------------------------------------------------------------------------------------- Goodwill and other intangible assets, net $ 9,019 $ 9,233 =================================================================================================
Under SFAS 142, "Goodwill and Intangible Assets," the Company's goodwill balance is not being amortized and goodwill impairment tests are being performed at least annually. The Company completed its most recent annual impairment review during the second quarter of 2004, and no impairment charge was required. The Company's other intangible assets balance solely comprises a non-compete agreement from the Company's 1999 purchase of an energy business. Future amortization expense on the other intangible assets balance is currently estimated to be $286,000 for the years ending December 31, 2004 and 2005, with the remaining balance of $190,000 being amortized in 2006. NOTE 8 - NEW ACCOUNTING PRONOUNCEMENTS In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"), which was subsequently revised in December 2003 ("FIN 46R"). FIN 46 clarifies Accounting Research Bulletin No. 51, "Consolidated Financial Statements," and requires that unconsolidated variable interest entities be consolidated by their primary beneficiaries. The primary beneficiary is the party that absorbs a majority of the entity's expected losses or returns as a result of holding the variable interest. The requirements of FIN 46 were required to be applied immediately to variable interest entities in which an enterprise obtains an interest, or which an enterprise creates, after January 31, 2003. For variable interest entities considered to be special purpose entities (SPEs) in which an enterprise holds a variable interest that it acquired prior to February 1, 2003, FIN 46 is required to be adopted for the first fiscal year or interim period ending after December 15, 2003. For non-SPE variable interest entities acquired prior to February 1, 2003, FIN 46 must be adopted no later than the first fiscal year or interim period ending after March 15, 2004. The Company adopted this interpretation during the first quarter of 2004; such adoption had no impact on the Company's financial statements. NOTE 9 - RECLASSIFICATIONS Certain reclassifications have been made to the prior year financial statements amounts in order to conform to the current year presentation. -11- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS BUSINESS OVERVIEW The Company provides engineering and energy expertise for public and private sector clients worldwide. The firm's primary services include engineering design for the transportation and civil infrastructure markets, operation and maintenance of oil and gas production facilities, architectural and environmental services, and construction management services for buildings and transportation projects. The Company views its short and long-term liquidity as being dependent upon its results of operations, changes in working capital and its borrowing capacity. BUSINESS ENVIRONMENT The Company's operations are affected by appropriations of public funds for infrastructure and other government-funded projects, capital spending levels in the private sector, and the demand for the Company's services in the engineering and energy markets. Additional external factors such as price fluctuations in the energy industry could affect the Company. The Federal government's TEA-21 legislation has made significant transportation infrastructure funding available to the various state agencies since its approval in 1998. Prior to the expiration of TEA-21 on September 30, 2003, the U.S. Congress and President Bush signed a five-month extension of the program at current funding levels. This initial extension expired on February 29, 2004 and has since been extended five times at current funding levels. The most recent extension occurred on September 30, 2004 and lasts through the end of May 2005 at the same previously extended funding levels. During the current extension period, a long-term reauthorization of the original TEA-21 program is expected to receive significant Congressional attention. Prior to the extensions, certain state agencies were limited in their abilities to apply for Federal transportation funding during 2003, as they were unable to commit the required matching funds due to budget constraints. Although further delays in the reauthorization of TEA-21 could impact the Company's transportation design business activity for 2005 and beyond, the Company is currently seeing limited funding of new transportation projects. For example, the Company was recently selected by the Kentucky Transportation Cabinet to negotiate a multi-million dollar, multi-year contract to design a new bridge over the Ohio River connecting Louisville, Kentucky and Jeffersonville, Indiana. From 2002 through the third quarter of 2004, the Company has observed increased Federal spending activity on Departments of Defense and Homeland Security activities, including the Federal Emergency Management Agency (FEMA). To mitigate the effect of the state transportation budget constraints on the Company's business, management has focused more marketing and sales activity on these agencies of the Federal government. Additional government spending in these areas, or on transportation infrastructure, could result in profitability and liquidity improvements for the Company. Significant contractions in any of these areas could unfavorably impact the Company's profitability and liquidity. In March 2004, the Company announced that it had been awarded a five-year contract with FEMA for up to $750 million to serve as the Program Manager to develop, plan, manage, implement, and monitor the Multi-Hazard Flood Map Modernization Program for flood hazard mitigation across the United States and its territories. Approximately $713 million of this contract value was included in the Company's backlog as of September 30, 2004. In addition, during the first nine months of 2004, the Company was selected for several indefinite delivery/indefinite quantity task order contracts by the U.S. Army Corps of Engineers and U.S. Air Force. During the first nine months of 2004, the Company was also selected for several contracts with the Mineral Management Service, agencies within the U.S. Departments of Transportation and Homeland Security, -12- the Department of Energy, and the Federal Bureau of Investigation. The Company's Energy business benefited significantly in 2001 and 2002 from the adoption of its Managed Services (which includes services formerly known as OPCO(R)) business model by several oil and gas producers in the Gulf of Mexico. Energy services provided via this innovative model generated higher margins than the Company's traditional service delivery methods. During the second half of 2002, many of the properties serviced under this model were sold by their owners, and while the Company continues to provide operations and maintenance services to the properties' new owners, such services reflect lower margin manpower and logistics work. Presently, there is uncertainty in the oil and gas marketplace regarding capital investment and outsourcing decisions in the Gulf of Mexico, the Company's primary market for its Energy business. As a result, the Company has continued to provide manpower services to its clients in this region. During the third quarter of 2004, however, the Company executed a long-term, multi-million dollar Managed Services contract with Anglo-Suisse Offshore Partners, LLC ("ASOP") to operate, maintain and optimize the performance of ASOP's offshore oil and gas producing properties in the Gulf. The Company has also expanded its Managed Services offerings to onshore U.S. oil and gas producers, as demonstrated by the two four-year contracts totaling $144 million received from Huber Energy during 2003. In addition, the Company has been able to increase its penetration into the deepwater Gulf of Mexico and international markets, where oil and gas producers are currently investing significant amounts of capital for new projects. After giving effect to the foregoing, management believes that the combination of cash generated from operations and its existing credit facility will be sufficient to meet its operating and capital expenditure requirements for at least the next year. RESULTS OF OPERATIONS The following table reflects a summary of the Company's operating results (excluding intercompany transactions) for ongoing operations and non-core businesses for the periods ended September 30, 2004 and 2003 (dollars in millions): TOTAL CONTRACT REVENUES/INCOME FROM OPERATIONS
For the three months ended For the nine months ended --------------------------------- -------------------------------- SEPT. 30, 2004 Sept. 30, 2003 SEPT. 30, 2004 Sept. 30, 2003 - ------------------------------------------------------------------------------------------------------------- ENGINEERING Revenues $ 86.0 $ 62.6 $ 242.0 $ 182.9 Income from operations before Corporate overhead 8.3 4.6 23.2 10.9 Percentage of Eng. revenues 9.7% 7.3% 9.6% 6.0% Less: Corporate overhead (2.9) (2.8) (8.5) (8.7) Percentage of Eng. revenues (3.4)% (4.5)% (3.5)% (4.8)% - ------------------------------------------------------------------------------------------------------------- Income from operations 5.4 1.8 14.7 2.2 Percentage of Eng. revenues 6.3% 2.9% 6.1% 1.2% - -------------------------------------------------------------------------------------------------------------
-13-
For the three months ended For the nine months ended --------------------------------- -------------------------------- SEPT. 30, 2004 Sept. 30, 2003 SEPT. 30, 2004 Sept. 30, 2003 - ------------------------------------------------------------------------------------------------------------- ENERGY Revenues 54.7 43.7 154.2 127.5 Income from operations before Corporate overhead 2.4 1.9 6.9 5.5 Percentage of Energy revenues 4.4% 4.3% 4.5% 4.3% Less: Corporate overhead (1.2) (0.9) (3.5) (3.1) Percentage of Energy revenues (2.2)% (2.1)% (2.3)% (2.4)% - ------------------------------------------------------------------------------------------------------------- Income from operations 1.2 1.0 3.4 2.4 Percentage of Energy revenues 2.2% 2.3% 2.2% 1.9% - ------------------------------------------------------------------------------------------------------------- NON-CORE* Revenues - - - - Income/(loss) from operations before Corporate overhead - (0.1) 0.2 0.3 Less: Corporate overhead - - - - - ------------------------------------------------------------------------------------------------------------- Income/(loss) from operations - (0.1) 0.2 0.3 - ------------------------------------------------------------------------------------------------------------- TOTAL REPORTABLE SEGMENTS Revenues 140.7 106.3 396.2 310.4 Income from operations before Corporate overhead 10.7 6.6 30.3 16.7 Percentage of total revenues 7.6% 6.2% 7.6% 5.4% Less: Corporate overhead (4.1) (3.7) (12.0) (11.8) Percentage of total revenues (2.9)% (3.5)% (3.0)% (3.8)% - ------------------------------------------------------------------------------------------------------------- Income from operations 6.6 2.9 18.3 4.9 Percentage of total revenues 4.7% 2.7% 4.6% 1.6% - ------------------------------------------------------------------------------------------------------------- Other Corporate/Insurance expense (0.6) (0.2) (0.8) (1.2) - ------------------------------------------------------------------------------------------------------------- TOTAL COMPANY - INCOME FROM OPERATIONS $ 6.0 $ 2.7 $ 17.5 $ 3.7 Percentage of total revenues 4.3% 2.5% 4.4% 1.2% =============================================================================================================
* The Non-Core segment includes activity associated with the former buildings and transportation construction operations that are being wound down. TOTAL CONTRACT REVENUES Total contract revenues increased 32% in the third quarter of 2004 relative to the third quarter of 2003. Engineering revenues for the third quarter of 2004 increased 37% from the third quarter of 2003. Engineering's revenues were positively impacted by the Company's above mentioned map modernization program management project with FEMA, which commenced near the end of the first quarter of 2004. Also positively impacting Engineering revenues for the third quarter of 2004 were improved labor utilization rates over the third quarter of 2003 as a result of new work added since 2003. These labor utilization rates have a direct impact on revenues. By contrast, Engineering's labor utilization for the third quarter of 2003 was lower as a result of a slow down in its private sector contract activity. In the Energy segment, revenues for the third quarter of 2004 increased 25% over the third quarter of 2003. This increase is primarily the result of the two -14- onshore Managed Services contracts that commenced during 2003, as well as the addition of several new overseas contracts and additions to existing contracts that occurred during 2003 and 2004. Revenues from Managed Services contracts composed 21% and 10% of Baker Energy's total contract revenues for the third quarters of 2004 and 2003, respectively. The Company's Non-Core segment posted no revenues for the third quarters of 2004 or 2003. For the first nine months of 2004, total contract revenues increased 28% over the corresponding period in 2003. In the Engineering segment, revenues increased 32% in the first nine months of 2004 as compared to the first nine months of 2003. Again, the increase in revenues over the first nine months of 2003 reflects the addition of the Company's map modernization program management project with FEMA and improved labor utilization rates over the first nine months of 2003. Engineering's labor utilization rates were lower during the first nine months of 2003 due to delays in the commencement of certain public sector projects due to state budget constraints, a slow down in its private sector contract activity and the January 2003 relocation of the Company's largest Engineering office to Moon Township, PA. In the Energy segment, revenues for the first nine months of 2004 increased 21% over the first nine months of 2003. Again, this increase is primarily the result of the two new onshore Managed Services contracts, and the additional new overseas contracts and additions to existing contracts that occurred during 2003 and 2004. Revenues from Managed Services contracts composed 18% and 5% of Baker Energy's total contract revenues for the first nine months of 2004 and 2003, respectively. The Company's Non-Core segment posted no revenues for the first nine months of 2004 or 2003. GROSS PROFIT Gross profit expressed as a percentage of revenues increased to 15.6% for the third quarter of 2004 from 15.3% in the third quarter of 2003. Overall, the Company's third quarter 2004 gross profit expressed as a percentage of revenues benefited from cost reduction measures implemented by management relative to the Company's medical and 401(k) retirement benefit plans. The Engineering segment's gross profit percentage increased to 19.1% in the third quarter of 2004 from 18.5% in the third quarter of 2003. This increase is primarily attributable to the increase in labor utilization rates as compared to the third quarter of 2003 and the cost reduction measures discussed above. The Energy segment's gross profit percentage increased slightly to 11.3% in the third quarter of 2004 from 11.0% in the third quarter of 2003. This 2004 increase in gross profit as a percentage of revenues is the direct result of the performance of the previously mentioned two onshore Managed Services contracts and performance-based incentive bonuses totaling approximately $0.3 million earned during the third quarter of 2004. Also benefiting Energy's gross profit margin were the previously mentioned cost reduction measures put in place by management at the beginning of 2004 and higher margins on international projects for the third quarter of 2004, as partially offset by higher insurance costs in the third quarter of 2004. Energy's Managed Services business posted gross profit of 5.2% for the third quarter of 2004 versus 1.2% in the third quarter of 2003. The Non-Core segment's gross profit was negligible in the third quarters of 2004 and 2003. For the first nine months of 2004, gross profit expressed as a percentage of revenues increased to 16.9% from 14.4% in 2003. As stated in the previous paragraph, the Company's 2004 gross profit expressed as a percentage of revenues benefited from cost reduction measures implemented by management relative to the Company's medical and 401(k) retirement benefit plans. The Engineering segment's gross profit percentage increased to 20.3% in the first nine months of 2004 from 17.4% in the first nine months of 2003. Again, the Engineering segment benefited from an increase in labor utilization rates as compared to the first nine months of 2003 and the aforementioned cost reduction measures. The Energy segment's gross profit percentage increased to 11.9% in the first nine months of 2004 from 10.9% in the first nine months of 2003. This increase in gross profit as a percentage of revenues is the direct result of the previously mentioned performance of the Managed Services contracts, cost reduction measures implemented by management, and the achievement of -15- the incentive bonuses totaling $0.9 million, as offset by the effect of a reserve related to a customer billing rate dispute in the first quarter of 2004. Energy's Managed Services business posted gross profit of 6.4% for the first nine months of 2004 versus a loss in the first nine months of 2003. In the Non-Core segment, gross profit was $0.2 million and $0.3 million for the nine-month periods of 2004 and 2003, respectively. These favorable results were primarily attributable to favorable developments in certain casualty insurance claims related to the Company's former construction operations during both nine-month periods. The 2003 favorable developments were partially offset by charges associated with the settlement of a construction-related claim. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative ("SG&A") expenses, including Corporate overhead, expressed as a percentage of total contract revenues decreased to 11.4% in the third quarter of 2004 from 12.8% in the third quarter of 2003. This overall decrease in SG&A expenses expressed as a percentage of revenues primarily reflects the additional effects (in this case, related to overhead personnel) of management's aforementioned cost reduction measures related to the medical and 401(k) retirement benefit plans, as offset by an increase in accruals related to the Company's 2004 short-term and long-term incentive compensation programs at maximum levels. Allocated Corporate overhead costs expressed as a percentage of total contract revenues decreased for the third quarter of 2004 versus the third quarter of 2003 as a result of cost reductions associated with the Company's new information systems which were implemented effective January 1, 2003, as partially offset by external (i.e., third party) costs incurred during the third quarter of 2004 in connection with the Company's implementation of Section 404 of the Sarbanes-Oxley Act of 2002 ("SOX"). In the Engineering segment, SG&A expenses expressed as a percentage of revenues decreased to 12.8% in the third quarter of 2004 from 15.6% in the third quarter of 2003. In the Energy segment, SG&A expenses expressed as a percentage of revenues increased to 9.0% in the third quarter of 2004 from 8.7% in the third quarter of 2003. Energy's benefits from the cost reduction measures were primarily offset by the higher incentive compensation expense. The Company's Non-Core operations incurred no SG&A expenses in either third quarter period. For the first nine months of 2004, SG&A expenses, including Corporate overhead, expressed as a percentage of total contract revenues decreased to 12.5% from 13.2% in the first nine months of 2003. As mentioned previously, this overall decrease in SG&A expenses expressed as a percentage of revenues reflect the additional effects of management's cost reduction measures as offset by an increase in incentive compensation expense, in combination with the relatively significant increase in revenues for the first nine months of 2004. Allocated Corporate overhead costs expressed as a percentage of total contract revenues decreased for the first nine months of 2004 versus the first nine months of 2003 as a result of cost reductions associated with the Company's new information systems, as partially offset by 2004 external SOX costs totaling $1.1 million. In the Engineering segment, SG&A expenses expressed as a percentage of revenues decreased to 14.2% in the first nine months of 2004 from 16.1% in the first nine months of 2003. In addition to the aforementioned effects of the cost reduction measures, higher incentive compensation expense, and the relatively significant revenue increase, the Engineering segment incurred nonrecurring costs associated with its Moon Township office relocation during the first quarter of 2003. In the Energy segment, SG&A expenses expressed as a percentage of revenues increased to 9.7% in the first nine months of 2004 from 9.0% in the first nine months of 2003. As mentioned above, Energy's benefits from the cost reduction measures were primarily offset by the higher incentive compensation expense. The Company's Non-Core operations incurred no SG&A expenses in either nine-month period. Project-to-date external SOX costs, which include $0.2 million of costs expensed in 2003, totaled $1.3 million at September 30, 2004. In addition to costs associated with the use of internal resources, management currently estimates its total external SOX costs related to 2004 Section 404 compliance will be in the range of $1.8 million to $2.0 million. Certain of these costs are expected to be incurred during the first quarter of 2005. -16- OTHER INCOME Interest income was higher and interest expense was lower for both the third quarter and first nine months of 2004 as a result of the Company's average net borrowings being higher for the third quarter and first nine months of 2003. The Company's borrowing rates were similar for all periods mentioned above. The Company had no borrowings under its credit facility at September 30, 2004. Other expense was negligible for the third quarter of 2004 and primarily resulted from currency-related losses, while other income for the first nine months of 2004 primarily resulted from the sale of an investment that resulted in a gain of $352,000 and minority interest related to two consolidated subsidiaries. Other income for the third quarter of 2003 was the result of currency-related gains, while other expense for the first nine months of 2003 primarily related to a $0.8 million impairment of an investment in Energy Virtual Partners, an Energy services business that discontinued operations and was liquidated. INCOME TAXES The Company's year-to-date effective income tax rate for the first nine months of 2004 remained unchanged at 45% from the first six months of 2004. This rate reflects the Company's best estimate of taxable income for the year ending December 31, 2004. The Company had a provision for income taxes of 52% for the first nine months of 2003. The lower effective tax rate for the first nine months of 2004 as compared to the first nine months of 2003 primarily reflects the higher full-year taxable income that is expected for 2004, as well as a more favorable mix of domestic and foreign components of such estimated taxable income. CONTRACT BACKLOG
(In millions) SEPT. 30, 2004 Dec. 31, 2003 - --------------------------------------------------------------------- Engineering $ 1,176.7 $ 470.7 Energy 345.4 250.0 - --------------------------------------------------------------------- Total $ 1,522.1 $ 720.7 =====================================================================
Backlog consists of that portion of uncompleted work that is represented by signed or executed contracts. Certain of the Company's contracts with the Federal government and other clients may be terminated at will, or option years may not be exercised; therefore, no assurance can be given that all backlog will be realized. Among the more significant new work added during the first nine months of 2004 was a new $750 million contract in the Engineering segment to serve as Program Manager to develop, plan, manage, implement, and monitor FEMA's Multi-Hazard Flood Map Modernization Program for flood hazard mitigation across the United States and its territories. In the Energy segment, a new $50 million contract to operate, maintain and optimize the performance of oil and gas producing properties in the Gulf of Mexico was added during the third quarter of 2004. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities was $17.5 million for the first nine months of 2004 as compared to net cash used in operating activities of $17.1 million for the same period in 2003. This increase in cash provided by operating activities was the direct result of increased net income and the Company becoming more efficient with its new billing system and the related process changes that were implemented effective January 1, 2003. The cash used in operating activities for the first nine months of 2003 was negatively affected by the implementation of the new billing system and related changes to its billing process. As a result of these billing system and process changes, the Company experienced certain data conversion and training issues, which caused delays in producing client invoices during the first quarter of 2003. Since the new system was first used -17- to invoice clients in February 2003, the Company has implemented various corrective improvement measures, and is invoicing on a current basis through its new software. Net cash used in investing activities was $2.8 million and $3.9 million for the first nine months of 2004 and 2003, respectively. These amounts reflect only capital expenditures for both periods. The 2004 amount primarily relates to office and field equipment purchases totaling $1.2 million and computer software and equipment purchases totaling $1.4 million, while the 2003 amount relates to leasehold improvements of $2.5 million associated with the Company's new headquarters and $1.2 million of computer software and equipment purchases. During the first nine months of 2004 and 2003, the Company procured additional computer software and equipment under the terms of operating leases. The Company utilizes operating leases to acquire assets used in its daily business activities. These assets include office space, computer and related equipment, and motor vehicles. Net cash used in financing activities was $12.5 million for the first nine months of 2004 versus net cash provided by financing activities of $19.8 million for the same period in 2003. The cash usage for financing activities during the first nine months of 2004 resulted primarily from repayments of long-term debt totaling $13.5 million, as partially offset by proceeds from the exercise of stock options totaling $0.9 million. The cash provided by financing activities for the first nine months of 2003 reflects the proceeds from long-term debt totaling $20.5 million, which was used to fund the aforementioned working capital needs in conjunction with changes in the Company's billing process and system and the resultant billing and collection delays. During the first quarter of 2003, pursuant to the Company's stock repurchase program, the Company also paid $0.7 million to acquire 80,400 additional treasury shares. During the third quarter of 2004, the Company successfully negotiated and extended its unsecured credit agreement ("the Amended Agreement") with a consortium of financial institutions. The Amended Agreement provides for an increase in the commitment amount from $40 million to $60 million, as well as a three-year extension of the maturity date through September 17, 2008. The commitment includes the sum of the principal amount of revolving credit loans outstanding and the aggregate face value of outstanding letters of credit. The Company experienced increased cash collections during the first nine months of 2004, and as a result, utilized a portion of these collections to reduce the borrowings under its credit facility. Accordingly, as of September 30, 2004, no borrowings were outstanding under the Amended Agreement, however, outstanding letters of credit totaled $7.0 million. The Company expects to use the increased commitment to accommodate additional working capital and/or future acquisition needs. The Company's professional liability insurance coverage had been placed on a claims-made basis with Reliance Insurance Group ("Reliance") for the period July 1, 1994 through June 30, 1999. In October 2001, the Pennsylvania Insurance Commissioner placed Reliance into liquidation. The Company remains uncertain at this time what effect this action will have on any claim the Company or its subsidiaries may have for insurance coverage under policies issued by Reliance with respect to past years. A wholly-owned subsidiary of the Company was subject to one substantial claim which fell within the Reliance coverage period. This claim was settled in the amount of $2.5 million, and payment was made by the Company in April 2003. Due to the liquidation of Reliance, the Company is currently uncertain what amounts paid to settle this claim will be recoverable under the insurance policy with Reliance. The Company is pursuing a claim in the Reliance liquidation and believes that some recovery will result from the liquidation, but the amount of such recovery -18- cannot currently be estimated. The Company had no related receivables recorded from Reliance as of September 30, 2004. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Currently, the Company's primary interest rate risk relates to its variable-rate investments, which totaled $1.4 million as of September 30, 2004. Assuming a 10% decrease in interest rates on these variable-rate investments (i.e., an decrease from the actual weighted average interest rate of 0.98% as of September 30, 2004, to a weighted average interest rate of 0.88%), the decrease in annual interest income would be negligible based on the outstanding balance of variable-rate obligations as of September 30, 2004. Accordingly, the Company has no material exposure to interest rate risk, nor does it have any interest rate swap or exchange agreements. The Company has several foreign subsidiaries that transact portions of their local activities in currencies other than the U.S. Dollar. In assessing its exposure to foreign currency exchange rate risk, the Company recognizes that the majority of its foreign subsidiaries' assets and liabilities reflect ordinary accounts receivable and payable balances. These receivable and payable balances are substantially settled in the same currencies as the functional currencies of the related foreign subsidiaries, thereby not exposing the Company to material transaction gains and losses. Assuming that foreign currency exchange rates could change unfavorably by 10%, the Company would have no material exposure to foreign currency exchange rate risk. The Company has no foreign currency exchange contracts. Based on the nature of the Company's business, it has no direct exposure to commodity price risk. ITEM 4. CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures The Company's principal executive officer and principal financial officer have evaluated the effectiveness of the Company's "disclosure controls and procedures," as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of September 30, 2004. Based upon their evaluation, the principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports filed or submitted by it under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and to provide reasonable assurance that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company's management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. (b) Changes in Internal Controls There was no change in the Company's "internal control over financial reporting" (as such term is defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2004, and that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. -19- PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS See discussion in Note 5 to the accompanying financial statements. ITEM 6. EXHIBITS The following exhibits are included herewith as a part of this Report:
