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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1992 COMMISSION FILE NUMBER 0-2315
JWP INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 11-2125338
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
SIX INTERNATIONAL DRIVE,
RYE BROOK, NEW YORK 10573-1058
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
(914) 935-4000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, $.10 PAR VALUE NEW YORK STOCK EXCHANGE
(TITLE OF EACH CLASS) (NAME OF EACH EXCHANGE ON WHICH
REGISTERED)
Securities registered pursuant to Section 12(g) of the Act:
7 3/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2012
(TITLE OF CLASS)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES NO X
The aggregate market value of the Registrant's voting stock held by non-
affiliates of the Registrant on August 31, 1994 was approximately $0.
Number of shares of Common Stock outstanding as of the close of business on
August 31, 1994: 41,357,697 shares.
Indicate by check mark if disclosure of delinquent filings pursuant to Item
405 Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
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TABLE OF CONTENTS
PART I
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PAGE
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Item 1. Business.................................................................... 3
General................................................................... 3
Mechanical/Electrical Services............................................ 4
Supply of Water........................................................... 6
Information Services...................................................... 7
Other..................................................................... 7
Item 2. Properties.................................................................. 8
Item 3. Legal Proceedings........................................................... 10
Item 4. Submission of Matters to a Vote of Security Holders......................... 12
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholders Matters.. 13
Item 6. Selected Financial Data..................................................... 14
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 15
Item 8. Financial Statements and Supplementary Data................................. 25
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure............................................................... 53
PART III
Item Directors and Executive Officers of the Registrant.......................... 55
10.
Item Executive Compensation...................................................... 57
11.
Item Security Ownership of Certain Beneficial Owners and Management.............. 67
12.
Item Certain Relationships and Related Transactions.............................. 68
13.
PART IV
Item Exhibits, Financial Statement Schedules, and Reports on Form 8-K............ 69
14.
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PART I
ITEM 1. BUSINESS
GENERAL
JWP INC. ("JWP" or the "Company") is a leader in mechanical/electrical
construction and maintenance services.
The Company also owns and operates Jamaica Water Supply Company, which is the
largest investor-owned water utility in New York State and which serves
portions of Queens County and Nassau County in New York State, and Sea Cliff
Water Company, a water utility which serves a small portion of Nassau County.
As discussed in more detail below under "Management's Discussion and Analysis
of Financial Condition and Results of Operations", JWP is seeking to reorganize
under Chapter 11 of the United States Bankruptcy Code. Since 1992, the Company
has experienced losses, and cash flow from operations continues to be
inadequate to fund its operations and service its debt and other obligations.
From August 1992 until February 1994, when it obtained debtor-in-possession
financing, JWP did not have available credit facilities and consequently had to
fund operations from working capital and from the proceeds of sales of
businesses and other assets.
JWP's subsidiaries are not a party to the Chapter 11 proceeding, which
affects only JWP INC., the parent holding company. With the exception of
certain subsidiaries of JWP that had been engaged in the information services
business, none of the Company's subsidiaries is a party to any insolvency or
similar proceeding. However, there has been significant deterioration in the
Company's mechanical and electrical services backlog of business. In addition,
a surety company that had been the primary source of surety bonds for certain
subsidiaries engaged in the Company's mechanical and electrical services
business (the "MES Companies"), which subsidiaries comprised approximately 20%
of the Company's 1993 revenues of those MES Companies which the Company
currently plans to retain, is no longer engaged in the business of issuing such
bonds. As a result, these subsidiaries are currently not receiving such bonds.
However, the absence of available bonding for these subsidiaries has not
resulted in a material reduction in their backlog. The Company and these
subsidiaries are actively engaged in discussions with another surety company
which has undertaken due diligence for the purpose of entering into a new
surety bonding arrangement. However, there can be no assurance that such a new
surety bonding arrangement will be entered into.
In the second half of 1992, JWP developed an asset disposition program to
sell certain of its businesses as part of a business restructuring plan. The
Company's business restructuring plan and its proposed plan of reorganization
under its Chapter 11 proceeding contemplates, among other things, the sale and
downsizing of certain of its mechanical and electrical business units in the
United States, as well as the sale of its non-core businesses. The business
restructuring plan has been implemented and as a consequence the broad range of
mechanical and electrical services offered by the Company and the Company's
broad geographical range in the United States has been reduced. The MES
Companies to be retained by the reorganized JWP generated revenues of
approximately $1.9 billion in 1992.
Under JWP's proposed plan of reorganization, creditors of the Company will
own all of the common stock of the reorganized JWP and holders of the Company's
common stock, preferred stock and warrants of participation will receive
warrants to purchase common stock of the reorganized JWP in exchange for their
existing equity interests. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
A class action lawsuit on behalf of the Company's common stockholders against
the Company and certain former officers and certain directors of the Company,
among others, has been pending since 1992. It seeks an unspecified amount of
damages from the defendants, including the Company. Under the proposed plan of
reorganization, members of the class in that litigation also will receive
warrants to purchase common stock of the reorganized JWP but will not be
entitled to receive any other recovery from the Company with respect to their
claims. Claims against defendants other than the Company will not be affected
by the
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proposed plan of reorganization. For further information regarding this
litigation see "Legal Proceedings--JWP Shareholder Litigation."
The Company's continuation as a going concern is dependent upon its ability
to restructure its indebtedness as part of its plan of reorganization, obtain
sufficient bonding which is frequently required for the award of construction
contracts, return to profitability, obtain new credit facilities and otherwise
generate sufficient cash flow to meet its restructured and other obligations on
a timely basis. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Capital Resources and Liquidity."
For several years prior to August 9, 1993, the Company, through its
information services group, also provided computer and system integration
services. On August 9, 1993 the Company sold substantially all its business
operations in that field which were located in the United States. In October
1993, the subsidiary that formerly conducted these operations in the United
States filed a voluntary petition under Chapter 7 of the United States
Bankruptcy Code.
Since the middle of 1992, the Company has sold a number of other non-core
business units. It intends to pursue the sale of the balance of its non-core
businesses, including its water supply business.
JWP is a Delaware corporation, formed in 1987 to continue the business of its
predecessor, a New York corporation with the same name.
MECHANICAL/ELECTRICAL SERVICES
JWP's MES Companies specialize in the design, distribution, integration,
installation and maintenance of complex mechanical and electrical systems.
Services are provided to a broad range of commercial, industrial and
institutional customers through 43 offices located in major markets throughout
the United States and more than 25 offices located in Canada, the United
Kingdom and the Middle East.
The MES Companies provide mechanical and electrical services, directly, by
designing, selling, integrating, installing and maintaining systems to and for
end-users (including corporations, municipalities and other governmental
entities, owner/developers and tenants of buildings) and, indirectly, by acting
as subcontractor for construction managers, general contractors and other
subcontractors.