Exhibit No. Description - ----------- ----------- 10.4(a) First Amended and Restated Loan Agreement dated September 17, 2004 by and between the Company and Citizens Bank of Pennsylvania, PNC Bank, National Association and Fifth Third Bank, filed herewith. 31.1 Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) 31.2 Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) 32.1 Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MICHAEL BAKER CORPORATION /s/ William P. Mooney Dated: November 8, 2004 - ---------------------------- William P. Mooney Executive Vice President and Chief Financial Officer /s/ Craig O. Stuver Dated: November 8, 2004 - ---------------------------- Craig O. Stuver Senior Vice President, Corporate Controller and Treasurer (Chief Accounting Officer) -20- EX-10.4.A 2 j1008401exv10w4wa.txt EXHIBIT 10.4.A Exhibit 10.4(a) FIRST AMENDED AND RESTATED LOAN AGREEMENT Agreement, dated the 17th day of September, 2004, by and among Michael Baker Corporation, a Pennsylvania corporation ("MBC"), Michael Baker, Jr., Inc., a Pennsylvania corporation ("Michael Baker Jr."), Baker/MO Services, Inc., a Texas corporation ("Baker/MO"), Baker/OTS, Inc., a Delaware corporation ("Baker/OTS"), Baker Engineering NY, Inc., a New York corporation ("Baker NY"), (each a "Borrower" and collectively, the "Borrowers"), Citizens Bank of Pennsylvania, a Pennsylvania banking institution ("Citizens"), the Banks (as hereinafter defined), and Citizens Bank of Pennsylvania, a Pennsylvania banking institution (assignee of Mellon Bank, N.A.), as agent for the Banks (in such capacity, the "Agent"). W I T N E S S E T H: WHEREAS, pursuant to that certain Loan Agreement, dated September 5, 2001, by and among the Borrowers, Mellon Bank, N.A. ("Mellon"), National City Bank of Pennsylvania ("NCB"), Fifth Third Bank ("Fifth Third") and Mellon, as agent, as amended by that certain (i) First Amendment to Loan Agreement, dated February 20, 2002, by and among the Borrowers, Citizens (as assignee of Mellon), NCB, Fifth Third and the Agent, (ii) Second Amendment to Loan Agreement, dated April 26, 2002, by and among the Borrowers, Citizens, NCB, Fifth Third and the Agent, (iii) Third Amendment to Loan Agreement, dated July 31, 2002, by and among the Borrowers, Citizens, NCB, Fifth Third and the Agent, (iv) Fourth Amendment to Loan Agreement, dated March 24, 2003, by and among the Borrowers, Citizens, NCB, Fifth Third and the Agent, and (v) Fifth Amendment to Loan Agreement, dated October 27, 2003, by and among the Borrowers, Citizens, NCB, Fifth Third and the Agent, Citizens, NCB and Fifth Third extended to the Borrowers a revolving credit facility in the principal amount not to exceed Forty Million and 00/100 Dollars ($40,000,000.00) (as amended, the "Existing Loan Agreement"); and WHEREAS, the Borrowers desire to amend and restate the Existing Loan Agreement, among other things, to increase the principal amount of the revolving credit facility to Sixty Million and 00/100 Dollars ($60,000,000.00), which shall be used (i) to refinance the Indebtedness under the Existing Loan Agreement and (ii) for working capital and general corporate purposes, pursuant to the terms and subject to the conditions set forth herein. WHEREAS, the Banks have agreed to such amendment and restatement pursuant to the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the premises and of the mutual covenants contained in this Agreement, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.01 Certain Definitions. In addition to other words and terms defined elsewhere in this Agreement, the following words and terms have the following meanings, respectively, unless the context otherwise clearly requires: "Acquisition" shall mean any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of any Person, or any business or division of any Person, (b) the acquisition of in excess of fifty percent (50%) of the capital stock (or other equity interest) of any Person, or (c) the acquisition of another Person (other than a Subsidiary) by a merger or consolidation or any other combination with such Person. "Advantage" shall mean any payment (whether made voluntarily or involuntarily by offset of any deposit or other Indebtedness or otherwise) received by any Bank in respect of the Indebtedness evidenced by the Notes, if such payment results in that Bank having less than its Pro Rata Share of the Indebtedness to the Banks pursuant to this Agreement than was the case immediately before such payment. "Affiliate" shall mean, with respect to any Borrower, any Person that directly or indirectly controls, is controlled by or is under common control with such Borrower. The term "control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Agent" shall mean Citizens, in its capacity as agent for the Banks under the Loan Documents and any successor appointed pursuant to the provisions of this Agreement. "Agreement" shall mean this Agreement, as amended, modified or supplemented from time to time. "Anti-Terrorism Laws" shall mean any Laws relating to terrorism or money laundering, including Executive Order No. 13224, the USA Patriot Act, the Laws comprising or implementing the Bank Secrecy Act, and the Laws administered by the United States Treasury Department's Office of Foreign Asset Control (as any of the foregoing Laws may from time to time be amended, renewed, extended, or replaced). "Applicable L/C Margin" shall mean that as set forth in Section 2.06 hereof. "Applicable Libor Margin" shall mean that as set forth in Section 2.02(a)(ii) hereof. "Applicable Margin" shall mean the Applicable Libor Margin or the Applicable Prime Margin, as the case may be. "Applicable Prime Margin" shall mean that as set forth in Section 2.02(a)(ii) hereof. -2- "Applicable Rate" shall mean, as of the date of determination, the Prime Rate plus the Applicable Prime Margin or the Libor Rate plus the Applicable Libor Margin, as the case may be. "Assignment Agreement" shall mean that as set forth in Section 8.17(A)(iv) hereof. "Authorized Representative" shall mean each Person designated from time to time, as appropriate, in writing by the Borrowers to the Agent for the purposes of giving notices of borrowing, conversion or continuation of Loans, which designation shall continue in force and effect until terminated in writing by the Borrowers to the Agent. "Baker NY" shall mean that as set forth in the preamble hereof. "Baker/Mellon Stuart" shall mean Baker/Mellon Stuart Construction, Inc., a Pennsylvania corporation. "Baker/MO" shall mean that as set forth in the preamble hereof. "Baker/OTS" shall mean that as set forth in the preamble hereof. "Bank" or "Banks" shall mean, singularly or collectively as the context may require, (i) Citizens Bank of Pennsylvania, a Pennsylvania banking association with an office located at 525 William Penn Place, Pittsburgh, Pennsylvania 15219; and (ii) the financial institutions listed on the signature page hereof and their respective successors and Eligible Assignees. "Bank-Provided Hedge" shall mean a Hedging Agreement which is provided by a Bank or an affiliate of a Bank and with respect to which such Bank or affiliate of such Bank confirms meets the following requirements: such Hedging Agreement (i) is documented in a standard International Swap Dealer Association Agreement or similar agreement satisfactory to such Bank or affiliate of such Bank, (ii) provides for the method of calculating the reimbursable amount of the provider's credit exposure in a reasonable and customary manner, and (iii) is entered into for hedging (rather than speculative) purposes. The liabilities of the Borrowers to the provider of any Bank-Provided Hedge shall be "Indebtedness" hereunder. "Blocked Person" shall mean that as set forth in Section 3.23(b) hereof. "Borrower" or "Borrowers" shall mean, singularly or collectively as the context may require, MBC, Michael Baker Jr., Baker/MO, Baker/OTS and Baker NY. "Business Day" shall mean (a) any day which is neither a Saturday or Sunday nor a legal holiday on which commercial banks are authorized or required to be closed in Pittsburgh, Pennsylvania; (b) when such term is used to describe a day on which a payment or prepayment is to be made in respect of a Libor Rate Loan, any day which is: (i) neither a Saturday or Sunday nor a legal holiday on which commercial banks are authorized or required to be closed in Pittsburgh, Pennsylvania; and (ii) a London Banking Day; and (c) when such term is used to describe a day on which an interest rate determination is to be made in respect of a Libor Rate Loan, any day which is a London Banking Day. -3- "Capital Expenditure" shall mean any expenditure made or liability incurred which is, in accordance with GAAP, treated as a capital expenditure. "Capital Lease" shall mean any lease of any tangible or intangible property (whether real, personal or mixed), however denoted, which is required by GAAP to be reflected as a liability on the balance sheet of the lessee. "Capitalized Lease Obligation" shall mean, with respect to each Capital Lease, the amount of the liability reflecting the aggregate discounted amount of future payments under such Capital Lease calculated in accordance with GAAP, statement of financial accounting standards No. 13 (as supplemented and modified from time to time), and any corresponding future interpretations by the Financial Accounting Standards Board or any successor thereto. "Change of Control" shall mean that (i) any Person (other than the Michael Baker Corporation Employee Stock Ownership Plan and Trust) or group within the meaning of Rule 13d-5 under the Securities Exchange Act of 1934, as amended, as in effect on the date of this Agreement, has become the owner of, directly or indirectly, beneficially or of record, shares representing more than fifty percent (50%) of the aggregate ordinary voting power represented by the issued and outstanding capital stock of MBC, or (ii) during any period of twelve (12) consecutive calendar months, individuals who were directors of MBC on the first day of such period, together with individuals elected as directors by not less than a majority of the individuals who were directors of MBC on the first day of such period, shall cease to hold at least sixty percent (60%) of the total number of directors of MBC. "Citizens" shall mean that as set forth in the preamble hereof. "Closing" shall mean the closing of the transactions provided for in this Agreement on the Closing Date. "Closing Date" shall mean September 17, 2004 or such other date upon which the parties may agree. "Code" shall mean the Internal Revenue Code of 1986 as amended, along with the rules, regulations, decisions and other official interpretations in connection therewith. "Commitment" shall mean, with respect to each Bank, the amount set forth on Schedule 1 attached hereto and made a part hereof as the amount of each Bank's commitment to make Revolving Credit Loans (and, in the case of Citizens, Swing Line Loans) and participate in the issuance of Letters of Credit, as such amount may be modified from time to time pursuant to Section 8.17(A) hereof. Schedule 1 shall be amended from time to time to reflect modifications pursuant to Section 8.17(A) and any other changes to the Commitment of the Banks. "Commitment Percentage" shall mean, with respect to each Bank, the percentage set forth on Schedule 1 attached hereto and made a part hereof as such Bank's percentage of the aggregate Commitments of all of the Banks, as such percentage may be changed from time to time in accordance with the terms and conditions of this Agreement. Schedule 1 shall be amended from time to time to reflect any changes to the Commitment Percentages. -4- "Consolidated" shall mean the resulted consolidation of the financial statements of the Borrowers and their Subsidiaries in accordance with GAAP, including principles of consolidation consistent with those applied in preparation of the Consolidated financial statements referred to in Section 3.07 hereof. "Current Assets" shall mean, as of the date of determination, the Consolidated current assets of the Borrowers and their Subsidiaries as determined in accordance with GAAP. "Current Liabilities" shall mean, as of the date of determination, the Consolidated current liabilities of the Borrowers and their Subsidiaries determined in accordance with GAAP, plus, without duplication, the Indebtedness of the Borrowers incurred hereunder. "Current Ratio" shall mean, as of the date of determination, the ratio of Current Assets to Current Liabilities. "Distributions" shall mean, for the period of determination, (a) all distributions of cash, securities or other property (other than capital stock) on or in respect of any shares of any class of capital stock of any Borrower and (b) all purchases, redemptions or other acquisitions by any Borrower of any shares of any class of capital stock of such Borrower, in each case determined and Consolidated for the Borrowers and their Subsidiaries in accordance with GAAP, excepting specifically the conversion and/or exchange of any class of capital stock of any Borrower into or for any other class of capital stock of such Borrower. "EBITDA" shall mean, for the period of determination, (i) Net Income, plus (ii) Interest Expense, plus (iii) all income taxes included in Net Income, plus (iv) depreciation, depletion, amortization, and all other non-cash expenses included in Net Income, in each case determined and Consolidated for the Borrowers in accordance with GAAP. "EBITR" shall mean, for the period of determination, (i) Net Income, plus (ii) Interest Expense, plus (iii) all income taxes included in Net Income, plus (iv) all Rent Expense, in each case determined and Consolidated for the Borrowers and their Subsidiaries in accordance with GAAP. "Eligible Assignee" shall mean any commercial bank or non-bank financial institution organized under the United States of America or any state thereof including, without limitation, any insurance company, savings bank or savings and loan association, having total assets in excess of One Billion Dollars ($1,000,000,000.00). "Environmental Laws" shall mean that as set forth in Section 3.13(a) hereof. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as in effect as of the date of this Agreement and as amended from time to time in the future. "ERISA Affiliate" shall mean a Person which is under common control with a Borrower within the meaning of Section 414(b) of the Code including, but not limited to, a Subsidiary of such Borrower. -5- "Event of Default" shall mean any of the Events of Default described in Section 7.01 of this Agreement. "Excess Amount" shall mean that as set forth in Section 2.01(d) hereof. "Excess Interest" shall mean that as set forth in Section 2.02(c) hereof. "Executive Order No. 13224" shall mean the Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, as the same has been, or shall hereafter be, renewed, extended, amended or replaced. "Existing Letters of Credit" shall mean that as set forth in Section 2.05 hereof. "Existing Loan Agreement" shall mean that as set forth in the recitals hereof. "Expiry Date" shall mean September 17, 2008 or such earlier date on which the Revolving Credit Facility Commitment shall have been terminated pursuant to this Agreement. "Fifth Third" shall mean that as set forth in the recitals hereof. "Fiscal Quarter(s)" shall mean the period(s) of January 1 through March 31, April 1 through June 30, July 1 through September 30, and October 1 through December 31 of each calendar year or such other quarterly fiscal period as may be approved by the Securities and Exchange Commission at the request of any Borrower. "GAAP" shall mean generally accepted accounting principles (as such principles may change from time to time), which shall include the official interpretations thereof by the Financial Accounting Standards Board, applied on a consistent basis. "Hedging Agreements" shall mean foreign exchange agreements, currency swap agreements, interest rate exchange, swap, cap, collar, adjustable strike cap, adjustable strike corridor agreements or any other similar hedging agreements or arrangements entered into by the Borrowers in the ordinary course of business and not for speculative purposes. "Hedging Obligations" shall mean all liabilities of the Borrowers under Hedging Agreements. "Incentive Pricing Effective Date" shall mean that as set forth in Section 2.02(a)(ii) hereof. "Indebtedness" shall mean, for any Borrower or its Subsidiaries (i) all obligations for borrowed money, direct or indirect, incurred, assumed, or guaranteed (including, without limitation, all notes payable and drafts accepted representing extensions of credit, all obligations evidenced by bonds, debentures, notes or similar instruments, all obligations on which interest charges are customarily paid, all obligations under conditional sale or other title retention agreements, all obligations for the deferred purchase price of capital assets and all obligations issued or assumed as full or partial payment for property), (ii) all obligations secured by any Lien existing on property owned or acquired subject thereto, whether or not the obligations secured thereby shall have been -6- assumed (excluding specifically all obligations under Operating Leases), (iii) all reimbursement obligations (contingent or otherwise), (iv) all indebtedness represented by obligations under a Capital Lease and the amount of such indebtedness shall be the Capitalized Lease Obligations with respect to such Capital Lease, (v) all Hedging Obligations and all obligations (contingent or otherwise) under any letter of credit, banker's acceptance, guaranty or indemnification agreement, (vi) all obligations to advance funds to, or to purchase assets, property or services from, any other Person in order to maintain the financial condition of such Person and (vii) any other transaction (including forward sale or purchase agreements) having the commercial effect of a borrowing of money entered into by such Borrower to finance its operations or capital requirements. "Indemnitees" shall mean that as set forth in Section 9.16 hereof. "Indemnified Liabilities" shall mean that as set forth in Section 9.16 hereof. "Interest and Rent Coverage Ratio" shall mean, as of the date of determination, the ratio of (i) EBITR to (ii) the sum of all Interest Expense and Rent Expense. "Interest Expense" shall mean, for the period of determination, all interest accruing during such period on Indebtedness, including, without limitation, all interest required under GAAP to be capitalized during such period, in each case determined and Consolidated for the Borrowers and their Subsidiaries in accordance with GAAP. "Interest Period" shall mean, with respect to any Libor Rate Loan, the period commencing on the date such Loan is made as, continued as or converted into a Libor Rate Loan and ending on the last day of such period as selected by the Borrowers pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of such period, as selected by the Borrowers pursuant to the provisions below. The duration of each Interest Period for any Libor Rate Loan shall be for any number of months selected by the Borrowers upon notice as set forth in Section 2.01(c), provided that: (i) the Interest Period for any Libor Rate Loan shall be one (1), two (2), three (3) or six (6) months or such other period as may be agreed upon by the Borrowers and the Banks; (ii) Interest Periods for Libor Rate Loans in connection with which any Borrower has or may incur Hedging Obligations with any Bank shall be of the same duration as the relevant periods set under the applicable Bank-Provided Hedge; (iii) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall occur on the next succeeding Business Day, provided that if such extension of time would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the last Business Day immediately preceding the last day of such Interest Period; (iv) if the Borrowers continue any Libor Rate Loan for an additional Interest Period, the first day of the new Interest Period shall be the last day of the preceding -7- Interest Period; however, interest shall only be charged once for such day at the rate applicable to the Libor Rate Loan for the new Interest Period; (v) if the Borrowers fail to so select the duration of any Interest Period, the duration of such Interest Period shall be one (1) month; and (vi) the last day of any Interest Period shall not occur after the Expiry Date. "Law" shall mean any law (including common law), constitution, statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree or award of any Official Body. "Letter of Credit" or "Letters of Credit" shall mean, singularly or collectively as the context may require, the letters of credit issued in accordance with Section 2.05 hereof. "Letter of Credit Commission" shall mean that as set forth in Section 2.06 hereof. "Letter of Credit Face Amount" shall mean, for each Letter of Credit, the face amount of such Letter of Credit. "Letter of Credit Related Documents" shall mean any agreements or instruments relating to a Letter of Credit. "Letter of Credit Reserve" shall mean, at any time, an amount equal to (a) the aggregate Letter of Credit Undrawn Availability at such time plus, without duplication, (b) the aggregate amount theretofore paid by the issuer under the Letters of Credit and not debited to the Borrowers' account or otherwise reimbursed by the Borrowers. "Letter of Credit Undrawn Availability" shall mean, at any time, the maximum amount available to be drawn at such time under all then outstanding Letters of Credit, including any amounts drawn thereunder and not reimbursed, regardless of the existence or satisfaction of any conditions or limitations on drawing. "Leverage Ratio" shall mean, as of the date of determination, the ratio of (i) Indebtedness, as Consolidated for the Borrowers and their Subsidiaries in accordance with GAAP, to (ii) EBITDA. "Libor Advantage Loan Interest Payment Date" shall mean, initially, October 1, 2004, and thereafter the numerically corresponding date of each month. If a month does not contain a day that numerically corresponds to the date of the Libor Advantage Loan Interest Payment Date, the Libor Advantage Loan Interest Payment Date shall be the last day of such month. "Libor Advantage Loan Interest Period" shall mean, initially, the period commencing on the Closing Date (the "Start Date") and ending on the numerically corresponding date one (1) month later, and thereafter each one (1) month period ending on the day of such month that numerically corresponds to the Start Date. If a Libor Advantage Loan Interest Period is to end in a month for which there is no day which numerically corresponds to the Start Date, the Libor Advantage Loan Interest Period will end on the last day of such month. -8- "Libor Advantage Rate" shall mean, relative to any Libor Advantage Loan Interest Period, the offered rate for delivery in two (2) London Banking Days (as defined below) of deposits of U.S. Dollars which the British Bankers' Association fixes as its LIBOR rate and which appears on the Dow Jones Market Service (formerly known as Telerate) page 3750 as of 11:00 a.m. London time on the day on which the Libor Advantage Loan Interest Period commences, and for a period approximately equal to such Libor Advantage Loan Interest Period. If the first (1st) day of any Libor Advantage Loan Interest Period is not a day which is both a (i) Business Day, and (ii) (a London Banking Day, the Libor Advantage Rate shall be determined in reference to the next preceding day which is both a Business Day and a London Banking Day. If for any reason the Libor Advantage Rate is unavailable and/or the Swing Line Lender is unable to determine the Libor Advantage Rate for any Libor Advantage Loan Interest Period, the Libor Advantage Rate shall be deemed to be equal to the Prime Rate. "Libor Advantage Rate Loan" shall mean any Loan that bears interest with reference to the Libor Advantage Rate. "Libor Lending Rate" means, relative to any Libor Rate Loan to be made, continued or maintained as, or converted into, a Libor Rate Loan for any Interest Period, a rate per annum determined pursuant to the following formula: Libor Lending Rate = Libor Rate -------------------------------- (1.00 - Libor Reserve Percentage) "Libor Rate" means relative to any Interest Period for Libor Rate Loans, the offered rate for deposits of U.S. dollars in an amount approximately equal to the amount of the requested Libor Rate Loan for a term coextensive with the designated Interest Period which the British Bankers' Association fixes as its Libor rate and which appears on the Dow Jones Markets Service (formerly known as Telerate) Page 3750 as of 11:00 a.m. London time on the day which is two (2) London Banking Days prior to the beginning of such Interest Period. "Libor Rate Loan" shall mean any Loan that bears interest with reference to the Libor Rate. "Libor Reserve Percentage" means, relative to any day of any Interest Period for Libor Rate Loans, the maximum aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements (including all basic, emergency, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements) under any regulations of the Board of Governors of the Federal Reserve System (the "Board") or other governmental authority having jurisdiction with respect thereto as issued from time to time and then applicable to assets or liabilities consisting of "Eurocurrency Liabilities", as currently defined in Regulation D of the Board, having a term approximately equal or comparable to such Interest Period. "Lien" shall mean any mortgage, deed of trust, pledge, lien, security interest, charge or other encumbrance or security arrangement of any nature including, but not limited to, any conditional sale or title retention arrangement, and any assignment, deposit arrangement (other than escrow deposits) or lease intended as, or having the effect of, security. -9- "Loan" or "Loans" shall mean, singularly or collectively, as the context may require, the Revolving Credit Loans, the Swing Line Loans and any other credit to any Borrower extended by any Bank in accordance with Article II hereof as evidenced by the Notes, as the case may be. "Loan Account" shall mean that as set forth in Section 2.14 hereof. "Loan Document" or "Loan Documents" shall mean, singularly or collectively as the context may require, (i) this Agreement, (ii) the Notes, (iii) the Notice of Waiver of Rights, (iv) the Letters of Credit, (v) the Letter of Credit Related Documents and (vi) any and all other documents, instruments, certificates and agreements executed and delivered in connection with this Agreement, as any of them may be amended, modified, extended or supplemented from time to time. "London Banking Day" means a day on which dealings in U.S. dollar deposits are transacted in the London interbank market. "Majority Banks" shall mean the Banks whose Commitment Percentages aggregate at least fifty-one percent (51%) of the Total Commitment Amount or, if there is any borrowing hereunder, the holders of at least fifty-one percent (51%) of the amount outstanding under the Notes. "Material Adverse Change" shall mean a material adverse change in the (a) business, operations or condition (financial or otherwise) of MBC and its Subsidiaries taken as a whole; (b) the ability of the Borrowers, collectively, to perform any of their payment or other material obligations under this Agreement or any of the other Loan Documents to which they are a party; or (c) the legality, validity, or enforceability of the obligations of any Borrower under this Agreement or any of the other Loan Documents. "Material Adverse Effect" shall mean a material adverse effect on (a) the business, operations or condition (financial or otherwise) of MBC and its Subsidiaries taken as a whole; (b) the ability of the Borrowers, collectively, to perform any of their payment or other material obligations under this Agreement or any of the other Loan Documents to which they are a party; or (c) the legality, validity, or enforceability of the obligations of any Borrower under this Agreement or any of the other Loan Documents. "Maximum Rate" shall mean that as set forth in Section 2.02(c) hereof. "MBC" shall mean that as set forth in the preamble hereof. "Measurement Quarter" shall mean that as set forth in Section 2.02(a)(ii) hereof. "Mellon" shall mean that as set forth in the recitals hereof. "Michael Baker, Jr." shall mean that as set forth in the preamble hereof. "NCB" shall mean that as set forth in the recitals hereof. -10- "Net Income" shall mean, for the period of determination, net income (after taxes), excluding, however, extraordinary gains, in each case determined and Consolidated for the Borrowers and their Subsidiaries in accordance with GAAP. "Note" or "Notes" shall mean, singularly or collectively as the context may require, the Revolving Credit Notes, the Swing Line Note and any other note of the Borrowers executed and delivered pursuant to this Agreement, as any such note may be amended, modified or supplemented from time to time, together with all extensions, renewals, refinancings or refundings in whole or in part. "Notice of Waiver of Rights" shall mean the Notice of Waiver of Rights Regarding Warrants of Attorney, Execution Rights and Waiver of Rights to Prior Notice and Judicial Hearing, dated of even date herewith, made by the Borrowers to the Agent, as amended, modified or supplemented from time to time. "Notices" shall mean that as set forth in Section 9.04 hereof. "Office", when used in connection with (i) Citizens or the Agent, shall mean its designated office located at 525 William Penn Place, Pittsburgh, Pennsylvania 15219 or such other office of Citizens or the Agent as Citizens or the Agent may designate in writing from time to time, or (ii) any other Bank, shall mean its designated office identified on Schedule 1 attached hereto and made a part hereof with respect to such Bank or such other office of such Bank as such Bank may designate in writing from time to time. "Official Body" means any government or political subdivision or any agency, authority, bureau, central bank, board, commission, department or instrumentality of either, or any court, tribunal, grand jury or arbitrator, in each case whether foreign or domestic. "Operating Leases" shall mean all leases other than Capital Leases. "Owner's Equity" means, as of the date of determination, (i) net worth minus (ii) the aggregate amount of all investments made pursuant to Section 6.04(h) hereof, less accumulated Distributions and other returns of capital directly related to such investments, in each case determined and Consolidated for the Borrowers and their Subsidiaries in accordance with GAAP. "PBGC" shall mean the Pension Benefit Guaranty Corporation established pursuant to Title IV of ERISA. "Person" shall mean an individual, corporation, limited liability company, partnership, joint venture, trust, or unincorporated organization or government or agency or political subdivision thereof. "Plan" shall mean any deferred compensation program, including both single and multi-employer plans, subject to Title IV of ERISA and established and maintained for employees, officers or directors of any Borrower or any Subsidiary or any ERISA Affiliate. "Potential Default" shall mean any event or condition which with notice or passage of time, or any combination of the foregoing, would constitute an Event of Default. -11- "Preference" shall mean that as set forth in Section 8.13 hereof. "Prime Rate" shall mean that rate of interest per annum announced by the Agent from time to time as its Prime Rate, which may not represent the lowest rate charged by the Agent to other borrowers at any time or from time to time. "Prime Rate Loan" shall mean any Loan that bears interest with reference to the Prime Rate. "Pro Rata Share" shall mean, with respect to each Bank, its Commitment Percentage. "Prohibited Transaction" shall mean any transaction which is prohibited under Section 4975 of the Code or Section 406 of ERISA and not exempt under Section 4975 of the Code or Section 408 of ERISA. "Refunded Swing Line Loans" shall mean as set forth in Section 2.01.5(d) hereof. "Register" shall mean that as set forth in Section 8.17(A)(vii) hereof. "Regulations" shall mean that as set forth in Section 9.17 hereof. "Rent Expense" shall mean all items included as rent expense in the audited financial statements of the Borrowers and their Subsidiaries submitted pursuant to Section 5.01(a) hereof, in each case determined and Consolidated for the Borrowers and their Subsidiaries in accordance with GAAP; provided, however, for any period of determination for which Rent Expense must be estimated in good faith by the Borrowers in accordance with the terms of this Agreement, Rent Expense shall be determined and Consolidated for the Borrowers and their Subsidiaries in accordance with sound accounting principles. "Reportable Event" shall mean any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder, except any such event as to which the provision for thirty (30) days notice to the PBGC is waived under applicable regulations. "Reporting Quarter" shall mean that as set forth in Section 2.02(a)(ii) hereof. "Required Deductions" shall mean that as set forth in Section 2.13 hereof. "Revolving Credit Commitment" shall mean, with respect to each Bank, the amount set forth on Schedule 1 attached hereto and made a part hereof as the amount of such Bank's commitment to make Revolving Credit Loans. "Revolving Credit Facility Commitment" shall mean that as set forth in Section 2.01(a) hereof. "Revolving Credit Loans" shall mean that as set forth in Section 2.01(a) hereof. -12- "Revolving Credit Note" or "Revolving Credit Notes" shall mean, singularly or collectively, as the context may require, the Revolving Credit Notes of the Borrowers delivered in accordance with Section 2.01(b) hereof together with all amendments, extensions, renewals, replacements, refinancings or refundings thereof in whole or in part. "Subsidiary" or "Subsidiaries" of a Borrower shall mean, singularly or collectively as the context may require, (i) any corporation more than fifty percent (50%) of whose capital stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation is owned (directly or indirectly) by such Borrower and/or one or more Subsidiaries of such Borrower, (ii) any partnership, association, joint venture or other entity in which such Borrower and/or one or more Subsidiaries of such Borrower has more than a fifty percent (50%) equity interest and (iii) any entity that is required to be Consolidated under FASB Interpretation #46 (as revised) (Consolidation of variable interest entities); provided, however, that with respect to the representations and warranties set forth in Article III hereof only, the terms "Subsidiary" and "Subsidiaries", as they relate to MBC, shall mean Michael Baker Jr., Baker/MO, Baker/OTS and Baker NY. "Swing Line Lender" shall mean Citizens, in its capacity as Swing Line Lender, or any Person serving as a successor Swing Line Lender hereunder. "Swing Line Loan Facility" shall mean as set forth in Section 2.01.5(a) hereof. "Swing Line Loans" shall mean the Loans made by the Swing Line Lender to the Borrowers pursuant to Section 2.01.5 hereof. "Swing Line Note" shall mean the First Amended and Restated Swing Line Note, dated of even date herewith, made by the Borrowers to the Swing Line Lender, as amended, modified or supplemented from time to time, together with all extensions, renewals, refinancings or refundings in whole or in part. "Termination Event" shall mean (i) a Reportable Event, (ii) the termination of a single employer Plan or the treatment of a single employer Plan amendment as the termination of such Plan under Section 4041 of ERISA, or the filing of a notice of intent to terminate a single employer Plan, or (iii) the institution of proceedings to terminate a single employer Plan by the PBGC under Section 4042 of ERISA, or (iv) the appointment of a trustee to administer any single employer Plan. "Total Commitment Amount" shall mean the obligation of the Banks hereunder to make Revolving Credit Loans up to the maximum aggregate principal amount of Sixty Million and 00/100 Dollars ($60,000,000.00). "USA Patriot Act" shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56, as the same has been, or shall hereafter be, renewed, extended, amended or replaced. -13- 1.02 Construction and Interpretation. (a) Obligations of and References to Borrowers. Each and every obligation of the Borrowers contained in this Agreement or any Loan Document, whether or not expressly stated, shall be the joint and several obligations of the Borrowers. Any and all references to the Borrowers contained in any representation or covenant of the Borrowers' hereunder shall be a representation or covenant with respect to each and every Borrower, both individually and collectively. (b) Construction. Unless the context of this Agreement otherwise clearly requires, references to the plural include the singular, the singular the plural, the part the whole and "or" has the inclusive meaning represented by the phrase "and/or". References in this Agreement to "judgments" of the Agent and the Banks include good faith estimates by the Agent and the Banks (in the case of quantitative judgments) and good faith beliefs by the Agent and the Banks (in the case of qualitative judgments). The definition of any document or instrument includes all schedules, attachments, and exhibits thereto and all renewals, extensions, supplements, restatements and amendments thereof. "Hereunder", "herein", "hereto", "hereof", "this Agreement" and words of similar import refer to this entire document; "including" is used by way of illustration and not by way of limitation, unless the context clearly indicates to the contrary; and any action required to be taken by any Borrower or all of the Borrowers is to be taken promptly, unless the context clearly indicates to the contrary. (c) Accounting Terms. Any accounting term not specifically defined in Section 1.01 hereof shall have the meaning ascribed thereto by GAAP. ARTICLE II THE CREDIT FACILITY 2.01 Revolving Credit Facility Commitment. (a) Revolving Credit Loans. Subject to the terms and conditions and relying upon the representations and warranties set forth in this Agreement, the Notes and the other Loan Documents, the Banks severally (but not jointly) agree to make loans (the "Revolving Credit Loans") to the Borrowers at any time or from time to time on or after the Closing Date and to and including the Business Day immediately preceding the Expiry Date in an aggregate principal amount which, when combined with the aggregate principal amount of all Swing Line Loans outstanding and the aggregate Letter of Credit Undrawn Availability, shall not exceed at any one time outstanding Sixty Million and 00/100 Dollars ($60,000,000.00) (the "Revolving Credit Facility Commitment"); provided, however, that no Bank shall be required to make Revolving Credit Loans (or participate in the issuance of Letters of Credit) in an aggregate principal amount outstanding at any one time exceeding such Bank's Commitment. The Revolving Credit Loans shall be made pro rata in accordance with each Bank Commitment Percentage. Within the limits of time and amount set forth in this Section 2.01, and subject to the provisions of this Agreement including, without limitation, the Banks' right to demand repayment of the Revolving Credit Loans upon the occurrence of an Event of Default, the Borrowers may borrow, repay and reborrow under this Section 2.01; provided, however, that if -14- the Borrowers prepay any Libor Rate Loan on a day other than the last day of the applicable Interest Period for such Libor Rate Loan, then the Borrowers shall comply with the terms and conditions of Section 2.11(c) with respect to such prepayment. (b) Revolving Credit Note. The joint and several obligations of the Borrowers to repay the unpaid principal amount of the Revolving Credit Loans made to the Borrowers by each Bank and to pay interest on the unpaid principal amount thereof is evidenced in part by the Revolving Credit Notes of the Borrowers, dated the Closing Date, in substantially the form of Exhibit "A" attached hereto and made a part hereof, with the blanks appropriately filled. Each Revolving Credit Note shall be payable to the order of a Bank in a principal amount equal to such Bank's Revolving Credit Commitment. The executed Revolving Credit Notes will be delivered by the Borrowers to the Banks on the Closing Date. (c) Making, Continuing or Converting of Revolving Credit Loans. Subject to the terms and conditions set forth in this Agreement and the other Loan Documents, and provided that the Borrowers have satisfied all applicable conditions specified in Article IV hereof, the Banks shall make Revolving Credit Loans to the Borrowers which, as selected by the Borrowers pursuant to this Section 2.01(c), shall be Prime Rate Loans or Libor Rate Loans. In addition, subject to the terms and conditions set forth below, the Borrowers shall have the opportunity to (i) convert Prime Rate Loans into Libor Rate Loans, (ii) convert Libor Rate Loans into Prime Rate Loans or (iii) continue Libor Rate Loans as Libor Rate Loans for additional Interest Periods. (i) Each Revolving Credit Loan that is made as or converted (from a Libor Rate Loan) into a Prime Rate Loan shall be made or converted on such Business Day and in such amount as an Authorized Representative of the Borrowers shall request by written or telephonic notice (confirmed promptly, but in no event later than one Business Day thereafter, in writing) received by the Agent no later than 10:00 a.m. (Pittsburgh, Pennsylvania time) on the date of requested disbursement of or conversion into the requested Prime Rate Loan. Subject to the terms and conditions of this Agreement, on each borrowing date, the Agent shall make the proceeds of the Prime Rate Loan available to the Borrowers at the Agent's Office in immediately available funds not later than 2:00 p.m. (Pittsburgh, Pennsylvania time). Unless an Authorized Representative of the Borrowers shall provide the Agent with the required written notice to convert a Prime Rate Loan into a Libor Rate Loan on or prior to the third (3rd) Business Day prior to the date of requested conversion, such Prime Rate Loan shall automatically continue as a Prime Rate Loan. (ii) Each Revolving Credit Loan that is made as, continued as or converted (from a Prime Rate Loan) into a Libor Rate Loan shall be made, continued or converted, on such Business Day, in such amount (greater than or equal to One Million and 00/100 Dollars ($1,000,000.00); provided, however, that any amount in excess of One Million and 00/100 Dollars ($1,000,000.00) may only be in increments of Five Hundred Thousand and 00/100 Dollars ($500,000.00)) and with such an Interest Period as an Authorized Representative of the Borrowers shall request by written or telephonic notice (confirmed promptly, but in no event later than one Business Day thereafter, in writing) received by the Agent no later than 10:00 a.m. (Pittsburgh, Pennsylvania time) on the third (3rd) Business Day prior to the requested date of disbursement of, continuation of or conversion into the requested Libor Rate Loan. -15- Subject to the terms and conditions of this Agreement, on each borrowing date, the Agent shall make the proceeds of the Libor Rate Loan available to the Borrowers at the Agent's Office in immediately available funds, no later than 10:00 a.m. (Pittsburgh, Pennsylvania time). In addition, in the event that the Borrowers desire to continue a Libor Rate Loan for an additional Interest Period, an Authorized Representative of the Borrowers shall provide the Agent with written notice thereof on or prior to the third (3rd) Business Day prior to the expiration of the applicable Interest Period. In the event that an Authorized Representative of the Borrowers fails to provide the Agent with the required written or telephonic notice (confirming promptly, but in no event later than one Business Day thereafter, in writing) on or prior to the third (3rd) Business Day prior to the expiration of the applicable Interest Period for a Libor Rate Loan, the Borrowers shall be deemed to have given written notice that such Loan shall be converted into a Prime Rate Loan on the last day of the applicable Interest Period. Notwithstanding anything contained herein to the contrary, there shall not be more than four (4) Revolving Credit Loans that are Libor Rate Loans outstanding at any time. Each written notice of any Libor Rate Loan shall be irrevocable and binding on the Borrowers and the Borrowers shall indemnify the Agent and the Banks against any loss or expense incurred by the Banks as a result of any failure by the Borrowers to consummate such transaction calculated as set forth in Section 2.11(c) hereof. (iii) Each Bank hereby authorizes the Agent to make all Loans that are requested by the Borrowers on the proposed date of disbursement. Upon receipt of a request to make, continue or convert a Revolving Credit Loan hereunder, the Agent shall promptly, but in no event later than 12:00 noon (Pittsburgh, Pennsylvania time) on the date of the receipt of such request, advise each of the Banks of the proposed date of disbursement, continuation or conversion, the amount and type of each such Revolving Credit Loan, the applicable Interest Period and the Bank's Commitment amount thereof. Each Bank shall remit its Commitment Percentage of the principal amount of each Revolving Credit Loan to the Agent at the Office of the Agent in immediately available funds no later than 2:00 p.m. (Pittsburgh, Pennsylvania time) on the applicable date of disbursement. If the amount of such Bank's Commitment Percentage is not made available to the Agent by such Bank on the applicable borrowing date, the Agent shall not be required to fund such Bank's Commitment Percentage of the Revolving Credit Loans on the applicable borrowing date; provided, however, the Agent may elect in its sole discretion to fund such Bank's Commitment Percentage on the applicable borrowing date, and such Bank shall be subject to the repayment obligations set forth below. (iv) The Agent may assume that each Bank has made or will make the proceeds of a Loan available to the Agent unless the Agent shall have been notified by such Bank on or before the later of (a) the close of business on the Business Day preceding the applicable borrowing date with respect to the Loan, or (b) one (1) hour before the time on which the Agent actually funds the proceeds of such Loan to the Borrowers (whether using its own funds pursuant to this subsection or using proceeds deposited with the Agent by the Banks and whether such funding occurs before or after the time on which the Banks are required to deposit the proceeds of such Loan with the Agent). The Agent may, in reliance upon such assumption (but shall not be required to), make available to the Borrowers a corresponding amount. If such corresponding amount is not in fact made available to the Agent by such Bank, the Agent shall be entitled to recover such amount on demand from such Bank (or, if such Bank fails to pay such amount, forthwith upon such demand from the Borrowers) together with interest thereon, in respect of each day during the period commencing on the date such amount was made -16- available to the Borrowers and ending on the date the Agent recovers such amount, at a rate per annum equal to (y) the Prime Rate during the first three (3) days after such interest shall begin to accrue and (z) the Applicable Rate in respect of such Loan after the end of such three (3) day period. (d) Maximum Principal Balance of Revolving Credit Loans and Letter of Credit Undrawn Availability. The sum of the aggregate principal amount of all Revolving Credit Loans outstanding, the sum of the aggregate principal amount of all Swing Line Loans outstanding and the aggregate Letter of Credit Undrawn Availability shall not exceed the amount of the Revolving Credit Facility Commitment. The Borrowers agree that if at any time the sum of the aggregate principal amount of all Revolving Credit Loans outstanding, the sum of the aggregate principal amount of all Swing Line Loans outstanding and the aggregate Letter of Credit Undrawn Availability exceeds the amount of the Revolving Credit Facility Commitment (the "Excess Amount"), the Borrowers shall promptly, but in no event later than one (1) Business Day thereafter, pay to the Agent (for the ratable benefit of the Banks) such Excess Amount. If not sooner paid, the entire principal balance of all outstanding Revolving Credit Loans, together with all unpaid accrued interest thereon, and all other sums and costs owed to the Agent and the Banks by the Borrowers pursuant to this Agreement, shall be immediately due and payable on the Expiry Date, without notice, presentment or demand of any kind. 2.01.5 Swing Line Loan Facility. (a) Swing Line Loans. Subject to the terms and conditions and relying upon the representations and warranties set forth in this Agreement and the other Loan Documents, the Swing Line Lender may, in its sole and absolute discretion, make available to the Borrowers at any time and from time to time during the period from the Closing Date through and including the Business Day immediately preceding the earlier of (i) the date upon which the aggregate unpaid principal balance of the Swing Line Loans become due and payable by demand or (ii) the Expiry Date, by making Swing Line Loans to the Borrowers in an aggregate principal amount not exceeding at any one time outstanding Five Million and 00/100 Dollars ($5,000,000.00) (the "Swing Line Loan Facility"). If not sooner paid, each Swing Line Loan, all unpaid interest thereon and all other sums and costs incurred hereunder with respect to such Swing Line Loan shall be immediately due and payable on the earlier of (i) thirty (30) Business Days from the date such Swing Line Loan was made, (ii) demand or (iii) the Expiry Date, without notice, presentment or demand (unless payable by demand). Within the limits of time and amount set forth in this Section 2.01.5, and subject to the provisions of this Agreement including, without limitation, the Swing Line Lender's right to demand repayment of the Swing Line Loans at any time with or without the occurrence of an Event of Default, the Borrowers may borrow, repay and reborrow under this Section 2.01.5. (b) Swing Line Note. The obligation of the Borrowers to repay the unpaid principal amount of the Swing Line Loans made to the Borrowers by the Swing Line Lender and to pay interest on the unpaid principal amount thereof will be evidenced by the Swing Line Note of the Borrowers. The executed Swing Line Note will be delivered by the Borrowers to the Swing Line Lender on the Closing Date. -17- (c) Making Swing Line Loans. Subject to the terms and conditions set forth in this Agreement and the other Loan Documents, and provided that the Borrowers have satisfied all applicable conditions specified in Article IV hereof, the Swing Line Lender may, in its sole and absolute discretion, make Swing Line Loans to the Borrowers on such Business Day and in such amount as (i) an Authorized Representative of the Borrowers shall request by written or telephonic notice (confirmed promptly, but in no event later than one (1) Business Day thereafter in writing) received by the Swing Line Lender no later than 10:00 a.m. (Pittsburgh, Pennsylvania time) on the date of requested disbursement of the Swing Line Loan or (ii) otherwise agreed to by the Borrowers and the Swing Line Lender in accordance with the Cash Management Master Agreement, dated March 24, 2003, by and among the Swing Line Lender and the Borrowers which incorporates by reference the Cash Sweep Terms and Conditions executed by the Borrowers and accepted by the Swing Line Lender on March 24, 2003 (collectively, the "Cash Management Agreement"). Subject to the terms and conditions of this Agreement and the terms and conditions of the Cash Management Agreement, on each borrowing date, the Swing Line Lender shall make the proceeds of the Swing Line Loan available to the Borrowers at the Swing Line Lender's Office in immediately available funds not later than 2:00 p.m., Pittsburgh, Pennsylvania time. Notwithstanding anything contained herein, the Swing Line Lender shall notify the Borrowers prior to terminating the Swing Line Loan Facility and/or the services provided under the Cash Management Agreement. The Swing Line Lender shall give notice to the Agent no later than 10:00 a.m. (Pittsburgh, Pennsylvania time) of the next Business Day or such other time as the Agent and the Swing Line Lender may agree of the amount of each such Swing Line Loan. (d) Refunded Swing Line Loans. With respect to any Swing Line Loans, the Swing Line Lender may, at any time in its sole and absolute discretion, deliver to the Agent (with a copy to the Borrowers), no later than 10:00 a.m. (Pittsburgh, Pennsylvania time) on the first (1st) Business Day immediately preceding the proposed date of disbursement, a notice (which shall be deemed to