The wide range of the Company's MES Companies is more particularly described
below.
RANGE OF MECHANICAL AND ELECTRICAL SERVICES. The MES Companies are primarily
involved in the design, integration, installation and maintenance of (i)
distribution systems for electrical power (including power cables, conduits,
distribution panels, transformers and generators), (ii) lighting systems and
(iii) heating, ventilating, air conditioning, plumbing, process and high purity
piping and clean air systems. JWP believes its mechanical and electrical
services business is the largest of its kind in the United States and Canada
and one of the largest in the United Kingdom.
Mechanical and electrical services are principally of three types: (l) large
installation projects, with contracts generally in the multi-million dollar
range, in connection with construction of industrial facilities, institutional
and public works projects, commercial buildings and large blocks of space
within commercial buildings, (2) smaller system installations involving
renovation and retrofit work and (3) maintenance and service.
The MES Companies' largest installation projects have included those (i) for
industrial and institutional use (such as manufacturing, pharmaceutical and
chemical plants, refineries, research facilities, water and wastewater
treatment facilities, hospitals, correctional facilities, schools, trading
floors, computer facilities and mass transit systems), (ii) for commercial use
(such as office buildings, convention centers, shopping malls, hotels and
resorts) and (iii) for electrical utilities. These can be multiyear projects
ranging in size up to, and occasionally in excess of, $50 million. The MES
Companies also install and maintain street, highway, bridge and tunnel
lighting, traffic signals, computerized traffic signal control systems and
signal control and communication systems for mass transit in several
metropolitan areas.
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Major projects are performed pursuant to contracts with owners, such as
corporations and municipalities and other governmental entities, general
contractors, construction managers, as agents for owners of construction
projects, owner-developers and tenants of commercial properties. Institutional
and public works projects are frequently long-term, complicated projects
requiring significant technical skills and financial strength to obtain the
performance bonds that are often a condition to the award of contracts for such
projects.
Smaller projects, which are generally completed in less than a year, involve
the provision of conventional mechanical and electrical services in industrial
plants, office buildings and commercial and retail space in which the MES
Companies install electrical fixtures, provide electrical and air conditioning
systems for computer facilities, and install smaller heating, air conditioning,
and plumbing systems for office and renovation projects. In this area, the MES
Companies are not necessarily dependent upon new construction; demands for
their services are frequently prompted by the expiration of leases, changes in
technology and changes in the customer's plant or office layout in the normal
course of business.
The MES Companies also perform maintenance and service work, under contract
or on an on-call basis, for exterior and interior lighting systems and for air
conditioning and heating systems in plants and other large facilities, office
buildings and commercial enterprises. The MES Companies also install
refrigeration systems for restaurants, office cafeterias and supermarkets.
Contracts for maintenance of mechanical and electrical systems range from one
to several years and are billed on a time and materials basis or a fixed fee
plus the cost of materials. In many of the buildings in which the MES Companies
maintain lighting systems, they also install fixtures, move outlets, rewire and
perform other routine electrical work. Maintenance and service operations often
require a number of employees to be permanently located at the building or
facility served.
In addition, the MES Companies operate fully equipped sheet metal fabrication
facilities in the United States, providing and installing sheet metal for both
their own mechanical services businesses and unrelated mechanical contractors;
they also maintain welding and piping fabrication shops for their own
mechanical operations.
BACKLOG. The MES Companies had a backlog, as of December 31, 1992, of
approximately $1.6 billion compared with a backlog of approximately $1.85
billion as of December 31, 1991. At March 31, 1994, the backlog of the MES
Group was approximately $1.1 billion, of which approximately $1.0 billion
relates to mechanical and electrical subsidiaries which the Company currently
intends to retain. The MES Companies have experienced a reduction in their
backlog principally because of the Company's weakened financial condition,
which adversely affects their ability to obtain new contracts, and by reason of
the continuing recession in the United States and overseas construction
markets.
EMPLOYEES. The MES Companies presently employ approximately 14,000 people,
approximately 80% of whom are represented by various unions. The Company
believes that its employee relations are generally satisfactory.
COMPETITION. The business in which the MES Companies engage is extremely
competitive. They compete with national, regional and local companies. However,
the Company believes that, at present, it is the largest mechanical and
electrical services company in the United States and Canada and one of the
largest in the United Kingdom. The MES Companies compete on the basis of the
quality of service, price, performance and reliability. Their competitive
position has been adversely affected by the Company's weakened financial
condition, among other things, inasmuch as their surety companies have become
more selective in issuing new bonds, especially on larger, longer duration
projects and inasmuch as one company that had provided bonds for certain of the
Company's subsidiaries has withdrawn from that business. Surety bonds are
frequently a precondition to the awarding of a mechanical or electrical
services contract.
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SUPPLY OF WATER
OPERATIONS. Jamaica Water Supply Company ("JWS") (substantially all the
common stock of which is owned by the Company) and Sea Cliff Water Company
("Sea Cliff") (all the capital stock of which is owned by the Company)
(sometimes referred to herein collectively as the "Water Companies") are
regulated public utilities that own and operate water supply systems on Long
Island, New York. JWS, the largest investor-owned water utility in New York
State, supplies water to a densely populated residential area of approximately
40 square miles in the Borough of Queens in New York City and in southwestern
Nassau County, an area with an aggregate population of approximately 650,000.
Sea Cliff supplies water to a four square mile area on the north shore of
western Nassau County with a population of approximately 20,000. The business
of the Water Companies consists of the purification, distribution and sale of
water for residential, commercial and industrial purposes, providing backup
water for commercial customers' fire sprinkler systems and renting fire
hydrants for municipal fire protection.
The Company has decided to sell the Water Companies as part of its business
restructuring plan.
As of December 31, 1992, the Water Companies provided potable water to
approximately 122,000 water service accounts, substantially all of whom are
metered and billed for the amount of water actually used, and approximately
1,000 private fire protection accounts for sprinkler connections billed on a
flat rate basis.
The Water Companies' primary sources of water are ground water from wells
located in the New York counties of Queens and Nassau and surface water
obtained from the City of New York (the "City"). JWS has 93 wells on 60 well
sites, of which 67 wells are currently operable, and Sea Cliff has two wells on
two sites, both of which are currently operable. Where appropriate, JWS has
installed treatment facilities at well sites to remove volatile organic
compounds prior to the water entering the distribution system.