be a notice of borrowing given by an Authorized Representative) requesting the Banks to make Revolving Credit Loans that are Prime Rate Loans on such date in an amount equal to the amount of such Swing Line Loans outstanding on the date such notice is given which the Swing Line Lender requests the Banks to prepay (the "Refunded Swing Line Loans"). Anything contained in this Agreement to the contrary notwithstanding, (i) the proceeds of such Revolving Credit Loans made by Banks other than the Swing Line Lender shall be immediately delivered by the Agent to the Swing Line Lender (and not to the Borrowers) and applied to repay a corresponding portion of the Refunded Swing Line Loans and (ii) on the day such Revolving Credit Loans are made, the Swing Line Lender's Pro Rata Share of the Refunded Swing Line Loans shall be deemed to be paid with the proceeds of a Revolving Credit Loan made by the Swing Line Lender, and such portion of the Swing Line Loans deemed to be so paid shall no longer be outstanding as Swing Line Loans and shall no longer be due under the Swing Line Note of the Swing Line Lender but shall instead constitute part of the Swing Line Lender's outstanding Revolving Credit Loans and shall be due under the Revolving Credit Note of the Swing Line Lender. Anything contained herein to the contrary notwithstanding, each Bank's obligation to make Revolving Credit Loans for the purpose of repaying any Refunded Swing Line Loans pursuant to the immediately preceding paragraph shall be absolute and unconditional and shall not be affected by any circumstance, including (a) any set-off, counterclaim, -18- recoupment, defense or other right which such Bank may have against the Swing Line Lender, the Borrowers or any other Person for any reason whatsoever; (b) the occurrence or continuation of an Event of Default or a Potential Default; (c) any Material Adverse Change; (d) any breach of this Agreement or any other Loan Document by the Borrowers; or (e) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing; provided that such obligations of each Bank are subject to the condition that (X) the Swing Line Lender believed in good faith that all conditions under Article IV to the making of the applicable Swing Line Loans were satisfied at the time such Swing Line Loans were made or (Y) the satisfaction of any such condition not satisfied had been waived in writing by the Banks prior to or at the time such Swing Line Loans were made. 2.02 Interest Rates. (a) Interest on the Revolving Credit Loans and Swing Line Loans. Subject to the terms and conditions of this Agreement, the aggregate outstanding principal balance of the Swing Line Loans shall be Libor Advantage Rate Loans which shall bear interest during each applicable Libor Advantage Loan Interest Period at the Libor Advantage Rate plus the Applicable Libor Margin as determined below and the aggregate outstanding principal balance of the Revolving Credit Loans shall be, at the option of the Borrowers as selected pursuant to Section 2.01(c) hereof, (x) Prime Rate Loans which shall bear interest for each day at the rates set forth below or (y) Libor Rate Loans which shall bear interest during each applicable Interest Period at the rates set forth below: (i) Subject to the terms and conditions of this Agreement, on the Closing Date and through the day immediately preceding the first Incentive Pricing Effective Date, (x) Revolving Credit Loans that are Prime Rate Loans shall bear interest for each day at a rate per annum equal to the Prime Rate plus the Applicable Prime Margin corresponding to Tier I as set forth below, (y) Revolving Credit Loans that are Libor Rate Loans shall bear interest during each applicable Interest Period at a rate per annum equal to the Libor Rate plus the Applicable Libor Margin corresponding to Tier I as set forth below, and (z) Swing Line Loans shall bear interest during each applicable Libor Advantage Loan Interest Period at a rate per annum equal to the Libor Advantage Rate plus the Applicable Libor Margin corresponding to Tier I as set forth below; (ii) Subject to the terms and conditions of this Agreement, during each Fiscal Quarter, in accordance with Section 5.01(b) hereof, the Borrowers shall submit to the Agent and the Banks quarterly financial statements (the Fiscal Quarter in which such financial statements are required to be received by the Agent and the Banks is the "Reporting Quarter") as of the last day of the Fiscal Quarter immediately preceding such Reporting Quarter (with respect to any Reporting Quarter, the Fiscal Quarter immediately preceding such Reporting Quarter is the "Measurement Quarter"). Upon receipt of such quarterly financial statements by the Agent and the Banks in accordance with Section 5.01(b), the Borrowers' Leverage Ratio shall be calculated as of the last day of the Measurement Quarter ending September 30, 2004 and as of the last day of each Measurement Quarter thereafter. From the first day of the first full calendar month following the Agent's and the Banks' receipt of such quarterly financial statements (the "Incentive Pricing Effective Date") until the next Incentive Pricing Effective Date, (x) Prime Rate Loans shall bear interest for each day at a rate -19- per annum equal to the Prime Rate plus the applicable margin determined by reference to the Borrowers' Leverage Ratio as set forth below (the "Applicable Prime Margin"), (y) Libor Rate Loans shall bear interest during each applicable Interest Period at a rate per annum equal to the Libor Rate plus the applicable margin determined by reference to the Borrowers' Leverage Ratio as set forth below (the "Applicable Libor Margin") and (z) Libor Advantage Rate Loans shall bear interest during each applicable Libor Advantage Loan Interest Period at a rate per annum equal to the Libor Advantage Rate plus the Applicable Libor Margin:
Applicable Applicable Applicable Tier Leverage Ratio Libor Margin Prime Margin L/C Margin - ---- -------------- ------------ ------------ ---------- I < 0.75 1.00% 0.00% 1.00% II > or = 0.75 < 1.25 1.375% 0.00% 1.375% III > or = 1.25 < 1.75 1.75% 0.00% 1.75% IV > or = 1.75 < 2.25 2.00% 0.00% 2.00% V > or = 2.25 2.25% 0.00% 2.25%
(iii) Subject to the terms and conditions of this Agreement, in the event that the Borrowers fail to timely deliver the financial statements required by Section 5.01(b) hereof, the Applicable Margin shall be the amount corresponding to Tier V until the delivery of such financial statements. (b) Calculation of Interest and Fees; Adjustment to Prime Rate. Interest on the Loans, unpaid fees and other sums payable hereunder shall be computed on the basis of a year of three hundred sixty (360) days and paid for the actual number of days elapsed. In the event of any change in the Prime Rate, the rate of interest applicable to each Prime Rate Loan shall be adjusted to immediately correspond with such change; provided, however, that any interest rate charged hereunder shall not exceed the Maximum Rate. (c) Interest After Maturity or Default; Interest Laws. Upon the occurrence and during the continuance of an Event of Default, (i) the unpaid principal amount of the Loans or any portion thereof, accrued interest thereon, any fees or any other sums payable hereunder shall thereafter until paid in full bear interest at a rate per annum equal to the Applicable Rate plus two percent (2.00%); (ii) each Libor Rate Loan shall automatically convert into a Prime Rate Loan at the end of the applicable Interest Period; and (iii) no Loans may be made as, continued as or converted into a Libor Rate Loan. Notwithstanding any provisions to the contrary contained in this Agreement or any other Loan Document, the Borrowers shall not be required to pay, and the Banks shall not be permitted to collect, any amount of interest in excess of the maximum amount of interest permitted by applicable Law ("Excess Interest"). If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Agreement or in any other Loan Document, then, in such event: (1) the provisions of this subsection shall govern and control; (2) the Borrowers shall not be obligated to pay any Excess Interest; (3) any Excess Interest that any Bank may have received hereunder shall be, at the Majority Banks' option, (a) applied as a credit against the outstanding principal balance of the Indebtedness evidenced by the Notes or accrued and unpaid interest thereon (not to exceed the maximum amount permitted by Law), (b) refunded to the payor thereof, or (c) any combination of the foregoing; (4) the interest rate(s) provided for herein shall be automatically reduced to the -20- maximum lawful rate allowed from time to time under applicable Law (the "Maximum Rate"), and this Agreement and the other Loan Documents shall be deemed to have been and shall be, reformed and modified to reflect such reduction; and (5) the Borrowers shall have no action against the Agent or the Banks for any damages arising out of the payment or collection of any Excess Interest. 2.03 Interest Payments. The Borrowers shall pay to the Agent for the ratable account of the Banks interest on the aggregate outstanding balance of the Revolving Credit Loans which are Prime Rate Loans in arrears, on October 1, 2004 and on the first day of each calendar month thereafter through and including the Expiry Date. The Borrowers shall pay to the Agent for the ratable account of the Banks interest on the unpaid principal balance of the Revolving Credit Loans that are Libor Rate Loans on the earlier of (i) the last day of the applicable Interest Period for such Loan or (ii) for such Loans with an applicable Interest Period exceeding three (3) months, on each and every three (3) month anniversary of each such Loan during the period from the Closing Date to and including the Expiry Date. The Borrowers shall pay to the Swing Line Lender interest on the unpaid principal balance of the aggregate outstanding balance of the Swing Line Loans in arrears, on each Libor Advantage Loan Interest Payment Date through and including the earlier of demand or the Expiry Date. After maturity of any part of the Loans (whether upon the occurrence of an Event of Default, by acceleration, demand or otherwise), interest on such part of the Loans shall be immediately due and payable upon delivery by the Agent of an invoice for such interest without further notice, presentment, or demand of any kind. 2.04 Fees. (a) The Borrowers shall pay to the Agent for the account of each Bank, a non-refundable upfront fee in the amount of Ninety Thousand and 00/100 Dollars ($90,000.00). (b) The Borrowers shall pay to the Agent for the account of each Bank, (i) a commitment fee on the unused portion of the Revolving Credit Facility Commitment during the period from the date of this Agreement to the Expiry Date, payable quarterly in arrears on the first (1st) day of each October, January, April and July of each calendar year and on the Expiry Date. Such fee shall be equal to the amount by which the amount of each Bank's Commitment has exceeded the average daily closing principal balance of the sum of such Bank's Revolving Credit Loans (for purposes of this computation, the Swing Line Loans shall be deemed to be borrowed amounts under the Revolving Credit Commitment of Citizens) plus its Pro Rata Share of the Letter of Credit Undrawn Availability during the preceding calendar quarter, multiplied by three-eights of one percent (0.375%), multiplied by a fraction, the numerator of which is the actual number of days in such calendar quarter and the denominator of which is three hundred sixty (360); and (ii) the Letter of Credit Commission pursuant to Section 2.06 hereof. (c) The Borrowers shall pay to the Agent for its own account the fees described in the first sentence of Section 2.06 hereof and in that certain fee letter of even date herewith by and among the Borrowers and the Agent in the amounts, and at the times, specified therein. -21- 2.05 Agreement to Issue Letters of Credit. From time to time during the period from the Closing Date to the thirtieth (30th) day preceding the Expiry Date, subject to the further terms and conditions hereof, including those required in connection with the making of Revolving Credit Loans, the Agent shall issue standby letters of credit or trade letters of credit (collectively with the Existing Letters of Credit, the "Letters of Credit") for the account of the Borrowers in an amount not to exceed Fifteen Million and 00/100 Dollars ($15,000,000.00) in the aggregate as a subfacility of the Revolving Credit Facility Commitment; provided, however, that on any date on which the Borrowers request a Letter of Credit, and after giving effect to the Letter of Credit Face Amount of such Letter of Credit, the sum of all Revolving Credit Loans outstanding, the sum of all Swing Line Loans outstanding and the Letter of Credit Undrawn Availability shall not exceed the Revolving Credit Facility Commitment. All such Letters of Credit shall be issued by the Agent in accordance with its then current practice relating to the issuance of letters of credit including, but not limited to, the execution and delivery to the Agent of applications and agreements required by the Agent and the payment by the Borrowers of all applicable fees with respect thereto. As of the date hereof, those letters of credit set forth on Schedule 2.05 hereof (collectively, the "Existing Letters of Credit"), which were issued under the Existing Loan Agreement and are outstanding on the date hereof, will be deemed to be Letters of Credit issued and outstanding hereunder. Each request for a Letter of Credit shall be delivered to the Agent no later than 10:00 a.m. (Pittsburgh, Pennsylvania time) on the second (2nd) Business Day, or such shorter period as may be agreed to by the Agent, prior to the proposed date of issuance. Each such request shall be in a form acceptable to the Agent and specify the Letter of Credit Face Amount thereof, the account party, the beneficiary, the intended date of issuance, the expiry date thereof, and the nature of the transaction to be supported thereby. All such Letters of Credit shall be issued by the Agent in accordance with its then current practice relating to the issuance of Letters of Credit including, but not limited to, the execution and delivery to the Agent of applications and agreements required by the Agent and the payment by the Borrowers of all applicable fees required by Section 2.06 hereof. Immediately upon the issuance of each Letter of Credit, each Bank shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Agent a participation in such Letter of Credit and each drawing thereunder in an amount equal to such Bank's Pro Rata Share of the Letter of Credit Face Amount of such Letter of Credit; provided, that the Agent believed in good faith that all conditions under Article IV to the issuing of such Letter of Credit were satisfied at the time such Letter of Credit was issued or the satisfaction of any such condition not satisfied had been waived in writing by the Banks prior to or at the time such Letter of Credit was issued. The Agent shall promptly, but in any event not later than the next Business Day, provide to each Bank notice of each such request for a Letter of Credit by the Borrowers. 2.06 Letter of Credit Fees. The Borrowers shall pay to the Agent for its own account (a) a fronting fee for each Letter of Credit issued hereunder, such fee shall be equal to one-eighth of one percent (0.125%) of the daily average Letter of Credit Undrawn Availability during the preceding calendar quarter, payable quarterly in arrears beginning on October 1, 2004 and continuing on the first (1st) day of each January, April, July and October thereafter and on the Expiry Date, (b) the Agent's standard amendment fees for each Letter of Credit issued hereunder, such fee to be paid on the date of the amendment of such Letter of Credit and (c) any reasonable out-of-pocket expenses and costs incurred by the Agent for the issuance of any Letter -22- of Credit issued hereunder, such fees to be paid on the day of issuance of such Letter of Credit. The Borrowers shall also pay to the Agent for the ratable account of the Banks a fee (the "Letter of Credit Commission") equal to the daily average Letter of Credit Undrawn Availability multiplied by the applicable margin determined by reference to the Borrowers' Leverage Ratio as set forth in Section 2.02(a)(ii) hereof (the "Applicable L/C Margin"), such fee to be paid quarterly in arrears beginning on October 1, 2004 and continuing on the first (1st) day of each January, April, July and October thereafter and on the Expiry Date. Notwithstanding the foregoing, after the occurrence and during the continuance of an Event of Default, the Letter of Credit Commission shall be increased by two percent (2.00%) per annum. 2.07 Payments Under Letters of Credit. Upon a draw under any Letter of Credit, the Borrowers shall immediately, but in any event not later than the end of such Business Day, reimburse the Agent for such drawing under a Letter of Credit. If (i) the Borrowers shall not have reimbursed the Agent for such drawing under such Letter of Credit by the end of such Business Day, (ii) the Agent must for any reason return or disgorge such reimbursement, or (iii) the Borrowers are required to make a payment under Section 7.02(a)(ii) hereof and fail to make such payment, then the amount of each unreimbursed drawing under such Letter of Credit and payment required to be made under Section 7.02(a)(ii) hereof shall automatically be converted into a Revolving Credit Loan which shall be a Prime Rate Loan made on the date of such drawing for all purposes of this Agreement. The Borrowers' obligation to reimburse the Agent with respect to each drawing under a Letter of Credit shall be absolute and unconditional. 2.08 Period of Issuance and Term of Letters of Credit. Letters of Credit shall only be issued by the Agent for the account of the Borrowers for such terms which expire at least ten (10) days prior to the Expiry Date. 2.09 Booking of Libor Rate Loans. Each Bank may make, carry or transfer Libor Rate Loans at, to or for the account of, any of its branch offices or the office of an affiliate of such Bank; provided, however, that no such action shall result in increased liability or cost to the Borrowers, including any increased liability or cost pursuant to Section 2.11 or 2.12 hereof. 2.10 Assumptions Concerning Funding of Libor Rate Loans. Calculation of all amounts payable to each Bank under Section 2.11(c) shall be made as though each Bank had actually funded its relevant Libor Rate Loan through the purchase of a Libor deposit bearing interest at the Libor Rate in an amount equal to the amount of that Libor Rate Loan and having maturity comparable to the relevant Interest Period and through the transfer of such Libor deposit from an offshore office to a domestic office in the United States of America; provided, however, that each Bank may fund each of its Libor Rate Loans in any manner it sees fit and the foregoing assumption shall be utilized only for the calculation of amounts payable under Section 2.11(c). 2.11 Additional Costs. (a) If, due to either (i) the introduction of, or any change in, or in the interpretation of, any Law or (ii) the compliance with any guideline or request from any central bank or other Official Body (whether or not having the force of Law), there shall be any increase in the cost to, or reduction in income receivable by, a Bank of making, funding or maintaining Loans (or commitments to make the Loans), then the Borrowers shall from time to time, upon -23- demand by such Bank made within a reasonable time after such Bank's determination thereof, pay to the Agent for the account of such Bank additional amounts sufficient to reimburse such Bank for any such additional costs or reduction in income. All such additional amounts shall be determined by such Bank in good faith using appropriate attribution and averaging methods ordinarily employed by such Bank. A certificate of such Bank submitted to the Borrowers in good faith as to the amount of such additional costs shall be presumptive evidence of such amount. Within ten (10) Business Days after the Agent or such Bank notifies the Borrowers in writing of any such additional costs pursuant to this Section 2.11(a), the Borrowers may (A) repay in full all Loans of any types so affected then outstanding, together with interest accrued thereon to the date of such repayment, or (B) convert all Loans of any types so affected then outstanding into Loans of any other type not so affected upon not less than four (4) Business Days' notice to the Agent. If any such repayment or conversion of any Libor Rate Loan occurs on any day other than the last day of the applicable Interest Period for such Loan, the Borrowers also shall pay to the Agent for the ratable account of the Banks such additional amounts as set forth in Section 2.11(c). (b) If either (i) the introduction of, or any change in, or in the interpretation of, any Law or (ii) the compliance with any guideline or request from any central bank or other Official Body (whether or not having the force of Law), affects the amount of capital required to be maintained by any Bank or any corporation controlling any Bank and such Bank reasonably determines in good faith that the amount of such capital is increased by or based upon the existence of the Loans (or commitment to make the Loans), then, within ten (10) Business Days of demand by such Bank, the Borrowers shall pay to the Agent for the account of such Bank from time to time as specified by such Bank, additional amounts sufficient to compensate such Bank in the light of such circumstances, to the extent that such Bank reasonably determines in good faith such increase in capital to be allocable to the existence of such Bank's Loans (or commitment to make the Loans). Any such demand by a Bank must be made by such Bank within a reasonable time. A certificate of such Bank in good faith submitted to the Borrowers as to such amounts shall be presumptive evidence of such amounts. Within ten (10) Business Days after the Agent or such Bank notifies the Borrowers in writing of any such additional costs pursuant to this Section 2.11(b), the Borrowers may (A) repay in full all Loans of any types so affected then outstanding, together with interest accrued thereon to the date of such prepayment, or (B) convert all Loans of any types so affected then outstanding into Loans of any other type not so affected upon not less than four (4) Business Days' notice to such Bank. If any such prepayment or conversion of any Libor Rate Loan occurs on any day other than the last day of the applicable Interest Period for such Loan, the Borrowers also shall pay to the Agent for the ratable account of the Banks such additional amounts as set forth in Section 2.11(c). (c) If the Borrowers shall repay any Libor Rate Loan on a day other than the last day of the applicable Interest Period for such Loan (whether such repayment is (i) permitted by this Section 2.11 or Section 2.12, (ii) permitted as a result of the failure of the Borrowers to consummate a transaction after providing notice as set forth in Section 2.01(c)(ii), (iii) otherwise permitted by a Bank, or (iv) otherwise required under the terms of this Agreement), the Borrowers shall within ten (10) Business Days of written demand pay to the Agent for the ratable benefit of the Banks such additional amounts reasonably determined by the Banks in good faith to be sufficient to indemnify the Banks against any loss, cost, or expense incurred by the Banks as a result of such prepayment including, without limitation, any loss -24- (including loss of anticipated profits), costs or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by the Banks to fund such Loan, and a certificate as to the amount of any such loss, cost or expense submitted by any Bank to the Borrowers in good faith shall be presumptive evidence of such amount. 2.12 Illegality; Impracticability. Notwithstanding any other provision contained in this Agreement, if: (a) it is unlawful, or any central bank or other Official Body shall determine that it is unlawful, for the Agent or any Bank to perform its obligations hereunder to make, continue, or convert Loans hereunder; or (b) on any date on which a Libor Rate would otherwise be set, any Bank shall have in good faith determined (which determination shall be conclusive absent manifest error) that (i) adequate and reasonable means do not exist for ascertaining a Libor Rate, (ii) a contingency has occurred which materially and adversely affects the interbank markets, or (iii) the effective cost to such Bank of funding a proposed Libor Rate Loan exceeds the Libor Rate then (y) upon written notice thereof by the Agent or such Bank to the Borrowers, the obligation of such Bank to make or continue a Loan of a type so affected or to convert any type of Loan into a Loan of a type so affected shall terminate and the Banks shall thereafter be obligated to make Prime Rate Loans whenever any written notice requests any type of Loans so affected and (z) upon written demand therefor by such Bank to the Borrowers, the Borrowers shall (i) forthwith prepay in full all Loans of the type so affected then outstanding, together with interest accrued thereon or (ii) request that such Bank, upon five (5) Business Days' notice, convert all Loans of the type so affected then outstanding into Loans of a type not so affected. If any such prepayment or conversion of any Libor Rate Loan occurs on any day other than the last day of the applicable Interest Period for such Loan, the Borrowers also shall pay to the Agent for the ratable benefit of the Banks such additional amounts as set forth in Section 2.11(c). 2.13 Payments. All payments to be made with respect to principal, interest, fees or other amounts due from the Borrowers under this Agreement or under the Notes are payable at 12:00 noon (Pittsburgh, Pennsylvania time), on the day when due, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, and an action for the payments will accrue immediately. All such payments must be made to the Agent at its Office in U.S. Dollars and in funds immediately available at such Office, without setoff, counterclaim or other deduction of any nature. The Agent may in its discretion deduct such payments from the Borrowers' demand or deposit accounts with Agent if not paid within five (5) days after the due date. All such payments shall be applied at the option of the Agent and the Banks to accrued and unpaid interest, outstanding principal and other sums due under this Agreement in such order as the Agent and the Banks, in their sole discretion, shall elect. All such payments shall be made absolutely net of, without deduction or offset, and altogether free and clear of any and all present and future taxes, levies, deductions, charges, and withholdings and all liabilities with respect thereto, excluding income and franchise taxes imposed on the Banks under the Laws of the United States or any state or political subdivision thereof. If the Borrowers are compelled by Law to deduct any such taxes or levies (other than such excluded taxes) or to make any such other deductions, charges, or withholdings (collectively, the "Required Deductions"), the Borrowers will pay to the Agent for the ratable benefit of the Banks an additional amount equal to the sum of (i) the aggregate amount of all Required Deductions and (ii) the aggregate amount of United States federal or state income taxes required to be paid by the Banks in respect of such Required Deductions. -25- 2.14 Loan Account. The Agent will open and maintain on its books and records, including computer records, in accordance with its customary procedures, a loan account (the "Loan Account") for the Borrowers in which shall be recorded the date and amount of each Loan made by the Banks and the date and amount of each payment and prepayment in respect thereof. The Agent shall record in the Loan Account the principal amount of the Loans owing to each Bank from time to time. The Loan Account for the Borrowers will be presumptive evidence as to the information contained therein. Any failure by the Agent to make any such notation or record shall not affect the obligations of the Borrowers to the Banks with respect to the Loans. 