In an effort to reduce the cost of water to City residents, the City provides
JWS with an exemption from the City's real property taxes and makes direct
revenue support payments to JWS for water service. JWS also has an agreement
with the City to purchase up to 50 million gallons of water daily from the City
(to the extent available) at a cost of $1 per million gallons; however, JWS
expects to purchase only approximately 30 million gallons daily. The $1 per
million gallons rate is substantially less than both JWS' cost to pump and
treat water from its wells and the City's rate for commercial customers. The
agreement expires June 30, 1998, although it is cancellable by either party on
two years notice. The 30 million gallons of water JWS expects to purchase daily
from the City constitutes approximately 60 percent of the average daily amount
of water presently distributed by JWS to its customers in Queens County. JWS
customers in Nassau County are served entirely from wells owned and operated by
JWS.
The Water Companies are subject to regulation by the Public Service
Commission of the State of New York (the "Public Service Commission"). Since
the population of the areas served by the Water Companies has been relatively
stable, the amount of water consumed by their customers has not and is not
expected to increase in any significant respect. Consequently, cost increases
due to inflation or otherwise must be recovered through operating efficiencies
or increases in rates which are subject to approval of the Public Service
Commission. Until 1992, the Water Companies had traditionally filed for rate
increases on an annual basis and had received approvals of rate increases from
the Public Service Commission enabling them to maintain satisfactory operating
results. Pursuant to a settlement agreement with respect to rate related
proceedings that became effective February 2, 1994, JWS has agreed that,
subject to limited specified exceptions, it will not seek to have a general
rate increase become effective prior to January 1, 1997. JWS is also a party to
certain condemnation proceedings. See "Legal Proceedings--Jamaica Water Supply
Company Rate Related Proceedings and Related Litigation" and "New York City
Condemnation Proceeding."
The Water Companies are also subject to regulation by various federal, state
and local agencies, including the Department of Environmental Conservation of
the State of New York, the New York State and New York City Departments of
Health, the New York City Department of Environmental Protection, the Nassau
County Department of Health and the United States Environmental Protection
Agency. The Company believes that the Water Companies are in compliance with
all applicable Federal, state and local laws and regulations.
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INFORMATION SERVICES
The Company's Information Services Group was principally engaged in providing
computer and systems integration services. It sold integrated multi-vendor
personal computer related products and services for medium and large sized
companies and other organizations. On August 9, 1993, the Company sold the
portion of this business that operated in the United States. During the period
April 1993 through January 1994, the Company sold, in separate transactions,
its information services businesses in Canada, the United Kingdom, Japan and
Germany. The Company also carried on similar information services businesses in
France and Belgium. In 1993, the French and Belgian businesses filed petitions
in their respective countries' courts seeking relief from their creditors.
These businesses are in the process of being liquidated.
OTHER
In addition to the sale of certain mechanical and electrical services
business units contemplated by its business restructuring plan, the Company
intends to dispose of the balance of its non-core businesses. The non-core
business units that continue to be held for sale are principally the Water
Companies, the Company's telephone systems business and its remaining energy
and environmental related businesses.
The Company's telephone systems business is engaged in the design, sale,
installation and servicing of telecommunication systems, including LEXAR PBX
telephone systems which the Company manufactures. These systems are used to
interconnect business and institutional users with telephone lines of the
regulatory telephone companies.
The Company's principal remaining energy and environmental related business
constructs, operates and maintains co-generation facilities for use in steam
enhanced oil recovery processes, industrial plants, hotels, universities,
hospitals and shopping centers. JWP, through its subsidiaries, has built 16 co-
generation facilities, operates 6 of them and owns, in whole or in part, 3 of
them. Where a JWP subsidiary owns a co-generation facility, it supplies utility
services to its customers under long-term contracts. Other energy and
environmental related business units manufacture fluidized bed combustion and
gasification systems for the waste-to-energy market to process solid wastes of
various types and collect methane gas at a landfill for conversion into
electrical energy which is sold to a utility.
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ITEM 2. PROPERTIES
The operations of the Company are conducted primarily in leased properties.
The following table lists the major facilities:
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APPROXIMATE
SQUARE LEASE EXPIRATION
FOOTAGE DATE, UNLESS OWNED
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CORPORATE HEADQUARTERS
Six International Drive 78,000 (of which 7/31/02
Rye Brook, New York 63,000 square feet
is presently sublet)
MECHANICAL AND ELECTRICAL SERVICES
1200 North Sickles Road
Tempe, Arizona 29,000 Owned
3208 Landco Drive
Bakersfield, California 50,000 4/30/95
4462 Corporate Center Drive
Los Alamitos, California 41,400 12/31/00
4464 Alvarado Canyon Road
San Diego, California 53,800 7/31/95
9505 Chesapeake Drive
San Diego, California 44,000 1/30/96
345 Sheridan Boulevard
Lakewood, Colorado 63,000 Owned
5697 New Peachtree Road
Atlanta, Georgia 27,200 11/30/95
2100 South York Road
Chicago, Illinois 77,700 1/09/00
1300 Michigan Street
Gary, Indiana 27,600 Month to Month
2655 Garfield Road
Highland, Indiana 34,600 7/08/96
3555 W. Oquendo Road
Las Vegas, Nevada 90,000 11/30/98
46-01 20th Avenue
Long Island City, New York 33,000 12/31/95
19-49 42nd Street
Long Island City, New York 59,000 2/28/96
30 N. MacQuesten Parkway
Mount Vernon, New York 25,300 11/30/98
111 West 19th Street
New York, New York 27,200 5/31/98
Two Penn Plaza
New York, New York 57,200 6/30/06
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<TABLE>
<CAPTION>
APPROXIMATE
SQUARE LEASE EXPIRATION
FEET DATE, UNLESS OWNED
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165 Robertson Road
Ottawa, Ontario 35,400 Owned
11245 Indian Trail
Dallas, Texas 43,400 4/27/96
11261 Indian Trail
Dallas, Texas 32,800 8/27/96
5550 Airline Road
Houston, Texas 74,500 6/30/96
515 Norwood Road
Houston, Texas 29,700 Month To Month
Canary Wharf
One Canada Square
London, U.K. 27,800 1/01/01
Building D-3 Freeport
Center
Clearfield, Utah 120,000 12/31/99
1574 South West Temple
Salt Lake City, Utah 58,500 12/31/94
22930 Shaw Road
Sterling, Virginia 32,600 7/31/99
109-D Executive Drive
Sterling, Virginia 49,000 7/31/96
1420 Spring Hill Road
McLean, Virginia 13,100 4/07/00
SUPPLY OF WATER
410 Lakeville Road
Lake Success, New York 24,000 7/31/98
OTHER
770 Lawrence Street
Newbury Park, California 50,800 7/31/95
175 Louis Street
South Hackensack, New
Jersey 25,700 4/30/97
</TABLE>
JWS owns a waterworks system consisting of approximately 850 miles of water
mains, 32 storage tanks and 93 wells (67 of which are presently operable).