2.15 Estoppel. As further consideration for the entry of the Banks into this Agreement, the Borrowers hereby represent and warrant that they do not presently have any claims or actions of any kind at Law or in equity against Citizens or Fifth Third arising out of or in any way relating to the Existing Loan Agreement or any related documents with respect thereto, the transactions referenced in or contemplated by this Agreement or any acts, transactions, or events that are or were the subject matter of any other prior loans, agreements or guaranties involving one or more of the Borrowers and Citizens or Fifth Third. ARTICLE III REPRESENTATIONS AND WARRANTIES The Borrowers represent and warrant to the Agent and the Banks that: 3.01 Organization and Qualification. The Borrowers and their Subsidiaries are corporations duly organized, validly existing and in good standing under their respective jurisdictions of incorporation. Except to the extent that the failure to be so qualified or licensed would not have a Material Adverse Effect, the Borrowers and their Subsidiaries are duly qualified or licensed to do business as a foreign corporation or partnership and are in good standing in all jurisdictions in which the ownership of their properties or the nature of their activities or both makes such qualification or licensing necessary. 3.02 Power to Carry on Business; Licenses. Each Borrower and its Subsidiaries have all requisite power and authority to own and operate its properties and to carry on its business as now conducted and as presently planned to be conducted. Except to the extent that the failure to have any such license, permit, consent or approval would not have a Material Adverse Effect, each Borrower and its Subsidiaries have all licenses, permits, consents and governmental approvals or authorizations necessary to carry on its business as now conducted and as presently planned to be conducted. 3.03 Execution and Binding Effect. This Agreement, the Notes, and the other Loan Documents to which the Borrowers are a party have been duly authorized by all appropriate corporate action of each Borrower, have been duly and validly executed and delivered by each Borrower which is a party thereto, and each such document or agreement constitutes a legal, valid and binding obligation of such Borrowers, enforceable against each such Borrower in accordance with its terms. -26- 3.04 Absence of Conflicts. Neither the execution and delivery of this Agreement or the other Loan Documents, nor the consummation of the transactions contemplated in any of them, nor the performance of or compliance with their terms and conditions will (a) violate any Law, (b) conflict with or result in a breach of or a default under the articles or certificate of incorporation or by-laws of any Borrower, (c) conflict with or result in a breach or a default under any material agreement or instrument to which any Borrower or its Subsidiaries is a party or by which any of them or any of their properties (now owned or acquired in the future) may be subject or bound or (d) result in the creation or imposition of any material Lien upon any property (owned or leased) of any Borrower or its Subsidiaries. 3.05 Authorizations and Filings. No authorization, consent, approval, license, exemption or other action by, and no registration, qualification, designation, declaration or filing with, any Official Body is or will be necessary or advisable in connection with the execution and delivery of this Agreement or the other Loan Documents, the consummation of the transactions contemplated in any of them, or the performance of or compliance with the terms and conditions of this Agreement or the other Loan Documents. 3.06 Title to Property. Each Borrower and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all other property purported to be owned by it, including that reflected in the most recent balance sheet referred to in Section 3.07 of this Agreement or submitted pursuant to Section 5.01(a) of this Agreement (except as sold or otherwise disposed of in the ordinary course of business), subject only to Liens not forbidden by Section 6.01 of this Agreement. 3.07 Financial Statements. (a) The Borrowers have delivered to the Agent and the Banks a Consolidated balance sheet and related statements of income, retained earnings and cash flow of the Borrowers and their Subsidiaries for the fiscal year ending December 31, 2003, as audited by PricewaterhouseCoopers LLP without qualification. Such financial statements (including the notes) present fairly the Consolidated financial condition of the Borrowers and their Subsidiaries as of the end of such fiscal period and the results of their operations and the changes in financial position for the fiscal period then ended, all in accordance with GAAP applied consistently with that of the preceding fiscal year. (b) The Borrowers have delivered to the Agent and the Banks the internally prepared Consolidated and consolidating balance sheets and related statements of income and cash flow of the Borrowers and their Subsidiaries that the Borrowers used to prepare the Borrowers' and their Subsidiaries' quarterly financial results as of, and for the Fiscal Quarter ending, June 30, 2004, as set forth in their 10-Q reports. Such financial statements provided by the Borrowers present fairly the financial position of each Borrower and its Subsidiaries as of the end of such period and the results of their operations and their cash flow for the period then ended, all in conformity with sound accounting principles, applied on a basis consistent with that of the preceding fiscal periods. 3.08 Taxes. All tax returns required to be filed by each Borrower and its Subsidiaries have been properly prepared, executed and filed. Except as may be permitted under -27- Section 5.05 hereof, all material taxes, assessments, fees and other governmental charges upon each Borrower and its Subsidiaries or upon any of their properties, income, sales or franchises which are due and payable have been paid. The reserves and provisions for taxes on the books of the Borrowers and their Subsidiaries are adequate for all open years and for the current fiscal period. No Borrower knows of any proposed additional material assessment or basis for any material assessment for additional taxes (whether or not reserved against). 3.09 Litigation. Except as reflected in MBC's most recent periodic reports filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, copies of which have been delivered to the Agent and the Banks and, except as set forth on Schedule 3.09 hereto, there is no pending, or to the best knowledge of MBC, contemplated or threatened, action, suit or proceeding by or before any Official Body against or affecting any Borrower or its Subsidiaries, at Law or equity, which, if adversely decided, would have a Material Adverse Effect. 3.10 Compliance with Laws. To the best of MBC's knowledge, except as set forth in Schedule 3.10 hereto, no Borrower nor any Subsidiary of a Borrower is in violation of or subject to any material contingent liability on account of any Law which in the aggregate would have a Material Adverse Effect. 3.11 Pension Plans. Except as described in Schedule 3.11 to this Agreement, (a) each Plan has been and will be maintained and funded in all material respects in accordance with its terms and with all provisions of ERISA and other applicable Laws; (b) no Reportable Event which could have a Material Adverse Effect, has occurred and is continuing with respect to any Plan; (c) no material liability to the PBGC has been incurred and is outstanding with respect to any Plan, other than for premiums due and payable; (d) no Plan has been terminated, no proceedings have been instituted to terminate any Plan, and there exists no intent to terminate or institute proceedings to terminate any Plan where such termination would have a Material Adverse Effect; (e) no withdrawal, either complete or partial, has occurred or commenced with respect to any multi-employer Plan, and there exists no intent to withdraw either completely or partially from any multi-employer Plan; and (f) there has been no cessation of, and there is no intent to cease, operations at a facility or facilities where such cessation could reasonably be expected to result in a separation from employment of more than 20% of the total number of employees who are participants under a Plan. 3.12 Patents, Licenses, Franchises. The Borrowers and their Subsidiaries own or possess the right to use all of the material patents, trademarks, service marks, trade names, copyrights, licenses, franchises and permits and rights with respect to the foregoing necessary to own and operate their properties and to carry on their businesses as presently conducted and presently planned to be conducted without conflict with the rights of others. There are no currently pending or, to the best knowledge of MBC, threatened claims with respect to infringement by or against any Borrower or any Subsidiary of a Borrower of any of the foregoing. -28- 3.13 Environmental Matters. Except as set forth in Schedule 3.13 hereof, (a) To the best knowledge of MBC, no Borrower nor any Subsidiary of a Borrower is in violation of The Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986, The Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, The Clean Water Act, The Toxic Substances Control Act and The Clean Air Act or any rule or regulation promulgated pursuant to any of the foregoing statutes, or any other federal, state or local environmental Law applicable to any Borrower, its Subsidiaries, or their respective properties (all of the foregoing are sometimes collectively referred to in this Section 3.13 as the "Environmental Laws") except to the extent that such violations in the aggregate would not have a Material Adverse Effect; (b) To the best knowledge of MBC, neither the Borrowers, their Subsidiaries nor any of their Affiliates, directors, officers, employees, agents or independent contractors have arranged, by contract, agreement or otherwise, (i) for the disposal or treatment of, or (ii) with a transporter for the transport, disposal or treatment of, any Hazardous Substance (as defined by CERCLA, as amended), owned, used or possessed by any Borrower or any Subsidiary of a Borrower, whether or not to a location identified by the Environmental Protection Agency (the "EPA") on the National Priorities List, 40 C.F.R. Part 300 (or proposed by the EPA in the Federal Register for listing on such National Priorities List) or identified under any corresponding state Law concerning cleanup of waste disposal sites (a "State Superfund Law") except to the extent that the same has been performed in compliance with all Environmental Laws, the non-compliance with which in the aggregate would not have a Material Adverse Effect; (c) To the best knowledge of MBC, no predecessor of a Borrower has arranged by contract, agreement or otherwise, (i) for the disposal or treatment of, or (ii) with a transporter for transport for the disposal or treatment of, any Hazardous Substance, owned, used or possessed by the predecessor, except to the extent that the same has been performed in compliance with all Environmental Laws, the non-compliance with which in the aggregate would not have a Material Adverse Effect; (d) Neither the Borrowers, their Subsidiaries nor any of their Affiliates "owned" or "operated" any "facility" at the time any Hazardous Substances were disposed of at such facility within the meaning of CERCLA, as amended, or any State Superfund Law in violation of any applicable Environmental Laws except to the extent that such violations would not have a Material Adverse Effect. 3.14 Proceeds. The Borrowers will use the proceeds of the Revolving Credit Loans to refinance the Indebtedness under the Existing Loan Agreement and for general corporate and working capital purposes. 3.15 Margin Stock. The Borrowers will make no borrowing under this Agreement for the purpose of buying or carrying any "margin stock", as such term is used in Regulation U and related regulations of the Board of Governors of the Federal Reserve System, as amended from time to time. No Borrower owns any "margin stock". No Borrower is engaged -29- in the business of extending credit to others for such purpose, and no part of the proceeds of any borrowing under this Agreement will be used to purchase or carry any "margin stock" or to extend credit to others for the purpose of purchasing or carrying any "margin stock". 3.16 No Event of Default; Compliance with Material Agreements. No event has occurred and is continuing and no condition exists which constitutes an Event of Default or Potential Default. No Borrower nor any of its Subsidiaries is (i) in violation of any term of any charter instrument or bylaw or (ii) in default under any material agreement, lease or instrument to which it is a party or by which it or any of its properties (owned or leased) may be subject or bound. 3.17 No Material Adverse Change. Except as otherwise disclosed herein, since December 31, 2003, there has been no Material Adverse Change. 3.18 Subsidiaries. Schedule 3.18 to this Agreement sets forth each Subsidiary of each Borrower, the authorized and outstanding capital stock (or other equity interest) of such Subsidiary and the outstanding capital stock (or other equity interest) of such Subsidiary which is owned by any Borrower or any of its Subsidiaries. 3.19 Labor Controversies. There are no labor controversies pending or, to the best knowledge of the officers and directors of MBC, threatened, against any Borrower or any of its Subsidiaries which, if adversely determined, would have a Material Adverse Effect. 3.20 Solvency. After the making of the Loans, each Borrower (a) will be able to pay its debts as they become due, (b) will have funds and capital sufficient to carry on its business and all businesses in which it is about to engage, and (c) will own property having a value at both fair valuation and at fair saleable value in the ordinary course of its business greater than the amount required to pay its debts as they become due. No Borrower was insolvent immediately prior to the date of this Agreement and no Borrower will be rendered insolvent by the execution and delivery of this Agreement, the borrowing hereunder and/or the consummation of any transactions contemplated by this Agreement. 3.21 Governmental Regulation. The Borrowers are not subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or the Investment Company Act of 1940 or to any federal or state statute or regulation limiting its ability to incur Indebtedness for borrowed money. 3.22 Accurate and Complete Disclosure. No representation or warranty made by any Borrower under this Agreement, the other Loan Documents or the schedules and exhibits attached thereto, and to the best knowledge of the officers and directors of MBC, no statement made by any Borrower or its Subsidiaries in any financial statement (furnished pursuant to Sections 3.07 or 5.01 or otherwise), certificate, report, exhibit or document furnished by any Borrower or its Subsidiaries to the Agent or any Bank pursuant to or in connection with this Agreement is false or misleading (including by omission of information necessary to make such representation, warranty or statement not misleading) in any manner which would have a Material Adverse Effect. -30- 3.23 Anti-Terrorism Laws. (a) No Borrower nor any Affiliate of any Borrower, is in violation of any Anti-Terrorism Law or engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law. (b) No Borrower, nor or any Affiliate of any Borrower, or its respective agents acting or benefiting in any capacity in connection with the Loans or other transactions hereunder, is any of the following (each a "Blocked Person"): (i) a Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224; (ii) a Person owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224; (iii) a Person with which the Bank is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law; (iv) a Person that commits, threatens or conspires to commit or supports "terrorism" as defined in the Executive Order No. 13224; (v) a Person that is named as a "specially designated national" on the most current list published by the U.S. Treasury Department Office of Foreign Asset Control at its official website or any replacement website or other replacement official publication of such list; or (vi) a Person who is affiliated or associated with a person or entity listed above. (c) No Borrower or to the knowledge of any Borrower, any of its agents acting in any capacity in connection with the Loans or other transactions hereunder (i) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person, or (ii) deals in, or otherwise engages in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order No. 13224. ARTICLE IV CONDITIONS OF LENDING The obligation of the Banks to make any Loan is subject to the satisfaction of the following conditions: 4.01 Representations and Warranties: Events of Default and Potential Defaults. The representations and warranties contained in Article III shall be true and correct on and as of -31- the date of each Loan with the same effect as though made on and as of each such date. On the date of each Loan, no Event of Default and no Potential Default shall have occurred and be continuing or exist or shall occur or exist after giving effect to the Loan to be made on such date. Each request by the Borrowers for any Loan shall constitute a representation and warranty by the Borrowers that the conditions set forth in this Section 4.01 have been satisfied as of the date of such request. The failure of the Agent to receive notice from the Borrowers to the contrary before such Loan is made shall constitute a further representation and warranty by the Borrowers that the conditions referred to in this Section 4.01 have been satisfied as of the date such Loan is made. 4.02 Proceedings and Incumbency. As of the Closing Date, each Borrower shall have delivered to the Agent a certificate, in form and substance satisfactory to the Agent, dated as of the Closing Date and signed on behalf of such Borrower by the Secretary of such Borrower certifying as to (a) true copies of the articles of incorporation or certificate of incorporation, as the case may be, and bylaws of such Borrower as in effect on such date, (b) true copies of all corporate action taken by such Borrower relative to this Agreement, the Notes and the other Loan Documents including, but not limited to, that described in Section 3.03 of this Agreement, and (c) the names, true signatures and incumbency of the officers of such Borrower authorized to execute and deliver this Agreement, the Notes and the other Loan Documents. The Agent and the Banks may conclusively rely on each such certificate unless and until a later certificate revising the prior certificate has been furnished to the Agent. 4.03 Loan Documents. On or prior to the Closing Date, the Loan Documents, satisfactory in terms, form and substance to the Agent and the Banks, shall have been executed and delivered by the Borrowers to the Agent and the Banks. 4.04 Opinion of Counsel. On the Closing Date, there shall have been delivered to the Agent a written opinion, dated the Closing Date, of counsel to the Borrowers, in form and substance satisfactory to the Agent and the Banks. 4.05 Other Documents and Conditions. On or before the Closing Date, the following documents and conditions shall have been delivered to the Agent or satisfied by or on behalf of the Borrowers to the satisfaction of the Agent: (a) Good Standing Certificates. (i) A good standing certificate of each of the Borrowers certifying as to the good standing and corporate status of each such Borrower in its jurisdiction of incorporation; and (ii) good standing/foreign qualification certificates from each of the material jurisdictions in which such Borrower is qualified to do business. (b) Financial Statements. Financial statements in form and substance satisfactory to the Banks, as described in Section 3.07 of this Agreement. (c) Lien Searches. Copies of UCC searches conducted for each Borrower at each of its material locations and in the jurisdiction of incorporation of such Borrower and in the Commonwealth of Virginia for Michael Baker Jr., evidencing that no Liens exist against any Borrower except those Liens permitted by Section 6.01 of this Agreement. -32- (d) Termination Statements and Other Releases. Evidence satisfactory to the Agent that all necessary UCC-3 termination statements and other releases necessary to terminate any and all Liens with respect to the Borrowers that are not permitted pursuant to Section 6.01 hereof have been filed or satisfactory arrangements have been made for such filing. (e) No Material Adverse Change. No Material Adverse Change shall have occurred with respect to any Borrower since December 31, 2003. (f) Refinancing of Commitments under Existing Loan Agreement. The commitments of the banks party to the Existing Loan Agreement shall have been terminated and all Indebtedness incurred by the Borrowers thereunder shall have been paid in full. (g) Other Documents and Conditions. Such other documents and conditions as may reasonably be requested to be submitted to the Agent or any Bank by the terms of this Agreement or of any Loan Document or set forth on the Closing Checklist with respect to the transaction contemplated by this Agreement. 4.06 Details, Proceedings and Documents. All legal details and proceedings in connection with the transactions contemplated by this Agreement shall be reasonably satisfactory to the Agent and the Banks and the Agent and the Banks shall have received all such counterpart originals or certified or other copies of such documents and proceedings in connection with such transactions, in form and substance reasonably satisfactory to the Agent and the Banks, as the Agent and the Banks may request from time to time. 4.07 Fees and Expenses. The Borrowers shall have paid all reasonable fees and charges as required for the Closing and relating to the Closing, including reasonable legal fees, closing costs, filing and notary fees and any other similar matters pertinent to the Closing. ARTICLE V AFFIRMATIVE COVENANTS The Borrowers covenant to the Agent and the Banks as follows: 5.01 Reporting and Information Requirements. (a) Annual Audited Reports. As soon as practicable, and in any event within ninety (90) days after the close of each fiscal year of the Borrowers, the Borrowers will furnish to the Agent and each of the Banks Consolidated audited statements of income, retained earnings and cash flow of the Borrowers and their Subsidiaries for such fiscal year and a Consolidated audited balance sheet of the Borrowers and their Subsidiaries as of the close of such fiscal year, and notes to each, all in reasonable detail, setting forth in comparative form the corresponding figures for the preceding fiscal year, prepared in accordance with GAAP applied on a basis consistent with that of the preceding fiscal year (except for changes in application in which such accountants concur) with such statements and balance sheet to be certified by independent certified public accountants of recognized standing selected by the Borrowers. The certificate or report of such accountants described in the immediately preceding sentence that relates to the fair presentation of the Borrowers' financial position shall be free of exception or -33- qualifications not reasonably acceptable to the Agent and the Banks and shall in any event contain a written statement of such accountants substantially to the effect that such accountants examined such statements and balance sheet in accordance with generally accepted auditing standards. (b) Quarterly Reports. As soon as practicable, and in any event within forty-five (45) days after the close of each Fiscal Quarter during the term of this Agreement, the Borrowers will furnish to the Agent and each of the Banks the Consolidated and consolidating statements of income and cash flow and the Consolidated and consolidating balance sheet that the Borrowers use to prepare the Borrowers' and their Subsidiaries' quarterly financial results set forth in their 10-Q reports, all in reasonable detail. All such income statements, statements of cash flow and balance sheets shall be prepared by the Borrowers and certified by the President or Chief Financial Officer or Corporate Controller of MBC as presenting fairly the Consolidated and consolidating financial position of the Borrowers as of the end of such Fiscal Quarter and the results of their operations for such periods, in conformity with sound accounting principles (subject to normal and recurring year-end audit adjustments) applied in a manner consistent with that of the most recent audited financial statements furnished to the Banks. (c) Quarterly Compliance Certificate. The income statements and balance sheets as of and for the end of each Fiscal Quarter which are delivered pursuant to Section 5.01(b) of this Agreement shall be accompanied by a compliance certificate, substantially in the form of Exhibit "B" attached hereto, executed by the President or Chief Financial Officer or Corporate Controller of MBC, stating that no Event of Default or Potential Default exists and that the Borrowers are in compliance with all applicable covenants contained in this Agreement. Such certificate shall include all figures necessary to calculate the Borrowers' compliance with all financial covenants set forth in this Agreement. If an Event of Default or Potential Default has occurred and is continuing or exists, such certificate shall specify in detail the nature and period of existence of the Event of Default or Potential Default and any action taken or contemplated to be taken by the Borrowers with respect thereto. (d) Reports to Governmental Agencies and Other Creditors. As soon as practicable, and in event within ten (10) days after the filing thereof, the Borrowers shall furnish to the Agent and each of the Banks a copy of its 10-K and 10-Q reports, each proxy statement, each registration statement and all other reports which any Borrower is or may be required to file with the United States Securities and Exchange Commission or any State Securities Commission. (e) Audit Reports. In addition to the reports set forth above, promptly upon receipt thereof, and in any event within five (5) Business Days after receipt by any Borrower, the Borrowers will deliver to the Agent and each of the Banks a copy of all formal or required reports submitted to any Borrower by its independent auditors, including comment or management letters, issued in connection with audits of the financial statements of any Borrower by such independent auditors. (f) Annual Plan. On or before January 31 of each calendar year, the Borrowers shall submit to the Agent and each of the Banks projections for the Borrowers and their Subsidiaries for such calendar year in form substantially similar to the form of the -34- projections provided to the Borrowers' boards of directors for the fiscal year ending December 31, 2003. (g) Visitation; Audits. The Borrowers will permit such Persons as the Agent or any of the Banks may designate (i) to visit and inspect any of the properties of the Borrowers and their Subsidiaries, (ii) to examine, and to make copies and extracts from, the books and records of the Borrowers and their Subsidiaries and (iii) to discuss their affairs with their officers during normal business hours; provided, however, if the Bank retains Persons not affiliated with the Bank to conduct any such audit, the Bank shall use its reasonable best efforts to ensure that such Persons are subject to appropriate non-disclosure and confidentiality requirements for the benefit of the Borrowers. Provided that no Event of Default has occurred, the Agent or such Bank shall provide the Borrowers with reasonable written notice of any such visitation or inspection. Upon the occurrence and during the continuation of an Event of Default, the Borrowers will permit such Persons as the Agent or any of the Banks may designate (i) to visit and inspect any of the properties of the Borrowers and their Subsidiaries, (ii) to examine, and to make copies and extracts from, the books and records of the Borrowers and their Subsidiaries and (iii) to discuss their affairs with their officers and independent accountants at any time and without notice; provided, however, if the Bank retains Persons not affiliated with the Bank to conduct any such audit, the Bank shall use its reasonable best efforts to ensure that such Persons are subject to appropriate non-disclosure and confidentiality requirements for the benefit of the Borrowers. (h) Notice of Event of Default. Promptly, and in any event within five (5) Business Days, after becoming aware of an Event of Default or Potential Default, the Borrowers will give the Agent and each of the Banks notice of the Event of Default or Potential Default, together with a written statement of the Presidents or Chief Financial Officers of the Borrowers setting forth the details of the Event of Default or Potential Default and any action taken or contemplated to be taken by the Borrowers with respect thereto. (i) Notice of Material Adverse Change. Promptly, and in any event within five (5) Business Days after becoming aware thereof, the Borrowers will give the Agent telephonic or telegraphic notice (with written confirmation sent on the same or next Business Day) with respect to any Material Adverse Change or any development or occurrence which would have a Material Adverse Effect. (j) Notice of Proceedings. Promptly, and in any event within five (5) Business Days, after becoming aware thereof, the Borrowers will give the Agent and each of the Banks notice of the commencement, existence or threat of all proceedings by or before any Official Body against or affecting any Borrower which, if adversely decided, would have a Material Adverse Effect. (k) Further Information. The Borrowers will promptly, but in any event within fifteen (15) days, furnish to the Agent and each of the Banks such other information, and in such form, as the Agent or the Majority Banks may reasonably request from time to time. -35- 5.02 Preservation of Existence and Franchises. Except as otherwise permitted under this Agreement, the Borrowers will maintain their respective corporate existences, rights and franchises in full force and effect in their respective jurisdictions of incorporation. Except to the extent that the failure to be so qualified would not have a Material Adverse Effect, the Borrowers and their Subsidiaries will qualify and remain qualified as a foreign corporation in each jurisdiction in which the ownership of their properties or the nature of their activities or both makes such qualification necessary. 