Water is drawn from these wells by electric motors housed in small brick or
concrete buildings. These facilities are located on parcels of land,
aggregating approximately 55 acres, owned by JWS scattered throughout the
territory it serves. Many of the parcels are subject to liens, encumbrances and
other restrictions. Sea Cliff owns approximately 56 miles of water mains and 4
parcels of land aggregating approximately 5 acres, on which a diesel pumping
station, 2 storage facilities and 2 operating wells are located.
The Company believes that all of its property, plant and equipment are well
maintained, in good operating condition and suitable for purposes for which
they are used.
See Note 8 to Consolidated Financial Statements for additional information
regarding lease costs. The Company believes there will be no difficulty either
in negotiating the renewal of its real property leases as they expire or in
finding other satisfactory space.
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ITEM 3. LEGAL PROCEEDINGS
JWP SHAREHOLDER LITIGATION. Since August 1992, nineteen purported class
action lawsuits have been filed against the Company arising out of the
restatements of earnings, write-offs and losses announced by the Company on
August 4, 1992 and October 2, 1992. The lawsuits named as defendants, among
others, the Company, certain of its former officers and certain directors, and
alleged federal securities law and state law violations. On November 2, 1992,
all of those actions were consolidated for pre-trial purposes before Judge
Charles L. Brieant in the White Plains division of the Southern District of New
York.
Pursuant to Stipulation and Court Order, on January 15, 1993, a single
consolidated amended class action complaint (the "Complaint") was filed against
the Company and Andrew T. Dwyer, a director of the Company and a former
Chairman of the Board, President and Chief Executive Officer of the Company,
Ernest W. Grendi, a former Chief Financial Officer of the Company, Joseph E.
Grendi, a former Chief Financial Officer of the Company's Mechanical/Electrical
Services Group, and three current directors of the Company--Innis O'Rourke,
Jr., Craig C. Perry, and Edmund S. Twining, Jr.-- and George M. Duff, Jr., a
former director, each of whom were members of the Company's Audit Committee for
all or part of 1991, and Ernst & Young which served as the Company's auditor
for 1992 and 1991 and several prior years.
The Complaint alleges violations of Section 10(b) of the Securities and
Exchange Act of 1934, Rule 10b-5 promulgated thereunder and common law fraud
and deceit on the part of the Company and the other named defendants. Among
other things, the Company is alleged to have intentionally and materially
overstated its inventory, accounts receivable and earnings in various public
disseminations during the purported class period May 1, 1991 through October 1,
1992. The Complaint seeks an unspecified amount of damages. On March 30, 1993,
the Company filed an Answer which denies the material allegations in the
Complaint. The parties are now engaged in discovery proceedings. For
information regarding the anticipated effect of the Company's bankruptcy
proceeding on the claims asserted in this litigation, see "Business--General".
SECURITIES AND EXCHANGE COMMISSION INVESTIGATION. The Company has been
informed by the Securities and Exchange Commission (the "SEC") that it is
conducting a private investigation to determine whether there have been
violations of certain provisions of the Federal securities laws and/or the
rules and regulations of the SEC in connection with the Company's financial
records, reports and public disclosures. The Company has been cooperating with
the SEC's staff and has voluntarily produced documents and information as
requested by the staff. On April 12, 1994, the SEC's staff informed the Company
of its intention to recommend that the SEC file a civil injunction action
against the Company. The Company is currently engaged in discussions with the
SEC's staff concerning a possible consensual resolution of the matter.
NEW YORK COUNTY DISTRICT ATTORNEY INVESTIGATION. In connection with an
investigation of the plumbing industry being conducted by the New York County
District Attorney's office, two subsidiaries of the Company engaged in the
plumbing business in New York City have received subpoenas for certain of their
books and records. The subsidiaries have complied with those subpoenas.
Additionally, certain employees of these subsidiaries have been subpoenaed to
testify as witnesses before a grand jury and those employees have complied with
the subpoenas.
JAMAICA WATER SUPPLY COMPANY RATE RELATED PROCEEDINGS AND RELATED
LITIGATION. Effective March, 1991, Jamaica Water Supply Company ("JWS") was
authorized by the Public Service Commission of the State of New York (the
"Public Service Commission") to increase its rates charged to customers by
amounts designed to increase annual revenues by $3,992,000. At that time the
Public Service Commission made $2,000,000 of that increase temporary and
subject to refund pending a further review by the Public Service Commission.
Upon completion of its review, in July 1992, the Public Service Commission
ordered JWS to refund to its customers all of the amounts collected under the
temporary portion of the rate increase during the period from March 1991
through June 1992. In addition, the Public Service Commission ordered JWS to
reduce its rates charged to customers by amounts designed to reduce annual
revenues by $1,400,000 effective July 1, 1992. During the third quarter of
1992, JWS, which had not recorded as revenue any of the amounts collected under
the temporary portion of the rate increase, made the required refund,
aggregating $2,900,000 including interest, by way of credits to customers'
bills.
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In January 1992, the Public Service Commission ordered its Staff to perform
an audit covering all aspects of JWS' operations. The report on that audit
alleged that mismanagement and imprudence on the part of JWS may have resulted
in excess charges to customers of up to $10,600,000. As a result of the audit
report, in June 1992, the Public Service Commission instituted a proceeding
requiring JWS to demonstrate that its rates charged to customers are not
excessive and to provide for an investigation of JWS' management practices. As
part of this proceeding, the Public Service Commission ordered that effective
August 6, 1992, $10,600,000 of JWS' annual revenues be made temporary and
subject to refund pending the completion of the investigation.
Between December 1992 and May 1993, prior to the commencement of the hearing,
each of JWS, the Public Service Commission Staff, the New York State Consumer
Protection Board, Waterbill Watchdogs, Inc., the County of Nassau, the Town of
Hempstead, the New York City Department of Environmental Protection and the New
York City Water Board submitted proposed testimony in the Public Service
Commission proceedings. On June 3, 1993, the Public Service Commission issued
an order suspending hearings and appointing two administrative law judges for
the purpose of effecting a settlement. Negotiations among the parties and
through the settlement judges were ongoing from that time.
In addition, in February 1993, the County of Nassau, State of New York,
commenced an action alleging violation of the Racketeer Influenced and Corrupt
Organizations Act ("RICO") and common law fraud based on allegations that JWS
intentionally filed false rate applications and, as a result, had earnings that
exceeded projections by $8,653,000. The complaint demanded treble damages and
punitive damages.