5.03 Insurance. The Borrowers and their Subsidiaries will maintain with financially sound and reputable insurers insurance with respect to their properties and business and against such liabilities, casualties and contingencies and of such types and in such amounts as is reasonably satisfactory to the Agent and as is customary in the case of corporations or other entities engaged in the same or similar business or having similar properties similarly situated. The Borrowers agree to provide the Agent with thirty (30) days advance notice of the termination of any such insurance coverage. 5.04 Maintenance of Properties. Except to the extent that the failure to do so would not have a Material Adverse Effect, the Borrowers and their Subsidiaries will maintain or cause to be maintained in good repair, working order and condition (ordinary wear and tear excepted), the properties now or in the future owned, leased or otherwise possessed by each of them and shall make or cause to be made all needful and proper repairs, renewals, replacements and improvements to the properties so that the business carried on in connection with the properties may be properly and advantageously conducted at all times. 5.05 Payment of Liabilities. The Borrowers and their Subsidiaries will pay or discharge: (a) on or prior to the date on which penalties attach, all taxes, assessments, fees and other governmental charges or levies imposed upon them or any of their respective properties, income, sales or franchises other than those contested with due diligence, in good faith, without the incurrence of any Lien which would have a Material Adverse Effect and for which the Borrowers and their Subsidiaries have established sufficient reserves on their books; (b) on or prior to the date when due, all lawful claims of materialmen, mechanics, carriers, warehousemen, landlords and other like persons which, if unpaid, might result in the creation of a Lien upon any of their respective property other than those contested with due diligence, in good faith, and for which the Borrowers or their Subsidiaries have established adequate reserves on their books and for which the Borrowers and their Subsidiaries have put in place adequate bonds or other security to cover the amount of any such Lien; and (c) on or prior to the date when due, all other lawful claims which, if unpaid, might result in the creation of a Lien upon any of their property other than those contested with due diligence, in good faith without the occurrence of any Lien which would have a Material Adverse Effect and for which the Borrowers and their Subsidiaries have established sufficient reserves on their books. -36- 5.06 Financial Accounting Practices. The Borrowers and their Subsidiaries will make and keep books, records and accounts which, in reasonable detail, accurately and fairly reflect their respective transactions and dispositions of assets and maintain a system of internal accounting controls sufficient to provide reasonable assurances that (a) transactions are executed in accordance with management's general or specific authorization, (b) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets, (c) access to assets is permitted only in accordance with management's general or specific authorization and (d) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. 5.07 Compliance with Laws. The Borrowers and their Subsidiaries shall comply with all applicable Laws, the non-compliance with which would have a Material Adverse Effect. 5.08 Pension Plans. The Borrowers and their Subsidiaries shall (a) keep in full force and effect any and all Plans which are presently in existence or may, from time to time, come into existence under ERISA, unless such Plans can be terminated without material liability to any Borrower or its Subsidiary in connection with such termination; (b) make contributions to each of their Plans in a timely manner and in a sufficient amount to comply in all material respects with the requirements of ERISA; (c) comply with all material requirements of ERISA which relate to such Plans so as to preclude the occurrence of any Reportable Event, Prohibited Transaction (other than a Prohibited Transaction subject to an exemption under ERISA) or material accumulated funding deficiency as such term is defined in ERISA; and (d) notify the Agent immediately upon receipt by any Borrower or its Subsidiaries of any notice of the institution of any proceeding or other action which may result in the termination of any Plan. The Borrowers shall deliver to the Agent and each of the Banks, promptly but in any event within ten (10) Business Days after the filing or receipt thereof, copies of all reports or notices which any Borrower or its Subsidiaries files or receives under ERISA with or from the Internal Revenue Service, the PBGC, or the U.S. Department of Labor, other than reports or notices which do not have a Material Adverse Effect. 5.09 Use of Proceeds. The Borrowers shall use the proceeds of the Loans for the purposes set forth in Section 3.14 hereof. 5.10 Continuation of and Change in Business. The Borrowers and their Subsidiaries will continue to engage generally in business and activities substantially similar to those described in MBC's Annual Report on Form 10-K for the fiscal year ended December 31, 2003 (the "2003 Form 10-K") and the Borrowers and their Subsidiaries will not engage in any other business or activity without the prior written consent of the Banks. 5.11 Lien Searches. Upon an Event of Default, the Agent may, but shall not be obligated to, conduct lien searches of the Borrowers, their Subsidiaries and their assets and properties at any time. The Borrowers shall reimburse the Agent for the Agent's reasonable out of pocket costs and expenses in connection with such lien searches. -37- 5.12 Further Assurances. The Borrowers, at their own cost and expense, will cause to be promptly and duly taken, executed, acknowledged and delivered all further acts, documents and assurances as the Agent may from time to time reasonably request in order to more effectively carry out the intent and purposes of this Agreement and the transactions contemplated by this Agreement. 5.13 Financial Covenants. The following financial covenants with respect to the Borrowers shall apply: (a) Minimum Owner's Equity. The Borrowers shall maintain at all times Owner's Equity in an amount not less than the sum of (i) Sixty-Eight Million and 00/100 Dollars ($68,000,000.00) plus (ii) seventy-five percent (75%) of Net Income of the Borrowers for the Fiscal Quarter ending September 30, 2004 and each Fiscal Quarter thereafter (excluding any net loss in any such Fiscal Quarter) at all times. (b) Leverage Ratio. As of September 30, 2004 and on the last day of each Fiscal Quarter thereafter, for the period equal to the four (4) consecutive Fiscal Quarters then ending, the Borrowers shall maintain a Leverage Ratio in an amount not to exceed 2.5 to 1.0. (c) Interest and Rent Coverage Ratio. As of September 30, 2004 and as of the last day of each Fiscal Quarter thereafter, for the period equal to the four (4) consecutive Fiscal Quarters then ending, the Borrowers shall maintain an Interest and Rent Coverage Ratio in an amount not less than 1.25 to 1.0; provided, however, that, for purposes of this calculation, "Rent Expense" shall be estimated by the Borrowers in good faith for each Fiscal Quarter ending June 30, September 30 and March 31 of each fiscal year of the Borrowers. (d) Current Ratio. As of September 30, 2004 and as of the last day of each Fiscal Quarter thereafter, the Borrowers shall maintain a Current Ratio of not less than 1.1 to 1.0. 5.14 Amendment to Schedules. The Borrowers may amend any one or more of the schedules referred to in this Agreement (subject to prior consent of the Majority Banks) and any representation, warranty, or covenant contained herein which refers to any such schedule shall from and after the date of any such amendment refer to such schedule as so amended; provided, however, that in no event shall the amendment of any such schedule constitute a waiver by the Banks of any default or Event of Default that exists notwithstanding the amendment of such schedule. -38- ARTICLE VI NEGATIVE COVENANTS The Borrowers covenant to the Agent and the Banks as follows: 6.01 Liens. No Borrower, nor any Subsidiary of a Borrower shall, at any time, incur, create, assume or permit to exist, any Lien on any of its property or assets, tangible or intangible, now or hereafter owned, or agree to become liable to do so, except: (a) such Liens existing on the Closing Date and set forth on Schedule 6.01 to this Agreement; (b) Liens granted in favor of the Agent on behalf of the Banks; (c) pledges or deposits under workers compensation, unemployment insurance and social security laws, or to secure the performance of bids, tenders, contracts (other than for the repayment of borrowed money) or leases or to secure statutory obligations or surety or similar bonds used in the ordinary course of business; (d) Liens arising from taxes, assessments, fees, charges, levies or claims described in Section 5.05 of this Agreement; (e) purchase money security interests to secure Indebtedness permitted under Section 6.02(e); provided, however, that such security interest shall be limited solely to the equipment purchased with the proceeds of such Indebtedness; (f) any unfiled materialmen's, mechanics, workmen's and repairmen's Liens (provided, that if such a Lien shall be filed or perfected, it shall be discharged of record immediately by payment, bond or otherwise); (g) attachment, judgment and other similar Liens arising in connection with court proceedings, so long as the existence of such Liens do not cause an Event of Default under Section 7.01(i) or 7.01(j) hereof; (h) reservations, exceptions, encroachments, easements, rights of way, covenants, conditions, restrictions, leases and other similar title exceptions or encumbrances affecting real property, provided that they do not, individually or in the aggregate, diminish the fair market value of the real property affected thereby or the utility of such real property for the purposes for which such property is presently devoted; (i) Liens or deposits made in connection with contracts with or made at the request of the United States of America or any department or agency thereof resulting from progress payments or partial payments under any such contracts, incurred in the ordinary course of business of the Borrowers or their Subsidiaries; and (j) Liens granted by Baker/Mellon Stuart to secure the loans permitted pursuant to Section 6.04(f) hereof. -39- 6.02 Indebtedness. No Borrower, nor any Subsidiary of a Borrower shall, at any time, create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness under this Agreement, the Notes, the other Loan Documents or under any Bank-Provided Hedge; (b) Indebtedness incurred pursuant to Section 6.04(c) hereof; (c) Indebtedness existing on the Closing Date, and described in Schedule 6.02 to this Agreement; provided, however, that such Indebtedness shall not be extended, renewed, refinanced or materially modified without the prior written consent of the Agent and the Majority Banks except for those renewals or refinancings thereof which do not increase the interest rate charged thereon or the principal amount thereof; (d) Current accounts payable, accrued expenses and other current items arising out of transactions (other than borrowings) in the ordinary course of business; (e) Purchase money Indebtedness or Capitalized Lease Obligations for purchases or leases of equipment in the ordinary course of business or Indebtedness represented by unsecured promissory notes; provided, however, that the amount of such Indebtedness, when combined with the amount guaranteed pursuant to Section 6.03(d) hereof, shall not exceed Ten Million and 00/100 Dollars ($10,000,000.00) as to the aggregate, at any time, of all such purchase money Indebtedness, Capitalized Lease Obligations, outstanding notes and guarantees; and (f) Indebtedness in connection with the loans permitted pursuant to Section 6.04(f) hereof. 6.03 Guarantees and Contingent Liabilities. No Borrower nor any Subsidiary of a Borrower shall, at any time directly or indirectly assume, guarantee, endorse or otherwise agree, become or remain directly or contingently liable upon or with respect to any obligation or liability of any other Person other than a Borrower or any Subsidiary of a Borrower, except: (a) indemnities of directors and officers in their capacities as such, as permitted by Law; (b) endorsements on negotiable or other instruments in any amount for deposit or collection or similar transactions in the ordinary course of their businesses; (c) those guarantees, indemnifications and performance bonds existing on the Closing Date and set forth on Schedule 6.03 attached to this Agreement; and (d) other guarantees with respect to obligations or liabilities in an aggregate amount which, when combined with the aggregate outstanding amount of the Indebtedness permitted pursuant to Section 6.02(e) hereof, shall not exceed Ten Million and 00/100 Dollars ($10,000,000.00). -40- 6.04 Loans and Investments. No Borrower nor any Subsidiary of a Borrower shall purchase, own or invest in any stock or other securities of any Person, or all or substantially all of the assets of any Person, or any business or division of any Person (whether in a single or series of related transactions) or make or permit to exist any investment or capital contribution to or acquire any interest whatsoever in any other Person or permit to exist any loans or advances to any Person except: (a) equity investments in the Subsidiaries as set forth on Schedule 3.18 to this Agreement; (b) Acquisitions permitted under Section 6.05 hereof; (c) Loans to any Borrower from any Subsidiary of such Borrower; (d) other loans and investments existing on the Closing Date and set forth on Schedule 6.04 attached to this Agreement; (e) investments in (i) direct obligations of the United States of America or any agency thereof, (ii) obligations guaranteed by the United States of America, (iii) prime commercial paper (rated by Moody's Investors Service at not less than a A-2 and by Standard & Poors at not less than P-2), (iv) certificates of deposit or repurchase agreements issued by any Bank or any commercial bank having capital and surplus in excess of One Hundred Million Dollars ($100,000,000); (v) deposit accounts in and banker's acceptances of, commercial banks, and (vi) investments (other than equity investments listed on Schedule 3.18 attached hereto and the loans set forth in Section 6.04(f) below) in any other Borrower or Subsidiary incurred in the ordinary course of business and pursuant to usual and customary terms in the form of advances to such Borrower or Subsidiary; provided, however, that (A) the total amount of all such future advances made by the Borrowers to those Subsidiaries which are not Borrowers, minus (B) the total amount of all such advances made by those Subsidiaries which are not Borrowers to the Borrowers shall not, at any time, exceed Fifteen Million and 00/100 Dollars ($15,000,000.00) and provided, further, that the total amount of all such advances made by the Borrowers to any single Subsidiary that is not a Borrower shall not exceed Ten Million and 00/100 Dollars ($10,000,000.00); (f) loans made by a Borrower to (i) Baker/Mellon Stuart, (ii) Baker Heavy & Highway, Inc., a Pennsylvania corporation and (iii) Baker GeoResearch, Inc., a District of Columbia corporation; provided, however, that the aggregate amount of all such loans shall not exceed an amount equal to Twenty-Five Million and 00/100 Dollars ($25,000,000.00)]; (g) subject to Section 6.11 hereof, repurchases of outstanding common stock of any Borrower as may be authorized by the board of directors of such Borrower from time to time; and (h) other investments in an aggregate amount not to exceed Two Million and 00/100 Dollars ($2,000,000.00) at any time. 6.05 Acquisitions. No Borrower nor any Subsidiary of a Borrower shall make an Acquisition or enter into any agreement with respect thereto, except Acquisitions of Persons -41- in businesses similar to those described in the 2003 Form 10-K so long as each of the following conditions are satisfied: (a) the Agent shall be given at least thirty (30) days advance written notice of any such Acquisition with a purchase price in excess of Two Million Dollars ($2,000,000.00); (b) the Agent and the Banks shall have received all documentation with respect to such Acquisition including, but not limited to, the purchase agreement and all related documentation and approvals as requested by the Agent or any Bank; (c) if requested by the Agent or any Bank, the Borrowers shall deliver to the Agent and the Banks, pro forma financial statements of the Borrowers and their Subsidiaries after giving affect to such Acquisition; (d) immediately before and after the closing and funding of such Acquisition, the amount available under the Revolving Credit Facility Commitment shall be greater than or equal to Ten Million and 00/100 Dollars ($10,000,000.00); (e) no Event of Default or Potential Default shall exist prior to such Acquisition and no Event of Default or Potential Default shall occur or exist as a result of such Acquisition; and (f) the aggregate purchase price of all such Acquisitions shall not exceed (i) Fifteen Million and 00/100 Dollars ($15,000,000.00) in the aggregate in any fiscal year and (ii) Twenty-Five Million and 00/100 Dollars ($25,000,000.00) in the aggregate during the term of this Agreement. 6.06 Partnerships, Combinations, Mergers or Consolidations. No Borrower nor any Subsidiary of a Borrower shall form a partnership or merge or consolidate with or into any other Person, or agree to do any of the foregoing, except: (a) the Borrowers may permit any of their Subsidiaries to merge with or consolidate into a Borrower if the Borrower is the surviving entity; (b) the Borrowers may permit any of their Subsidiaries to merge with or consolidate with another Subsidiary; (c) any Borrower may merge with any other Borrower; and (d) the Borrowers and their Subsidiaries may complete Acquisitions permitted under Section 6.05 hereof. 6.07 Dispositions of Assets. No Borrower nor any Subsidiary of a Borrower shall sell, convey, pledge, assign, lease, abandon or otherwise transfer or dispose of, voluntarily or involuntarily (any of the foregoing being referred to in this Section as a transaction and any series of related transactions constituting but a single transaction), any of their respective properties or assets, tangible or intangible (including stock of Subsidiaries) except: -42- (a) sales of inventory in the ordinary course of business; (b) sales of assets which are no longer useful to the business of the Borrowers or their Subsidiaries, made in the ordinary course of business; and (c) so long as no Event of Default or Potential Default shall have occurred, sales or dispositions of assets in the ordinary course of a Borrower's business having a fair market value, at the time of sale or disposition, not in excess of Two Million Five Hundred Thousand and 00/100 Dollars ($2,500,000.00) in the aggregate for all such sales and dispositions in any fiscal year. 6.08 Double Negative Pledge. No Borrower nor any Subsidiary of a Borrower shall enter into or suffer to exist any agreement with any Person, other than in connection with this Agreement, which prohibits or limits the ability of the Borrowers or any Subsidiary to create, incur, assume or suffer to exist any Lien upon or with respect to any property or assets of any kind (real or personal, tangible or intangible) of the Borrowers or any Subsidiary, whether now owned or hereafter acquired or created. 6.09 Self-Dealing. No Borrower nor any Subsidiary of a Borrower shall enter into or carry out any loan, advance or other transaction (including, without limitation, purchasing property or services, or selling property or services) with any Affiliate, except that shareholders, directors, officers or partners of a Borrower or a Subsidiary may render services to such Borrower or Subsidiary for compensation at the same rates generally paid by corporations or partnerships engaged in the same or similar businesses, and a Borrower or a Subsidiary may enter into transactions with Affiliates if such transactions are disclosed to the Agent and the Banks and made on terms comparable to those which could be obtained in arms length transactions with a Person who is not an Affiliate. 6.10 Capital Expenditures. The Borrowers will not, and will not permit any Subsidiary to, make or commit to make, Capital Expenditures in any fiscal year aggregating, for all Borrowers and Subsidiaries, more than Eight Million and 00/100 Dollars ($8,000,000.00). For purposes of this Section 6.10, amounts paid with respect to Acquisitions shall not constitute Capital Expenditures. 6.11 Distributions. No Borrower shall declare, make, pay, or agree, become or remain liable to make or pay, any Distributions of any nature (whether in cash, property, securities or otherwise) on account of or in respect of any shares of the capital stock of such Borrower or on account of the purchase, redemption, retirement or acquisition of any shares of the capital stock (or warrants, options or rights for any shares of the capital stock of the Borrower) other than (i) Distributions declared, made or paid by a Subsidiary of a Borrower to such Borrower or (ii) Distributions in an aggregate amount not to exceed Five Million and 00/100 Dollars ($5,000,000.00) during the term of this Agreement. 6.12 Margin Stock. The Borrowers will not use the proceeds of any Loans directly or indirectly to purchase or carry any "margin stock" (within the meaning of Regulations U, T, or X of the Board of Governors of the Federal Reserve System) or to extend credit to others for the purpose of purchasing or carrying, directly or indirectly, any margin stock. -43- 6.13 Fiscal Year; Tax Designation. No Borrower shall change its fiscal year; or elect to be designated as an entity other than its current tax designation without the prior written consent of the Agent and the Majority Banks. 6.14 Anti-Terrorism Laws. The Borrowers and their respective Affiliates and agents shall not (i) conduct any business or engage in any transaction or dealing with any Blocked Person, including making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person, (ii) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order No. 13224; or (iii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in the Executive Order No. 13224, the USA Patriot Act or any other Anti-Terrorism Law. The Borrowers shall deliver to the Bank any certification or other evidence requested from time to time by the Bank in its sole discretion, confirming the Borrowers' compliance with this Section 6.14. ARTICLE VII DEFAULTS 7.01 Events of Default. An Event of Default means the occurrence or existence of one or more of the following events or conditions (whatever the reason for such Event of Default and whether voluntary, involuntary or effected by operation of Law): (a) The Borrowers shall fail to pay principal on any of the Notes when due; or (b) The Borrowers shall fail to pay interest on the Loans or any fees payable pursuant to Article II of this Agreement within five (5) days of the date such interest or fees are due; or (c) The Borrowers shall fail to pay any other fee, or other amount payable pursuant to this Agreement, the Notes or any of the other Loan Documents within ten (10) days after written notice to MBC by the Agent or any Bank; or (d) Any representation or warranty made by any Borrower under this Agreement, the Notes or any of the other Loan Documents or any statement made by any Borrower in any financial statement, certificate, report, exhibit or document furnished by the Borrowers to the Agent or any Bank pursuant to this Agreement or the other Loan Documents shall prove to have been false or misleading in any material respect as of the time when made; or (e) Any Borrower shall be in default in the performance or observance of any covenant contained in Sections 5.01(h); 5.01(i); 5.01(j); 5.01(k); 5.13 or any section in Article VI hereof (other than Section 6.14); or (f) Any Borrower shall be in default in the performance or observance of any covenant contained in Sections 5.01(a); 5.01(b); 5.01(c); 5.01(d); 5.01(e); 5.01(f); 5.01(g); 5.07 or 5.08 hereof and such default shall not have been cured within fifteen (15) days of the occurrence of such default; or -44- (g) Any Borrower shall be in default in the performance or observance of any covenant contained in Sections 5.02; 5.03; 5.05; 5.09; 5.10, 5.14 or 6.14 hereof and such default shall not have been cured within thirty (30) days of the occurrence of such default; or (h) Any Borrower shall be in default in the performance or observance of any other covenant hereof or under any other Loan Document, or any Bank-Provided Hedge and such default shall not have been cured within thirty (30) days after written notice to MBC by the Agent; or (i) Any Borrower or any Subsidiary shall (i) default (as principal or guarantor or other surety) in any payment of principal of or interest on any obligation (or set of related obligations) for borrowed money in excess of One Million and 00/100 Dollars ($1,000,000.00), beyond any period of grace with respect to the payment or, if such obligation (or set of related obligations) is or are payable or repayable on demand, fails to pay or repay such obligation or obligations when demanded, or (ii) default in the observance of any other covenant, term or condition contained in any agreement or instrument by which an obligation (or set of related obligations) is or are created, secured or evidenced, if the effect of such default is to cause, or to permit the holder or holders of such obligation or obligations (or a trustee or agent on behalf of such holder or holders) to cause, all or part of such obligation or obligations to become due before its or their otherwise stated maturity; or (j) One or more final judgments for the payment of money in excess of One Million and 00/100 Dollars ($1,000,000.00) shall have been entered against any Borrower or any Subsidiary and, in the case of any such judgment or judgments which in the aggregate are less than Two Million and 00/100 Dollars ($2,000,000.00), such judgment or judgments shall have remained undischarged and unstayed for a period of thirty (30) consecutive days; or (k) A writ or warrant of attachment, garnishment, execution, distraint or similar process, exceeding in value the aggregate amount of One Hundred Thousand and 00/100 Dollars ($100,000.00), shall have been issued against any Borrower or any Subsidiary or any of their respective properties and, in the event the value of such matters is in the aggregate less than One Million and 00/100 Dollars ($1,000,000.00), such shall remain undischarged and unstayed for a period of thirty (30) consecutive days; or (l) The Majority Banks have determined in their reasonable judgment that a Material Adverse Change has occurred or that the prospect of payment or performance of any covenant, agreement or duty under this Agreement, the Notes or the other Loan Documents is impaired; or (m) A Change of Control shall occur; or (n) (i) A Termination Event with respect to a Plan shall occur, (ii) any Person shall engage in any prohibited transaction involving any Plan, (iii) an accumulated funding deficiency, whether or not waived, shall exist with respect to any Plan, (iv) any Borrower or any ERISA Affiliate shall be in "Default" (as defined in Section 4219(c)(5) of ERISA with respect to payments due to a multi-employer Plan resulting from such Borrower's or -45- any ERISA affiliate's, complete or partial withdrawal (as described in Section 4203 or 4205 of ERISA) from such Plan, or (v) any other event or condition shall occur or exist with respect to a single employer Plan, except that no such event or condition shall constitute an Event of Default if it, together with all other events or conditions at the time existing, would not have a Material Adverse Effect; or (o) A proceeding shall be instituted in respect of any Borrower or any Subsidiary: (i) seeking to have an order for relief entered in respect of such Borrower or any Subsidiary or seeking a declaration or entailing a finding that such Borrower or any Subsidiary is insolvent or a similar declaration or finding, or seeking dissolution, winding-up, charter revocation or forfeiture, liquidation, reorganization, arrangement, adjustment, composition or other similar relief with respect to such Borrower or any Subsidiary, its assets or debts under any Law relating to bankruptcy, insolvency, relief of debtors or protection of creditors, termination of legal entities or any other similar Law now or in the future which shall not have been dismissed or stayed within thirty (30) days after such proceedings were instituted; or (ii) seeking appointment of a receiver, trustee, custodian, liquidator, assignee, sequestrator or other similar official for any Borrower or any Subsidiary or for all or any substantial part of its property which shall not have been dismissed or stayed within thirty (30) days after such proceedings were instituted; or (p) Any Borrower shall voluntarily suspend transaction of its business, any Borrower or any Subsidiary shall become insolvent, shall become generally unable to pay its debts as they become due, shall make a general assignment for the benefit of creditors, shall institute a proceeding described in Section 7.01(o)(i) of this Agreement or shall consent to any order for relief, declaration, finding or relief described in Section 7.01(o)(i) of this Agreement, shall institute a proceeding described in Section 7.01(o)(ii) of this Agreement or shall consent to the appointment or to the taking of possession by any such official of all or any substantial part of its property whether or not any proceeding is instituted, shall dissolve, wind-up or liquidate itself or any substantial part of its property, or shall take any action in furtherance of any of the foregoing. 7.02 Consequences of an Event of Default. (a) If an Event of Default specified in subsections (c) through (n) of Section 7.01 of this Agreement occurs, the Agent and the Banks will be under no further obligation to make Loans or issue Letters of Credit and may at the option of the Majority Banks (i) demand the unpaid principal amount of the Notes, interest accrued on the unpaid principal amount thereof and all other amounts owing by the Borrowers under this Agreement, the Notes and the other Loan Documents to be immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are expressly waived, and an action for any amounts due shall accrue immediately; and (ii) require the Borrowers to, and the Borrowers shall thereupon, deposit in a non-interest bearing account with the Agent, as cash collateral for their obligations under the Loan Documents, an amount equal to one hundred five percent (105%) of -46- the Letter of Credit Reserve, and the Borrowers hereby pledge to the Agent, and grant to the Agent a security interest in, all such cash as security for such obligations of the Borrowers. (b) If an Event of Default specified in subsections (a), (b), (o) or (p) of Section 7.01 of this Agreement occurs and continues or exists, the Agent and the Banks will be under no further obligation to make Loans or issue Letters of Credit and the unpaid principal amount of the Notes, interest accrued thereon and all other amounts owing by the Borrowers under this Agreement, the Notes and the other Loan Documents shall automatically become immediately due and payable without presentment, demand, protest or notice of any kind, all of which are expressly waived, and an action for any amounts due shall accrue immediately. 7.03 Set-Off. If the unpaid principal amount of the Notes, interest accrued on the unpaid principal amount of the Notes or other amount owing by the Borrowers under this Agreement, the Notes or the other Loan Documents shall have become due and payable (at maturity, by acceleration or otherwise), each of the Banks, any assignee of the Banks and the holder of any participation in any Loan will each have the right, in addition to all other rights and remedies available to it, without notice to the Borrowers, to set-off against and to appropriate and apply to such due and payable amounts any debt owing to, and any other funds held in any manner for the account of, any Borrower by such Bank, by such assignee or by such holder including, without limitation, all funds in all deposit accounts (whether time or demand, general or special, provisionally credited or finally credited, or otherwise) now or in the future maintained by any Borrower with such Bank, assignee or holder. The Borrowers consent to and confirm the foregoing arrangements and confirm the Banks' rights, such assignee's rights and such holder's rights of banker's lien and set-off. Nothing in this Agreement will be deemed a waiver or prohibition of or restriction on the Banks' rights, such assignee's rights or any such holder's rights of banker's lien or set-off. 7.04 Equalization. Each Bank agrees with the other Banks that if, at any time, it shall obtain any Advantage over the other Banks or any thereof in respect of the Indebtedness of the Borrowers to the Banks, it shall purchase from the other Banks, for cash and at par, such additional participation in the Indebtedness of the Borrowers to the Banks as shall be necessary to nullify the Advantage. If any such Advantage resulting in the purchase of an additional participation as aforesaid shall be recovered in whole or in part from the Bank receiving the Advantage, each such purchase shall be rescinded and the purchase price restored (but without interest unless the Bank receiving the Advantage is required to pay interest on the Advantage to the Person recovering the Advantage from such Bank) ratably to the extent of the recovery. Each Bank agrees with the other Banks that if it, at any time, shall receive any payment for or on behalf of the Borrowers on any Indebtedness of the Borrowers to that Bank by reason of offset of any deposit or other Indebtedness of the Borrowers to the Banks, it will apply such payment first to any and all Indebtedness of the Borrowers to the Banks pursuant to this Agreement (including, without limitation, any participation purchased or to be purchased pursuant to this Section or any other Section of this Agreement). The Borrowers agree that any Bank so purchasing a participation from the other Banks or any thereof pursuant to this Section may exercise all of its rights of payment (including the right of setoff) with respect to such participation as fully as if such Bank was a direct creditor of the Borrowers in the amount of such participation. -47- 7.05 Other Remedies. The remedies in this Article VII are in addition to, not in limitation of, any other right, power, privilege, or remedy, either in Law, in equity, or otherwise, to which the Banks may be entitled. The Agent shall exercise the rights under this Article VII and all other collection efforts on behalf of the Banks and no Bank shall act independently with respect thereto, except as otherwise specifically set forth in this Agreement. ARTICLE VIII THE AGENT; ASSIGNMENTS; PARTICIPATIONS 8.01 Appointment and Authorization; No Liability. The Banks authorize Citizens and Citizens hereby agrees to act as agent for the Banks in respect of this Agreement and the other Loan Documents upon the terms and conditions set forth in this Agreement. Each Bank hereby irrevocably appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers hereunder as are expressly delegated to the Agent by the terms of this Agreement and any of the other Loan Documents, together with such powers as are reasonably incidental thereto; provided that no duties or responsibilities not expressly assumed herein or therein shall be implied to have been assumed by the Agent. The relationship between the Agent and the Banks is and shall be that of agent and principal only, and nothing contained in this Agreement or any of the other Loan Documents shall be construed to constitute the Agent as a trustee for any Bank. Neither the Agent nor any of its shareholders, directors, officers, attorneys or employees nor any other Person assisting them in their duties nor any agent or employee thereof, shall (a) be liable for any waiver, consent or approval given or action taken or omitted to be taken by it or them hereunder or under any of the Loan Documents or in connection herewith or therewith or be responsible for the consequences of any oversight or error of judgment whatsoever, or (b) be liable to the Borrowers for consequential damages resulting from any breach of contract, tort or other wrong in connection with the negotiation, documentation, administration or collection of the Loans or any of the Loan Documents, except with respect to (a) and (b) hereof, to the extent of its or their willful misconduct or gross negligence as finally determined by a court of competent jurisdiction. 8.02 Employees and Agents. The Agent may exercise its powers and execute its duties by or through employees or agents and shall be entitled to take, and to rely on, advice of counsel concerning all matters pertaining to its rights and duties under this Agreement and the other Loan Documents and shall not be liable for action taken or suffered in good faith by it in accordance with the opinion of such counsel. The Agent may utilize the services of such Persons as the Agent in its sole discretion may determine, and all reasonable fees and expenses of any such Persons shall be paid by the Borrowers and if not paid by the Borrowers shall be paid by the Banks based upon their respective Commitment Percentages. 8.03 No Representations; Each Bank's Independent Investigation. The Agent shall not be responsible for (a) the execution, validity or enforceability of this Agreement, the Notes, any of the other Loan Documents or any instrument at any time constituting, or intended to constitute, collateral security for the Notes, (b) the value of any such collateral security, (c) the validity, enforceability or collectibility of any such amounts owing with respect to the Notes, or (d) any recitals or statements, warranties or representations made herein or in any of the other -48- Loan Documents or in any certificate or instrument hereafter furnished to it by or on behalf of the Borrowers. The Agent shall not be bound (a) to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements herein or in any instrument at any time constituting, or intended to constitute, collateral security for the Indebtedness evidenced by the Notes or (b) to ascertain whether any notice, consent, waiver or request delivered to it by the Borrowers or any holder of any of the Notes shall have been duly authorized or is true, accurate and complete. The Agent has not made nor does it now make any representations or warranties, express or implied, nor does it assume any liability to the Banks with respect to the creditworthiness, financial condition or any other condition of the Borrowers or with respect to the statements contained in any information memorandum furnished in connection herewith or in any other oral or written communication between the Agent and such Bank. Each Bank acknowledges that it has, independently without reliance upon the Agent or any other Bank, and based upon such information and documents as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and agrees that the Agent has no duty or responsibility, either initially or on a continuing basis, to provide any Bank with any credit or other information with respect thereto (other than such notices as may be expressly required to be given by the Agent to the Banks hereunder). 8.04 Payments to Banks. (a) As between the Agent and the Borrowers, a payment by the Borrowers to the Agent hereunder or any of the other Loan Documents for the account of any Bank shall constitute a payment to such Bank. The Agent agrees to promptly, but in any event not later than the end of the following Business Day, distribute to each Bank such Bank's Pro Rata Share of payments received by the Agent for the account of the Banks in immediately available funds. (b) If in the opinion of the Agent the distribution of any amount received by it in such capacity hereunder, under the Notes or under any of the other Loan Documents, could reasonably be expected to involve it in liability, it may refrain from making distribution until its right to make distribution shall have been adjudicated by a court of competent jurisdiction. If a court of competent jurisdiction shall adjudge that any amount received by the Agent for the account of the Banks is to be distributed, the Agent shall distribute to each Bank such Bank's Pro Rata Share of the amount so adjudged to be distributed or in such manner as shall be determined by such court, together with interest thereon, in respect of each day during the period commencing on the date such amount was made available to the Agent and ending on the date the Agent distributes such amount, at a rate per annum equal to the interest rate earned by the Agent on such amount during such period. If a court of competent jurisdiction shall adjudge that any amount received and distributed by the Agent is to be repaid, each Person to whom any such distribution shall have been made shall either repay to the Agent its proportionate share of the amount so adjudged to be repaid or shall pay over the same in such manner and to such Persons as shall be determined by such court. (c) Notwithstanding anything to the contrary contained in this Agreement or any of the other Loan Documents, any Bank that fails (i) to make available to the Agent its Pro Rata Share of any Loan that the Agent made on its behalf or (ii) to comply with the provisions of Section 7.04 with respect to it obtaining an Advantage, in each case as, when and -49- to the full extent required by the provisions of this Agreement, shall be deemed delinquent and shall not be entitled to vote on any matters until such time as such delinquency is cured. Such Bank shall be deemed to have assigned any and all payments due it from the Borrowers, whether on account of outstanding Loans, interest, fees or otherwise, to the remaining Banks for application to, and reduction of, their respective Pro Rata Shares of all outstanding Loans. Such Bank hereby authorizes the Agent to distribute such payments to the other Banks in proportion to their respective Pro Rata Shares of all outstanding Loans. Such Bank shall be deemed to have satisfied in full a delinquency when and if the Banks' respective Pro Rata Shares of all outstanding Loans have returned to those in effect immediately prior to such delinquency and without giving effect to the nonpayment causing such delinquency. 8.05 Note Holders. The Agent may treat the payee of any Note as the holder thereof until written notice of transfer shall have been filed with it signed by such payee and in form satisfactory to the Agent. 8.06 Documents. The Agent shall not be under any duty to examine into or pass upon the validity, effectiveness, genuineness or value of any Loan Documents or any other document furnished pursuant hereto or in connection herewith or the value of any collateral obtained hereunder, and the Agent shall be entitled to assume that the same are valid, effective and genuine and what they purport to be. 8.07 Agents and Affiliates. With respect to the Loans, the Agent shall have the same rights and powers hereunder as any other Bank and may exercise the same as though it were not the agent, and the Agent and its affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrowers or any of their Affiliates. 8.08 Indemnification of Agent. The Banks ratably agree to indemnify and hold harmless the Agent (to the extent not indemnified by the Borrowers) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Agent in its capacity as agent in any way relating to or arising out of this Agreement or any Loan Document or any action taken or omitted by the Agent with respect to this Agreement or any Loan Document, provided that no Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorney fees) or disbursements resulting from the Agent's gross negligence or willful misconduct as finally determined by a court of competent jurisdiction. The obligations of the Banks under this Section 8.08 shall survive the payment in full of all amounts due pursuant to this Agreement or any other Loan Document and the termination of this Agreement. 8.09 Successor Agent. The Agent may resign as agent hereunder by giving not fewer than thirty (30) days' prior written notice to the Borrowers and the Banks. If the Agent shall resign under this Agreement, then either (a) the Majority Banks shall appoint from among the Banks a successor agent for the Banks or (b) if a successor agent shall not be so appointed and approved within the thirty (30) day period following the Agent's notice to the Banks of its resignation, then the Agent shall appoint a successor agent who shall serve as agent until such time as the Majority Banks appoint a successor agent pursuant to clause (a). Upon its appointment, such successor agent shall succeed to the rights, powers and duties as agent, and -50- the term "Agent" shall mean such successor effective upon its appointment, and the former agent's rights, powers and duties as agent shall be terminated without any other or further act or deed on the part of such former agent or any of the parties to this Agreement. 8.10 Knowledge of Default. It is expressly understood and agreed that the Agent shall be entitled to assume that no Event of Default or Potential Default has occurred and is continuing unless the Agent has been notified by a Bank or the Borrowers in writing that such Bank or the Borrowers consider that an Event of Default or Potential Default has occurred and is continuing and specifying the nature thereof. 8.11 Action by Agent. So long as the Agent shall be entitled, pursuant to Section 8.10 hereof, to assume that no Event of Default or Potential Default shall have occurred and be continuing, the Agent shall be entitled to use its discretion with respect to exercising or refraining from exercising any rights which may be vested in it by, or with respect to taking or refraining from taking any action or actions which it may be able to take under or in respect of, this Agreement. The Agent shall incur no liability under or in respect of this Agreement by acting upon any notice, certificate, warranty or other paper or instrument believed by it to be genuine or authentic or to be signed by the proper party or parties, or with respect to anything which it may do or refrain from doing in the reasonable exercise of its judgment. 8.12 Notification of Potential Defaults and Events of Defaults. Each Bank hereby agrees that, upon learning of the existence of a Potential Default or Event of Default, it shall promptly notify the Agent thereof. In the event that the Agent receives notice of an Event of Default or Potential Default, the Agent shall promptly notify all of the Banks and shall take such action and assert such rights under this Agreement as the Majority Banks shall direct and the Agent shall promptly inform the Banks in writing of the action taken. The Agent may take such action and assert such rights as it deems to be advisable, in its discretion, for the protection of the interests of the holders of the Notes. 8.13 Declaration of Invalidation. Each Bank agrees that, to the extent that any payments received by any Bank from the Borrowers or otherwise on account of the Loans are subsequently invalidated, declared to be fraudulent or preferential, set aside or judicially required to be repaid to a debtor-in-possession, trustee, receiver, custodian or any other Person in connection with any proceeding referred to in Section 7.01(p) hereof or any similar cause of action ("Preference"), then, to the extent of such Preference, each Bank shall, upon demand, reimburse the Bank subject to such Preference in the amount necessary to cause each Bank to be affected by such Preference in proportion to its Pro Rata Share of the Loans. 8.14 Pro Rata Portion, Pari Passu and Equal. The Pro Rata Share of each Bank in the Loans and the Letters of Credit shall be pari passu and equal with the Pro Rata Share of each other Bank and no Bank shall have priority over the other. 8.15 Cooperation. Each Bank agrees that it shall cooperate in good faith and in a commercially reasonable manner with each other Bank and take whatever reasonable actions (at its own expense) are necessary to implement decisions made in accordance with this Agreement and with each of the other Loan Documents relating thereto. -51- 8.16 Obligations Several. The obligations of the Banks hereunder are several and not joint. Nothing contained in this Agreement, and no action taken by the Agent or the Banks pursuant hereto, shall be deemed to constitute a partnership, association, joint venture or other entity between any of the Banks. No default by any Bank hereunder shall excuse any Bank from any obligation under this Agreement, but no Bank shall have or acquire any additional obligation of any kind by reason of such default. The relationship among the Borrowers and the Banks with respect to the Loan Documents and any other document executed in connection therewith is and shall be solely that of debtor and creditors, respectively, and neither the Agent nor any Bank has any fiduciary obligation toward the Borrowers with respect to any such documents or the transactions contemplated thereby. 8.17 Bank Assignments/Participations. A. Assignment/Transfer of Commitments. Each Bank shall have the right at any time or times to assign or transfer to another Eligible Assignee, without recourse, all or a portion of (a) that Bank's Commitment, (b) all Loans made by that Bank, (c) that Bank's Notes, and (d) that Bank's participation purchased pursuant to Section 7.04; provided, however, in each such case, that the transferor and the transferee shall have complied with the following requirements: (i) Prior Consent of Agent. No transfer may be consummated pursuant to this Section 8.17(A) (including, without limitation, a transfer from one Bank to another Bank) without the prior written consent of the Agent (other than a transfer by any Bank to any affiliate of such Bank or a transfer occurring during the existence of an Event of Default or Potential Default), which consent of the Agent shall not be unreasonably withheld, delayed or conditioned. (ii) Prior Consent of Borrowers. No transfer may be consummated pursuant to this Section 8.17(A) (including, without limitation, a transfer from one Bank to another Bank) without the prior written consent of the Borrowers (other than a transfer by any Bank to any affiliate of such Bank or a transfer occurring during the existence of an Event of Default or Potential Default), which consent of the Borrowers shall not be unreasonably withheld, delayed or conditioned. (iii) Minimum Amount. No transfer may be consummated pursuant to this Section 8.17(A) (including, without limitation, a transfer from one Bank to another Bank other than a transfer by any Bank to an affiliate of such Bank) in an aggregate amount less than (a) Five Million and 00/100 Dollars ($5,000,000.00) or (b) if such Bank's Commitment is at any time less than Five Million and 00/100 Dollars ($5,000,000.00), the entire amount of such Bank's Commitment. (iv) Agreement; Transfer Fee. Unless the transfer shall be to an affiliate of the transferor or the transfer shall be due to merger of the transferor or for regulatory purposes, the transferor (A) shall remit to the Agent, for its own account, an administrative fee of Three Thousand Five Hundred and 00/100 Dollars ($3,500.00) and (B) shall cause the transferee to execute and deliver to the Borrowers, the Agent and each Bank (1) an Assignment -52- Agreement, in the form of Exhibit "C" attached hereto and made a part hereof (an "Assignment Agreement') together with the consents and releases and the Administrative Questionnaire referenced therein, and (2) such additional amendments, assurances and other writings as the Agent may reasonably require. (v) Notes. Upon its receipt of an Assignment Agreement executed by the parties to such Assignment, together with each Note subject to such Assignment Agreement, the Agent shall (a) record the information contained therein in the Register, and (b) give prompt notice thereof to the Borrowers and the other Banks. Within five (5) Business Days after receipt of such notice, the Borrowers, at their own expense, shall execute and deliver (A) to the Agent, the transferor and the transferee, any consent or release (of all or a portion of the obligations of the transferor) to be delivered in connection with the Assignment Agreement, and (B) to the transferee and, if applicable, the transferor, the appropriate Notes. Upon delivery of the new Notes, the transferor's Notes shall be promptly returned to the Borrowers marked "replaced". (vi) Parties. Upon satisfaction of the requirements of this Section 8.17(A), including the payment of the fee and the delivery of the documents set forth in Section 8.17(A) (iv), (A) the transferee shall become and thereafter be deemed to be a "Bank" for the purposes of this Agreement, (B) if the transferor transfers all of its interest, the transferor shall cease to be and thereafter shall no longer be deemed to be a "Bank" and shall have no further rights or obligations under or in connection herewith, and (C) the signature pages hereof and Schedule 1 hereto shall be automatically amended, without further action, to reflect the result of any such transfer. (vii) The Register. The Agent shall maintain a copy of each Assignment Agreement delivered to it and a register or similar list (the "Register") for the recordation of the names and addresses of the Banks and the Commitment Percentages of, and principal amount of the Loans owing to, each Bank from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, with respect to such information, and the Borrowers, the Agent and the Banks may treat each financial institution whose name is recorded in the Register as the owner of the Loan recorded therein for all purposes of this Agreement. The Register shall be available for inspection by the Borrowers or any Bank at any reasonable time and from time to time upon reasonable prior notice. (viii) Certain Representations and Warranties; Limitations; Covenants. By executing and delivering an Assignment Agreement, the parties to the Assignment thereunder confirm to and agree with each other and the other parties hereto as follows: (a) Other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, the assigning Bank makes no representation and warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto; -53- (b) The assigning Bank makes no representation or warranty and assumes no responsibility of the financial condition of the Borrowers or any other Person primarily or secondarily liable in respect of any of the Indebtedness of the Borrowers to the Banks, or the performance or observance by the Borrowers or any other Person primarily or secondarily liable in respect of any of the Indebtedness of the Borrowers to the Banks or any of their obligations under this Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (c) Such assignee confirms that it has received a copy of this Agreement, together with copies of the most recent financial statements referred to in Section 5.