As a result of the negotiations ordered by the Public Service Commission, all
of the parties referred to above entered into a settlement agreement dated
December 22, 1993 ("Settlement Agreement"), which, following approval by the
Public Service Commission on February 2, 1994, settled all issues outstanding
before the Public Service Commission, various state courts and in the RICO
action. The Settlement Agreement provides, among other things, (i) that JWS
will use its best efforts to bring about the separation of Jamaica Water
Securities Corp., a subsidiary of JWP which owns substantially all of the
common stock of JWS, from JWP and will submit a plan to the Public Service
Commission on or before December 31, 1994 for the establishment of a separate
waterworks corporation to be incorporated under the New York Transportation
Corporations Law to provide water utility service to the Nassau County
customers served by JWS, (ii) a commitment by JWS that, subject to limited
specified exceptions, it will not seek to have a general rate increase become
effective prior to January 1, 1997, (iii) for refunds and other payments to
customers estimated to aggregate approximately $11.7 million over the 1994-1997
period, and (iv) a cap on earnings above which JWS will share with its
customers its return on equity.
NEW YORK CITY CONDEMNATION PROCEEDING. From time to time representatives of
New York City (the "City") and JWP have met to discuss a possible purchase by
the City of that portion of JWS's water distribution system, which is located
in the City. That system constitutes approximately 75% of JWS's water plant.
In September 1986, the State of New York enacted a law that requires the City
to acquire by condemnation all of the property of JWS "constituting or relating
to [its] water distribution system located in the City of New York" only in the
event of a decision by a Supreme Court of the State of New York that the amount
of compensation to be paid JWS for the water distribution system "shall be
determined solely by the income capitalization method of valuation, based on
the actual net income as allowed (to JWS) by the [New York State] public
service commission." In addition, the law provides that if any court determines
"that a method of compensation other than the income capitalization method be
utilized, or if the proposed award is more than the [JWS] rate base of the
[condemned] assets . . . as utilized by the public service commission in
setting rates," the City may withdraw the condemnation proceeding without
prejudice or costs. As of December 31, 1993, the rate base of those assets
located in the City was approximately $81,350,000 exclusive of water meters
currently under lease which may be required to be purchased in the event of
condemnation.
11
<PAGE>
In April 1988, the City instituted a proceeding in a Supreme Court of the
State of New York pursuant to the 1986 statute. The City sought, in the first
instance, an order providing that the income capitalization method of valuation
would be the sole method used to determine compensation for JWS's property,
and, on that basis, asked the Court to determine the value of the JWS property
to be condemned. Pursuant to the 1986 statute, if the Court determines
compensation that exceeds the rate base or determines compensation by a method
other than the income capitalization method, the City can withdraw the
condemnation proceeding. JWS argued, at trial and in its post-trial memorandum,
that the judicially recognized method for valuing public utility property is by
the method known as " Reproduction Cost New, Less Depreciation". JWS also
sought consequential and severance damages that would result from separating
the JWS Nassau County water supply system from that in the City. The aggregate
compensation sought by JWS as of December 31, 1987 was $923,966,341, consisting
of $846,625,285 for its tangible and intangible assets, $49,670,056 for
consequential and severance damages and $27,671,000 for the fair market value
of the land owned by JWS. The City submitted its income capitalization
valuation, as of December 31, 1987, at $62,500,000. The evidentiary hearings in
the proceedings were concluded and JWS reserved its right to contest the
constitutionality of the statute.
Subsequent to the trial, the Court requested that the parties address the
constitutionality of the statute. After a joint post-hearing submission from
JWS and the City contending that the statute was constitutional, the Supreme
Court, sua sponte, by decision dated June 21, 1993, dismissed the City's
petition and held, inter alia, that "insofar as the legislature has directed
this Court to make . . . a decision [on valuation only prior to any taking]
through the statute, that statute is unconstitutional" because such a decision
would be advisory. Aware that a constitutional challenge to a nearly identical
condemnation statute (the "Saratoga Statute") involving Saratoga County, was
pending in the appellate courts, neither JWS nor the City served a notice of
entry of the dismissal order that would commence the period within which an
appeal could be taken.
On February 24, 1994, the New York Court of Appeals held the Saratoga Statute
to be constitutional. On April 6, 1994, a conference was held with the Supreme
Court pursuant to the City's request that it reconsider its JWS decision in
light of the Court of Appeals February 24, 1994 decision. At the April 6, 1994
conference, the Court stated it would, as requested by the City, reconsider its
decision. The Court further stated that if it decided to withdraw its June 21,
1993 decision, it would then take the proceedings under further consideration.
The Company cannot predict whether the Court will withdraw its June 21, 1993
decision nor is it possible to predict what the decision of the Supreme Court
might be if it decides to value the JWS property or the effect of the pending
litigation on the proposed sale of JWS.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
12
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS
MATTERS
As of August 31, 1994, there were 6,618 holders of record of the Company's
common stock. Until October 11, 1993 the common stock of the Company was listed
for trading on the New York Stock Exchange. Because of the losses suffered by
the Company and its announcement that the Company intended to reorganize under
a Chapter 11 proceeding pursuant to a plan of reorganization that would not
permit holders of the Company's common stock to have any equity or debt
interest in the restructured Company, the New York Stock Exchange delisted the
Company's common stock from the Exchange.
The following table sets forth the high and low closing prices for the
Company's common stock during the periods indicated on the New York Stock
Exchange.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1992
Fourth Quarter............................................ 7 2 1/2
Third Quarter............................................. 12 5/8 6 1/8
Second Quarter............................................ 17 3/4 12 1/8
First Quarter............................................. 19 1/2 15 1/4
1991
Fourth Quarter............................................ 19 13 1/8
Third Quarter............................................. 19 3/4 15 3/8
Second Quarter............................................ 23 15 1/2
First Quarter............................................. 22 3/4 12 1/2
</TABLE>
The Company did not pay dividends on its common stock during 1992 or 1991 and
does not intend to pay dividends in the foreseeable future. See Note 3 to the
Consolidated Financial Statements regarding restrictions on the Company's
ability to pay dividends.
13
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected financial data (including restated amounts for the years ended
December 31, 1991 and December 31, 1990) should be read in conjunction with the
Consolidated Financial Statements, the related notes thereto and the
independent auditors' report thereon, which includes a disclaimer of opinion on
the 1992 Consolidated Financial Statements, appearing elsewhere in this report.
See Note 1 to the Consolidated Financial Statements regarding the uncertainty
as to the Company's ability to continue as a going concern, the class action
shareholder lawsuit filed against the Company, debt in default and the
restatement of the Company's financial statements for the years ended December
31, 1991 and 1990.