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into the Assignment Agreement; (d) Such assignee will, independently and without reliance upon the assigning Bank, the Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (e) Such assignee represents and warrants that it is an Eligible Assignee; (f) Such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; (g) Such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Bank; and (h) Such assignee represents and warrants that it is legally authorized to enter into such Assignment Agreement. B. Participations. Each Bank shall have the right at any time or times, without the consent of any other party, to sell one or more participations or sub-participations to one or more financial institutions, in all or any part of (a) that Bank's Commitment, (b) that Bank's Commitment Percentage, (c) any Loan made by that Bank, (d) any Note delivered to that Bank pursuant to this Agreement and (e) that Bank's participations, if any, purchased pursuant to Section 7.04 or this Section 8.17(B). (i) Rights Reserved. In the event any Bank shall sell any participation or sub-participation, that Bank shall, as between itself and the purchaser, retain all of its rights (including, without limitation, rights to enforce against the Borrowers the Loan Documents and -54- any and all other documents in connection therewith) and duties pursuant to the Loan Documents and any and all other documents in connection therewith, including, without limitation, that Bank's right to approve any waiver, consent or amendment pursuant to Section 9.02; provided, however, that (a) any such participation shall be in a minimum amount of Five Million and 00/100 Dollars ($5,000,000.00) and (b) the holder of any such participation shall not be entitled to require such Bank to take any action hereunder except action directly affecting (i) any reduction in the principal amount or an interest rate on any Loan in which such holder participates; (ii) any extension of the Expiry Date or the date fixed for any payment of interest or principal payable with respect to any Loan in which such holder participates; and (iii) any reduction in the amount of any fees payable hereunder with respect to any Loan in which such holder participates. The Borrowers hereby acknowledge and agree that the participant under each participation shall for purposes of Sections 2.11(b), 2.12, 7.03 and 9.16 be considered to be a "Bank"; provided, however, for purposes of Section 2.11(b), the rights of any participant shall not exceed the rights of the participating Bank. Except as otherwise set forth herein, no participant or sub-participant shall have any rights or obligations hereunder, and the Borrowers and the Agent shall continue to deal with the Banks as if no participation or sub-participation had occurred. The Agent shall continue to distribute payments as if no participation or sub-participation had been sold. (ii) No Delegation. No participation or sub-participation shall operate as a delegation of any duty of the seller thereof. Under no circumstances shall any participation or sub-participation be deemed a novation in respect of all or any part of the seller's obligations pursuant to this Agreement. C. Pledge by Banks. Notwithstanding the provisions of this Section 8.17, any Bank may at any time pledge all or any portion of its interest and rights under this Agreement (including all or any portion of its Notes) to any of the federal reserve banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or the enforcement thereof shall release the pledgor Bank from its obligations hereunder or under any of the other Loan Documents. ARTICLE IX MISCELLANEOUS 9.01 Business Days. Except as otherwise provided in this Agreement, whenever any payment or action to be made or taken under this Agreement, or under the Notes or under any of the other Loan Documents is stated to be due on a day which is not a Business Day, such payment or action will be made or taken on the next following Business Day and such extension of time will be included in computing interest or fees, if any, in connection with such payment or action. 9.02 Amendments and Waivers. No amendment, modification, termination, or waiver of any provision of this Agreement or any Loan Document, nor consent to any variance therefrom, shall be effective unless the same shall be in writing and signed by the Majority Banks and the Borrowers and then such waiver or consent shall be effective only in the specific instance and for the specific purpose given. Notwithstanding anything contained herein to the -55- contrary, unanimous consent of the Banks shall be required with respect to (a) any increase in the Commitments hereunder, (b) the extension of the Expiry Date, the payment date of interest or principal hereunder, or the payment of commitment or other fees or amounts payable hereunder, (c) any reduction in the rate of interest on the Notes, or in any amount of principal or interest due on any Note, or the payment of commitment or other fees hereunder or any change in the manner of pro rata application of any payments made by the Borrowers to the Banks hereunder, (d) any change in any percentage voting requirement, voting rights or the definition of Majority Banks in this Agreement, or (e) any amendment to this Section 9.02, Section 9.11 or Section 7.04 hereof. Notice of amendments or consents ratified by the Banks hereunder shall be immediately forwarded by the Agent to all Banks. Each Bank or other holder of a Note shall be bound by any amendment, waiver or consent obtained as authorized by this Section, regardless of its failure to agree thereto. In the case of any such waiver or consent relating to any provision of this Agreement, any Event of Default or Potential Default so waived or consented to will be deemed to be cured and not continuing, but no such waiver or consent will extend to any other or subsequent Event of Default or Potential Default or impair any right consequent to any other or subsequent Event of Default or Potential Default or impair any right consequent thereto. 9.03 No Implied Waiver: Cumulative Remedies. No course of dealing and no delay or failure of the Agent or the Banks in exercising any right, power or privilege under this Agreement, the Notes or any other Loan Document will affect any other or future exercise of any such right, power or privilege or exercise of any other right, power or privilege except as and to the extent that the assertion of any such right, power or privilege shall be barred by an applicable statute of limitations; nor shall any single or partial exercise of any such right, power or privilege or any abandonment or discontinuance of steps to enforce such a right, power or privilege preclude any further exercise of such right, power or privilege or of any other right, power or privilege. The rights and remedies of the Agent and the Banks under this Agreement, the Notes or any other Loan Document are cumulative and not exclusive of any rights or remedies which the Banks would otherwise have. 9.04 Notices. All notices, requests, demands, directions and other communications (collectively, "Notices") under the provisions of this Agreement or the Notes must be in writing (including telexed or telecopied communication) unless otherwise expressly permitted under this Agreement and must be sent by first-class or first-class express mail, private overnight or next Business Day courier or by telecopy with confirmation in writing mailed first class, in all cases with charges prepaid, and any such properly given Notice will be effective when received. All Notices will be sent to the applicable party at the addresses stated below or in accordance with the last unrevoked written direction from such party to the other parties. If to Borrowers: William P. Mooney Executive Vice President and Chief Financial Officer Michael Baker Corporation Airport Business Park 100 Airside Drive Moon Township, PA 15108 -56- and a copy to: H. James McKnight, Esquire Secretary and General Counsel Michael Baker Corporation Airport Business Park 100 Airside Drive Moon Township, PA 15108 Lee van Egmond, Esquire Reed Smith LLP 435 Sixth Avenue Pittsburgh, PA 15230 If to Agent: John J. Ligday Vice President Citizens Bank of Pennsylvania 525 William Penn Place Pittsburgh, PA 15219 and a copy to: Jeffrey J. Conn, Esquire Thorp Reed & Armstrong, LLP One Oxford Centre Pittsburgh, PA 15219-1425 If to Banks: At such Bank's address set forth on Schedule 1 attached hereto and made a part hereof 9.05 Expenses; Taxes; Attorneys Fees. The Borrowers agree to pay or cause to be paid and to save the Agent and the Banks harmless against liability for the payment of all reasonable out-of-pocket expenses, including, but not limited to reasonable fees and expenses of counsel and paralegals for the Agent and the Banks, incurred by the Agent and the Banks from time to time (i) arising in connection with the preparation, execution, delivery and performance of this Agreement, the Notes and the other Loan Documents, (ii) relating to any requested amendments, waivers or consents to this Agreement, the Notes or any of the other Loan Documents and (iii) arising in connection with the Agent's and the Banks' enforcement or preservation of rights under this Agreement, the Notes or any of the other Loan Documents including, but not limited to, such expenses as may be incurred by the Agent and the Banks in the collection of the outstanding principal amount of the Loans. The Borrowers agree to pay all stamp, document, transfer, recording or filing taxes or fees and similar impositions now or in the future determined by the Agent and the Banks to be payable in connection with this Agreement, the Notes or any other Loan Document. The Borrowers agree to save the Agent and the Banks harmless from and against any and all present or future claims, liabilities or losses with respect to or resulting from any omission to pay or delay in paying any such taxes, fees or impositions. In the event of a determination adverse to a Borrower of any action at law or suit in equity in relation to this Agreement, the Notes or the other Loan Documents, the Borrowers will pay, in addition to all other sums which the Borrowers may be required to pay, a reasonable sum for -57- attorneys and paralegals fees incurred by the Agent and the Banks or the holder of the Notes in connection with such action or suit. All payments due from the Borrowers under this Section will be added to and become part of the Loans until paid in full. 9.06 Severability. The provisions of this Agreement are intended to be severable. If any provision of this Agreement is held invalid or unenforceable in whole or in part in any jurisdiction, the provision will, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability of the provision in any other jurisdiction or the remaining provisions of this Agreement in any jurisdiction. 9.07 Governing Law: Consent to Jurisdiction. This Agreement will be deemed to be a contract under the Laws of the Commonwealth of Pennsylvania and for all purposes will be governed by and construed and enforced in accordance with the substantive Laws, and not the laws of conflicts, of said Commonwealth. The Borrowers consent to the exclusive jurisdiction and venue of the federal and state courts located in Allegheny County, Pennsylvania, in any action on, relating to or mentioning this Agreement, the Notes, the other Loan Documents, or any one or more of them. 9.08 Prior Understandings. This Agreement, the Notes and the other Loan Documents supersede all prior understandings and agreements, whether written or oral, among the parties relating to the transactions provided for in this Agreement, the Notes and the other Loan Documents. 9.09 Duration: Survival. All representations and warranties of the Borrowers contained in this Agreement or made in connection with this Agreement or any of the other Loan Documents shall survive the making of and will not be waived by the execution and delivery of this Agreement, the Notes or the other Loan Documents, by any investigation by the Agent or any Bank, or the making of any Loan. Notwithstanding termination of this Agreement or an Event of Default, all covenants and agreements of the Borrowers will continue in full force and effect from and after the date of this Agreement so long as the Borrowers may borrow under this Agreement and until payment in full of the Notes, interest thereon, and all fees and other obligations of the Borrowers under this Agreement or the Notes. Without limitation, it is understood that all obligations of the Borrowers to make payments to or indemnify the Agent and the Banks will survive the payment in full of the Notes and of all other obligations of the Borrowers under this Agreement, the Notes and the other Loan Documents. 9.10 Counterparts. This Agreement may be executed in any number of counterparts and by the different parties to this Agreement on separate counterparts each of which, when so executed, will be deemed an original, but all such counterparts will constitute but one and the same instrument. 9.11 Successors and Assigns. This Agreement will be binding upon and inure to the benefit of the Agent, the Banks, the Borrowers and their successors and assigns, except that the Borrowers may not assign or transfer any of its rights under this Agreement without the prior written consent of the Banks. -58- 9.12 No Third Party Beneficiaries. The rights and benefits of this Agreement and the other Loan Documents are not intended to, and shall not, inure to the benefit of any third party. 9.13 Exhibits. All exhibits and schedules attached to this Agreement are incorporated and made a part of this Agreement. 9.14 Headings. The section headings contained in this Agreement are for convenience only and do not limit or define or affect the construction or interpretation of this Agreement in any respect. 9.15 Limitation of Liability. To the fullest extent permitted by Law, no claim may be made by the Borrowers against the Agent or the Banks, or by the Agent or the Banks against the Borrowers, or by the Borrowers, the Agent or the Banks against any affiliate, director, officer, employee, attorney or agent of the other for any special, incidental, indirect, consequential or punitive damages in respect of any claim arising from or related to this Agreement or any other Loan Document or any statement, course of conduct, act, omission or event occurring in connection herewith or therewith (whether for breach of contract, tort or any other theory of liability). The Borrowers, the Agent and the Banks hereby waive, release and agree not to sue upon any claim for any such damages, whether such claim presently exists or arises hereafter and whether or not such claim is known or suspected to exist in its favor. This Section 9.15 shall not limit any rights of the Borrowers, the Agent or the Banks arising solely out of gross negligence or willful misconduct. 9.16 Indemnities. In addition to the payment of expenses pursuant to Section 9.05 hereof, the Borrowers agree to indemnify, pay and hold the Agent and each Bank and their officers, directors and attorneys (collectively, called the "Indemnitees"), harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto) that may be imposed on, incurred by or asserted against that Indemnitee, in any matter arising from the occurrence of an Event of Default hereunder or under the other Loan Documents, or the exercise of any right or remedy hereunder or under the other Loan Documents (the "Indemnified Liabilities"); provided, however, that the Borrowers shall have no obligation to an Indemnitee hereunder with respect to Indemnified Liabilities arising from the gross negligence or willful misconduct of that Indemnitee. 9.17 Certifications from Bank and Participants. (a) Tax Withholding. Any assignee or participant of a Bank that is not incorporated under the Laws of the United States of America or a state thereof (and, upon the written request of such Bank, assignee or participant of such Bank, or the Agent) agrees that it will deliver to the Borrowers, such Bank and the Agent three (3) duly completed appropriate valid Withholding Certificates (as defined under Section 1.1441-1(c)(16) of the Income Tax Regulations (the "Regulations")) certifying its status (i.e. U.S. or foreign person) and, if -59- appropriate, making a claim of reduced, or exemption from, U.S. withholding tax on the basis of an income tax treaty or an exemption provided by the Code. The term "Withholding Certificate" means a Form W-9; a Form W-8BEN; a Form W-8ECI; a Form W-8IMY and the related statements and certifications as required under Section 1.1441-1(e)(2) and/or (3) of the Regulations; a statement described in Section 1.871-14(c)(2)(v) of the Regulations; or any other certificates under the Code or Regulations that certify or establish the status of a payee or beneficial owner as a U.S. or foreign person. Any assignee or participant required to deliver to the Borrowers, a Bank and the Agent a Withholding Certificate pursuant to the preceding sentence shall deliver such valid Withholding Certificate at least five (5) Business Days before the effective date of such assignment or participation (unless such Bank in its sole discretion shall permit such assignee or participant to deliver such valid Withholding Certificate less than five (5) Business Days before such date in which case it shall be due on the date specified by such Bank). Any assignee or participant which so delivers a valid Withholding Certificate further undertakes to deliver to the Borrowers, a Bank and the Agent three (3) additional copies of such Withholding Certificate (or a successor form) on or before the date that such Withholding Certificate expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent Withholding Certificate so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by the Borrowers, such Bank or the Agent. Notwithstanding the submission of a Withholding Certificate claiming a reduced rate of or exemption from U.S. withholding tax, such Bank and/or the Agent shall be entitled to withhold United States federal income taxes at the full thirty percent (30%) withholding rate if in its reasonable judgment it is required to do so under the due diligence requirements imposed upon a withholding agent under Section 1.1441-7(b) of the Regulations. Further, such Bank and/or the Agent is indemnified under Section 1.1461-1(e) of the Regulations against any claims and demands of any assignee or participant of such Bank for the amount of any tax it deducts and withholds in accordance with regulations under Section 1441 of the Code. (b) USA Patriot Act. Each Bank or assignee or participant of a Bank that is not incorporated under the Laws of the United States of America or a state thereof (and is not excepted from the certification requirement contained in Section 313 of the USA Patriot Act and the applicable regulations because it is both (i) an affiliate of a depository institution or foreign bank that maintains a physical presence in the United States or foreign country, and (ii) subject to supervision by a banking authority regulating such affiliated depository institution or foreign bank) shall deliver to the Agent the certification, or, if applicable, recertification, certifying that such Bank is not a "shell" and certifying to other matters as required by Section 313 of the USA Patriot Act and the applicable regulations: (1) within ten (10) days after the Closing Date, and (2) as such other times as are required under the USA Patriot Act. 9.18 Confidentiality. (a) General. Each Bank agrees to keep confidential all information obtained from the Borrowers which is nonpublic and confidential or proprietary in nature (including without limitation any information a Borrower specifically designates as confidential), except as provided below, and to use such information only in connection with this Agreement and for the purposes contemplated hereby. Each Bank shall be permitted to disclose such information (i) to outside legal counsel, accountants and other professional advisors who need to know such information in connection with the administration and enforcement of this -60- Agreement, subject to agreement of such Persons to maintain the confidentiality of such information in accordance with the terms hereof, (ii) to assignees and participants as contemplated by Section 8.17, and prospective assignees and participants, subject to the agreement of such Persons to maintain the confidentiality of such information in accordance with the terms hereof, (iii) to the extent requested by any bank regulatory authority or, with notice to the applicable Borrower, as otherwise required by applicable Law or by any subpoena or similar legal process, or in connection with any investigation or proceeding arising out of the transactions contemplated by this Agreement or the other Loan Documents, (iv) if it becomes publicly available other than as a result of a breach of this Agreement or becomes available from a source not known to be subject to confidentiality restrictions, or (v) if the applicable Borrower shall have consented, in writing, to such disclosure. The provisions of this Section 9.18(a) shall survive the repayment of the Loans. (b) Sharing Information With Affiliates of the Bank. The Borrowers acknowledge that from time to time financial advisory, investment banking and other services may be offered or provided to the Borrowers or one or more of its Affiliates (in connection with this Agreement or otherwise) by a Bank or by one or more Subsidiaries or Affiliates of such Bank and each Borrower hereby authorizes such Bank to share any information delivered to such Bank by the Borrowers pursuant to this Agreement, or in connection with the decision of the Bank to enter into this Agreement, to any such Subsidiary or Affiliate of such Bank, it being understood that any such Subsidiary or Affiliate of such Bank receiving such information shall be bound by the provisions of Section 9.18 as if it were a Bank hereunder. Such authorization shall survive the repayment of the Loans.. [INTENTIONALLY LEFT BLANK] -61- 9.19 WAIVER OF TRIAL BY JURY. THE BORROWERS, THE AGENT AND THE BANKS EXPRESSLY, KNOWINGLY AND VOLUNTARILY WAIVE ALL BENEFIT AND ADVANTAGE OF ANY RIGHT TO A TRIAL BY JURY, AND NO PARTY HERETO WILL AT ANY TIME INSIST UPON, OR PLEAD OR IN ANY MANNER WHATSOEVER CLAIM OR TAKE THE BENEFIT OR ADVANTAGE OF A TRIAL BY JURY IN ANY ACTION ARISING IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS. INITIALS: /s/ WPM - --------------------------------- MBC /s/ WPM - --------------------------------- MICHAEL BAKER JR. /s/ WPM - --------------------------------- BAKER/MO /s/ WPM - --------------------------------- BAKER/OTS /s/ WPM - --------------------------------- BAKER NY /s/ JJL - --------------------------------- CITIZENS, AS AGENT AND FOR ITSELF /s/ JH - --------------------------------- FIFTH THIRD /s/ TB - --------------------------------- PNC BANK, NATIONAL ASSOCIATION IN WITNESS WHEREOF, and intending to be legally bound, the parties, by their duly authorized officers, have executed and delivered this Agreement on the date set forth at the beginning of this Agreement. Attest: Michael Baker Corporation By: /s/ C.O. Stuver By: /s/ William P. Mooney ------------------------------ ------------------------------- Name: Craig O. Stuver Name: William P. Mooney Title: Senior Vice President and Title: Executive Vice President and Corporate Controller Chief Financial Officer Attest: MICHAEL BAKER, JR., INC. By: /s/ C.O. Stuver By: /s/ William P. Mooney ------------------------------ ------------------------------- Name: Craig O. Stuver Name: William P. Mooney Title: Senior Vice President and Title: Executive Vice President and Corporate Controller Chief Financial Officer Attest: BAKER/MO SERVICES, INC. By: /s/ C.O. Stuver By: /s/ William P. Mooney ------------------------------ ------------------------------- Name: Craig O. Stuver Name: William P. Mooney Title: Senior Vice President and Title: Executive Vice President and Corporate Controller Chief Financial Officer Attest: Baker/OTS, Inc. By: /s/ C.O. Stuver By: /s/ William P. Mooney ------------------------------ ------------------------------- Name: Craig O. Stuver Name: William P. Mooney Title: Senior Vice President and Title: Executive Vice President and Corporate Controller Chief Financial Officer Attest: Baker Engineering NY, Inc. By: /s/ C.O. Stuver By: /s/ William P. Mooney ------------------------------ ------------------------------- Name: Craig O. Stuver Name: William P. Mooney Title: Senior Vice President and Title: Executive Vice President and Corporate Controller Chief Financial Officer Citizens Bank of Pennsylvania, as Agent and for itself as a Bank By: /s/ John J. Ligday, Jr. ------------------------------- Title: Vice President Fifth Third Bank By: /s/ John L. Hayes IV ------------------------------- Title: VP PNC Bank, National Association By: /s/ Troy Brown ------------------------------- Title: Vice President LIST OF SCHEDULES AND EXHIBITS All Schedules to the Loan Agreement: a. Schedule 1 - Banks and Commitments b. Schedule 2.05 - Existing Letters of Credit c. Schedule 3.09 - Litigation d. Schedule 3.10 - Compliance with Laws e. Schedule 3.11 - Pension Plans f. Schedule 3.13 - Environmental Matters g. Schedule 3.18 - Subsidiaries h. Schedule 6.01 - Permitted Liens i. Schedule 6.02 - Permitted Indebtedness j. Schedule 6.03 - Guarantees k. Schedule 6.04 - Loans and Investments All Exhibits to the Loan Agreement: a. Form of Revolving Credit Note b. Form of Compliance Certificate c. Form of Assignment Agreement Schedule 1 Schedule of Banks and Commitments
Bank Revolving Credit Commitment Commitment Percentage ---- --------------------------- --------------------- Citizens Bank of Pennsylvania $27,500,000 45.83% 525 William Penn Place Pittsburgh, PA 15219 PNC Bank, National Association $17,500,000 29.17% 249 Fifth Avenue One PNC Plaza Pittsburgh, PA 15222 Fifth Third Bank $15,000,000 25.00% Eleven Parkway Center Suite 375 Pittsburgh, PA 15220 Total Commitment Amount $60,000,000 100% =========== =====
EX-31.1 3 j1008401exv31w1.txt EXHIBIT 31.1 Exhibit 31.1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER I, Donald P. Fusilli, Jr., certify that: 1. I have reviewed this quarterly report on Form 10-Q of Michael Baker Corporation. 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ Donald P. Fusilli, Jr. Dated: November 8, 2004 - ------------------------------------------ Donald P. Fusilli, Jr. President and Chief Executive Officer EX-31.2 4 j1008401exv31w2.txt EXHIBIT 31.2 Exhibit 31.2 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER I, William P. Mooney, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Michael Baker Corporation. 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ William P. Mooney Dated: November 8, 2004 - ------------------------------------------ William P. Mooney Executive Vice President and Chief Financial Officer EX-32.1 5 j1008401exv32w1.txt EXHIBIT 32.1 Exhibit 32.1 ADDITIONAL CERTIFICATIONS Pursuant to 18 U.S.C. Section 1350, the undersigned officer of Michael Baker Corporation (the "Company"), hereby certifies that the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (the "Report") fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Donald P. Fusilli, Jr. Dated: November 8, 2004 - ------------------------------------------ Donald P. Fusilli, Jr. President and Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, the undersigned officer of Michael Baker Corporation (the "Company"), hereby certifies that the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (the "Report") fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ William P. Mooney Dated: November 8, 2004 - ------------------------------------------ William P. Mooney Executive Vice President and Chief Financial Officer These additional certifications are being furnished solely pursuant to 18 U.S.C. Section 1350, and are not being filed as part of the Report or as a separate disclosure document. -----END PRIVACY-ENHANCED MESSAGE-----