Income Statement Data (a) (c)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1992 1991 1990 1989 1988
---------- ----------- ----------- ---------- --------
AS RESTATED AS RESTATED
<S> <C> <C> <C> <C> <C>
Revenues................ $2,404,577 $2,318,112 $2,057,607 $1,547,618 $806,641
Gross profit............ 243,854 344,551 331,400 271,960 191,817
(Loss) income from
continuing operations.. (363,515) 4,712 28,649 32,206 23,033
(Loss) income from
discontinued
operations............. (253,230) 24,263 21,600 14,403 10,983
Cumulative effect of
change in method of
accounting for income
taxes.................. 4,315 -- -- -- --
---------- ---------- ---------- ---------- --------
Net (loss) income....... $ (612,430) $ 28,975 $ 50,249 $ 46,609 $ 34,016
========== ========== ========== ========== ========
(Loss) income per share
(b):
Continuing operations... $ (9.00) $ 0.10 $ 0.75 $ 0.91 $ 0.70
Discontinued operations. (6.24) 0.63 0.57 0.40 0.33
Cumulative effect of
change in method of
accounting for income
taxes.................. 0.11 -- -- -- --
---------- ---------- ---------- ---------- --------
Net (loss) income per $ (15.13) $ 0.73 $ 1.32 $ 1.31 $ 1.03
share..................
========== ========== ========== ========== ========
Balance Sheet Data
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
AS OF DECEMBER 31, 1992 1991 1990 1989 1988
- - - - - - - - - ------------------ ---------- ----------- ----------- ---------- --------
AS RESTATED AS RESTATED
<S> <C> <C> <C> <C> <C>
Shareholders' (deficit)
equity.................. $ (175,979) $ 456,136 $ 370,513 $ 311,939 $183,514
Total assets............ $ 907,584 $2,233,827 $1,476,012 $1,242,503 $834,022
Notes payable........... $ 6,452 $ 110,600 $ 62,500 $ 77,700 $ 53,478
Long-term debt,
including current
maturities............. $ 6,040 $ 463,071 $ 381,323 $ 326,717 $256,082
Debt in default......... $ 501,007 $ -- $ -- $ -- $ --
Capital lease
obligations, including
current maturities..... $ 3,935 $ 26,995 $ 29,973 $ 28,444 $ 26,792
Redeemable preferred
stock................... $ -- $ 5,242 $ 5,771 $ 5,967 $ 6,161
</TABLE>
(a) Includes the results of purchased businesses from acquisition dates except
for the acquisition of Neeco, Inc. ("Neeco") on May 22, 1990. The
acquisition of Neeco was accounted for as a pooling of interests and,
accordingly, all financial data has been restated to include the accounts
of Neeco, which are included in discontinued operations.
(b) Adjusted to reflect a three-for-two stock split effected July 16, 1990 and
a three-for-two stock split effected June 12, 1989.
(c) Income statement data has been reclassified for all periods presented to
reflect the Company's information services and water supply businesses as
discontinued operations (See Note 10 to the Consolidated Financial
Statements).
14
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
In 1992, JWP INC. (the "Company") incurred a net loss of $612.4 million or
$15.13 per share, had negative cash flow from operations of $49.6 million and
was in violation of certain financial and other covenants contained in its loan
agreements. The net loss includes losses of $363.5 million or $9.00 per share
from continuing operations and $253.2 million or $6.24 per share from
discontinued operations. As of December 31, 1992, the Company had negative net
worth of $176.0 million and a working capital deficit of $364.9 million after
the reclassification of debt in default aggregating $501.0 million. The Company
has continued to experience losses through June 30, 1994 and has failed to
generate sufficient cash flow to fund its operations and service its
obligations. From September 1992 to February 1994, when the Company obtained
debtor-in-possession financing, the Company did not have available credit
facilities and, consequently, funded its operations from working capital and
proceeds from the sale of businesses and other assets.
The Company's surety companies are reviewing bid and performance bonding
requests on a case-by-case basis for large construction projects and those with
a duration of more than two years. Further, the Company is experiencing
significant constraints in its bonding line which has adversely affected its
operations. In addition, a surety company that had been the primary source of
surety bonds for certain subsidiaries, which subsidiaries comprised
approximately 20% of the Company's 1993 revenues of those mechanical and
electrical companies the Company currently plans to retain, is no longer
engaged in the business of issuing such bonds. As a result, these subsidiaries
are currently not receiving such bonds. However, the absence of available
bonding for these subsidiaries has not resulted in a material reduction in
their backlog. The Company and these subsidiaries are actively engaged in
discussions with another surety company which has undertaken due diligence for
the purpose of entering into a new surety bonding arrangement. However, there
can be no assurance that such a new surety bonding arrangement will be entered
into. The failure to obtain a new surety for these subsidiaries would
materially adversely affect the Company.
On December 21, 1993, three holders of the Company's 7 3/4% Convertible
Subordinated Debentures filed an involuntary petition under Chapter 11 of the
U.S. Bankruptcy Code against the Company. The Company on February 14, 1994
consented to the entry of an order for relief under Chapter 11 of the
Bankruptcy Code. At that time the Company adopted a proposed plan of
reorganization which, as modified, has the support of the Official Unsecured
Creditors Committee and the Official Unsecured Junior Creditors and Interest
Holders Committee. The proposed plan of reorganization contemplates the
exchange of substantially all of the Company's indebtedness for new notes of
the reorganized Company, all of its common stock and warrants to purchase
common stock of the reorganized Company. Holders of the Company's common and
preferred stock and warrants of participation also will receive warrants to
purchase common stock of the reorganized Company in exchange for their equity
interests. The proposed plan also contemplates a business restructuring plan
which the Company initially developed in the third quarter of 1992 to divest
certain of its non-core businesses. There can be no assurance that the proposed
plan of reorganization will be consummated or, if so, its timing. However, a
hearing on the Company's proposed plan of reorganization is scheduled for
September 28, 1994. See "Liquidity and Capital Resources" for additional
discussion with respect to the Company's restructuring plan.
The accompanying financial statements have been prepared on a going concern
basis and do not include any adjustments relating to the recoverability and
classification of assets or the amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.
The Company's continuation as a going concern is dependent upon its ability to
restructure its indebtedness in connection with its reorganization under
Chapter 11 of the U.S. Bankruptcy Code, obtain sufficient bonding to guarantee
its performance on construction contracts, return to profitability, obtain new
credit facilities and otherwise generate sufficient cash flow to meet its
restructured and other obligations on a timely basis. See "Liquidity and
Capital Resources".
The Company has restated its financial statements for the years and quarters
ended December 31, 1991 and 1990 as well as for each of the quarters in the
nine month period ended September 30, 1992 based
15
<PAGE>
primarily upon a review of certain adjustments originally recorded in 1992. As
a result, net income for the year ended December 31, 1991 has been reduced from
the previously reported amount of $60.3 million to $29.0 million and earnings
per share has been reduced from the previously reported $1.54 per share to
$0.73 per share. The 1991 restatement reflects pre-tax charges of $47.9
million, of which $36.7 million relates to continuing operations and $11.2
million relates to discontinued operations. The 1991 restatement of continuing
operations reflects a $4.5 million increase to insurance reserves, a $6.6
million loss from the sale of a business which the Company had decided to sell
in 1991 and a $25.6 million reduction in the carrying value of certain assets,
principally receivables. Substantially all of the restated charges in 1991
applicable to discontinued operations relate to the Company's information
services business and include $9.9 million of costs and expenses relating to
the acquisition of Businessland, Inc. which was acquired by the Company in
August 1991. These costs and expenses were previously charged to reserves
established as part of that acquisition.
Net income for the year ended December 31, 1990 has been reduced from the
previously reported amount of $59.3 million to $50.2 million and earnings per
share has been reduced from $1.56 per share to $1.32 per share. The restatement
of the 1990 operating results reflects pre-tax charges of $9.6 million
consisting of $8.3 million related to continuing operations and $1.3 million to
discontinued operations. The restatement of continuing operations in 1990
reflects $4.8 million of adjustments to correct the accounting for goodwill and
a net $3.5 million reduction in the carrying value of certain assets, primarily
long-term investments.
See Notes 1 and 16 to the Consolidated Financial Statements with respect to
the restatement of the 1990 and 1991 financial statements and the restatement
of each of the quarters in the nine month period ended September 30, 1992 and
the fourth quarter of 1990 and 1991, respectively.
As a result of the restatements of the Company's first and second quarter
earnings of 1992 and write-offs and losses announced by the Company on August
4, 1992 and on October 2, 1992, class action lawsuits were filed on behalf of
shareholders against the Company and certain other defendants. The class action
lawsuits have been consolidated and the single consolidated amended class
action complaint alleges, among other things, that the Company intentionally
and materially overstated assets and earnings in various public disseminations
in violation of Section 10(b) of the Securities and Exchange Act of 1934 and
Rule 10b-5 promulgated thereunder. The complaint seeks an unspecified amount of
damages. The Company has denied the material allegations contained in the
complaint. The parties are now engaged in discovery proceedings. However, under
the terms of the Company's proposed plan of reorganization, no damages will be
recoverable from the Company by the claimants in the class action litigation,
although they will receive warrants to purchase common stock of the reorganized
Company. See Note 17 to the Consolidated Financial Statements for additional
discussion with respect to the shareholder litigation.
The Company had been informed by the Securities and Exchange Commission (the
"SEC") that it is conducting a private investigation to determine whether there
have been violations of certain provisions of the Federal securities laws
and/or the rules and regulations of the SEC in connection with the Company's
financial records, reports and public disclosures. The Company has been
cooperating with the SEC's staff and has voluntarily produced requested
documents and information. On April 12, 1994, the SEC's staff informed the
Company of its intention to recommend that the SEC file a civil injunction
action against the Company. The Company is currently engaged in discussions
with the SEC's staff concerning a possible consensual resolution of the matter.
The net loss in 1992 reflects (i) a continuing slump in the Company's
mechanical and electrical services business, principally attributable to a
downturn in commercial construction; (ii) intense competition in the Company's
information services business; (iii) restructuring charges related to the
planned disposition and downsizing of (a) the information services business,
(b) other non-core businesses and (c) certain mechanical/electrical operations;
(iv) significant provisions for losses on accounts receivable and inventories;
(v) a provision for losses on net assets held for sale; and (vi) expenses
associated with the shareholder litigation, the Company's efforts to
restructure its debt through a consensual arrangement and the restatement of
the Company's financial statements.
16
<PAGE>
A significant portion of the net loss in 1992, particularly with respect to
the losses on accounts receivable and to the write-down of inventories, arose
as a result of management's review conducted in connection with the preparation
of the Company's financial statements for the year ended December 31, 1992. As
a result of such review, the Company also recorded write-offs and losses in
1992 for impairment of goodwill and other intangibles, for the establishment of
asset valuation and restructuring reserves associated with net assets held for
sale under a debt restructuring and recapitalization plan it had then developed
and as a result of the decision to discontinue its information services
business.
The Company is focused on returning to profitability and restructuring its
operations around a smaller international mechanical/electrical services
business. In this regard, in March 1993, the Company's Board of Directors
approved the disposition of the Company's U.S. information services business
which was sold in August 1993. The Board of Directors had previously decided to
sell the Company's overseas information services business. Accordingly,
operating results reflect the information services business as discontinued
operations. See Notes 10 and 11 to the Consolidated Financial Statements.
Revenues of the information services business were $1.7 billion, $1.2 billion
and $0.7 billion in 1992, 1991 and 1990, respectively. The information services
business incurred a net loss of $201.1 million in 1992 compared to net income
of $18.4 million and $15.4 million in 1991 and 1990, respectively. The loss in
the information services business includes one-time charges of $67.3 million
which consist of the write-off of goodwill and other intangible assets related
to the U.S. information services business and costs attributable to employee
severance and facilities consolidation. The 1992 loss also reflects intense
competition among personal computer resellers, decreases in the prices of
personal computers and the rapid introduction of new technology. The
difficulties encountered by the Company in successfully integrating the back
office operations and accounting systems of Businessland Inc., which was
acquired in August 1991, with the Company's pre-existing information services
back office operations resulted in additional losses. In August 1993, the
Company sold substantially all the assets of its U.S. information services
subsidiary. The transaction did not result in a material gain or loss to the
Company. See "Liquidity and Capital Resources" for additional information with
respect to the disposition of such subsidiary.
In connection with the plan to dispose of the Company's overseas information
services business and certain other of its U.S. information services
businesses, the Company provided for losses aggregating $49.5 million in 1992.
These charges primarily represent the estimated losses to be realized upon the
disposition of such business units. Such amount is in addition to the
aforementioned net loss of $201.1 million and is included in the accompanying
Consolidated Statement of Operations under the caption "Loss from disposal of
businesses" in Discontinued Operations.
In April 1992, the Company announced its intention to sell its water supply
business. However, in July 1993, the Company's Board of Directors decided not
to proceed with the divestiture due to uncertainties created by then pending
rate-related proceedings and litigation. As described below, in December 1993,
the Company's subsidiary, Jamaica Water Supply Company ("JWS"), entered into an
agreement that became effective February 2, 1994 with respect to the rate
related proceedings and litigation (See Note 17) thereby eliminating
significant uncertainties relating to the water supply business. Accordingly,
the Company reinstated its plan of divestiture in the first quarter of 1994.
The Consolidated Financial Statements for all periods presented reflect the
water supply business as a discontinued operation. See Note 17 regarding the
status of a proceeding initiated in 1988 by the City of New York with respect
to the possible condemnation of the water distribution system of JWS that is
located in New York City.
Revenues from continuing operations were $2.4 billion, $2.3 billion and $2.1
billion in 1992, 1991 and 1990, respectively. The Company incurred an operating
loss from continuing operations of $235.6 million in 1992 compared to operating
income of $57.7 million and $82.8 million in 1991 and 1990, respectively. The
operating loss in 1992 includes restructuring charges of $38.7 million relating
to the downsizing and consolidation of the North American mechanical/electrical
services operations described under "Mechanical/Electrical Services".
17
<PAGE>
Restructuring charges related to continuing operations consist of $10.8
million applicable to permanent impairment of goodwill and $27.9 million for
severance payments, facilities consolidation costs, provisions for contract
losses and the write-down of certain assets to net realizable value.
In connection with the Company's proposed plan of reorganization, certain
mechanical/electrical services business units and non-core businesses have been
identified for sale or downsizing. The operating results of such businesses are
included in continuing operations. In 1992, 1991 and 1990 such business units
had revenues of $526.9 million, $501.7 million and $444.2 million,
respectively, and an operating loss of $41.2 million in 1992 compared to
operating income of $15.3 million and $12.6 million in 1991 and 1990,
respectively.
Selling, general and administrative expenses ("SG&A") were $440.7 million,
$286.9 million and $248.6 million in 1992, 1991 and 1990, respectively. The
significant increase in SG&A in 1992 includes a provision of $100.4 million for
losses on accounts and other receivables, an increase in general corporate
expenses of $29.2 million and $13.6 million applicable to the write-off of
goodwill. See "Mechanical/Electrical Services" below for a discussion regarding
the provision for losses on accounts receivable. General corporate expenses
were $48.4 million in 1992 compared to $19.2 million in 1991 and $12.2 million
in 1990. The increase in such expenses in 1992 was primarily attributable to
(a) fees paid to lenders for extensions of, amendments to and waivers of
provisions of the Company's revolving credit agreement ($4.5 million), (b) the
write-off of deferred debt expense in connection with the Company's planned
restructuring of its debt ($2.9 million), (c) legal, consulting and other
professional fees arising out of the shareholder litigation, defaults of
covenants contained in loan agreements and associated debt restructuring
activities and the restatement of the Company's financial statements ($9.6
million), (d) employee termination costs ($1.8 million), (e) relocation of the
Company's corporate headquarters, primarily the write-off of leasehold
improvements and costs related to an abandoned lease ($4.2 million), and (f)
the accelerated vesting of deferred compensation as a result of the termination
of employment of certain officers and employees in accordance with the terms of
a deferred compensation plan ($5.6 million). SG&A as a percentage of revenues
was 12.4% in 1991 compared to 12.1% in 1990. The increase in SG&A expenses in
1991 was primarily related to the Company's growth and expansion.
Net interest expense applicable to continuing operations was $44.2 million in
1992 compared to $43.9 million in 1991 and $36.6 million in 1990.
In 1992, the Company sold certain energy and environmental related
businesses and a division of its equipment rental business from which it
realized a gain of $12.0 million and a loss of $4.5 million, respectively. In
1992, the Company also recorded losses on businesses held for sale in the
amount of $83.6 million. In 1991, the Company incurred a loss of $6.6 million
from disposition of a subsidiary. See Note 11 to the Consolidated Financial
Statements.
Effective January 1, 1992, the Company adopted Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes" (SFAS 109). The
cumulative effect of adopting SFAS 109 was to record an income tax benefit of
$4.3 million or $0.11 per share as of January 1, 1992.
MECHANICAL/ELECTRICAL SERVICES
The mechanical/electrical services business revenues were $2.4 billion, $2.3
billion and $2.1 billion for the years ended December 31, 1992, 1991 and 1990,
respectively. In 1992, this business incurred an operating loss of $187.2
million compared to operating income of $76.9 million and $95.0 million in 1991
and 1990, respectively. As discussed above, the Company has restated its
financial statements for the years ended December 31, 1991 and 1990. The
restatement had the effect of decreasing the operating income of this segment
in 1991 and 1990 by $32.4 million and $6.7 million, respectively, from the
amounts previously reported. The operating loss in 1992 reflects, among other
things, the negative impact of the recession and oversupply in the commercial
real estate market which caused a sharp reduction in new commercial
construction. This reduction of commercial work caused many of the Company's
mechanical/electrical
18
<PAGE>
services business units to pursue noncommercial projects, primarily
governmental and municipal facilities, at lower margins than historically
available in the commercial market place. Certain of the business units were
not experienced in performing noncommercial projects and as a result incurred
significant losses. The operating loss in 1992 includes a provision for losses
on accounts and other receivables of $100.4 million due in part to the impact
of the recession on the financial condition of customers of the Company's
mechanical/electrical services business. Additionally, the Company's financial
condition and negative cash flow has impacted its ability to settle claims and
unapproved change orders on a favorable basis. The operating loss in 1992
includes restructuring charges of $38.7 million for the downsizing of the
Company's North American mechanical/electrical services operations (see Note 12
to the Consolidated Financial Statements), $13.6 million applicable to the
write-off of goodwill and a net charge of $15.6 million relating to the write-
off of small tool inventory. Small tools are located at numerous construction
sites and generally have short lives. The Company made the decision to write-
off its small tool inventory because of the difficulty and expense associated
with taking periodic physical inventories required to maintain the tools as an
asset.
The increase in revenues of 12% in 1991 was attributable to the acquisition
of Comstock Canada in February 1991 and internal growth within the European
mechanical/electrical services operations. Operating margins in 1991 declined
to 3.3% from 4.6% in 1990. Revenues and operating margins in the U.S. for 1991
were adversely affected by the recession which created competitive pressure for
small contracts, a slowdown in retrofit and service activities and delays in
the start-up of certain projects in the Company's energy and environmental
related operations. In 1991, the Company focused its attention on large
industrial, utility and governmental projects to offset the effects of the
continuing weakness in the U.S. commercial office building construction
marketplace.
At December 31, 1992, the mechanical/electrical services business backlog was
$1.6 billion compared to $1.0 billion at December 31, 1993. Such backlog
included $1,263 million at December 31, 1992 and $954.2 million at December 31,
1993 relating to subsidiaries which the Company currently intends to retain.
The Company's overall backlog in its North American regions and in the United
Kingdom has stabilized at approximately $1.0 billion through June 1994. The
initial decline was attributable to a downsizing in the Company's operations,
the Company's weakened financial condition which continues to adversely affect
its ability to obtain new surety bonds and contracts and the continuing
recession in the U.S. and overseas construction markets.
The Company's surety companies have become more selective in issuing new
bonds, especially on larger projects and those with a duration of more than two
years. Additionally, the surety companies will generally not bond new projects
for certain non-core businesses which the Company has identified for sale.
Surety bonds are frequently a precondition to the award of a mechanical or
electrical contract. Prospects for a recovery in the commercial office building
market in both North America and the United Kingdom remain poor for the
immediate future.
Included in the accompanying Consolidated Balance Sheet at December 31, 1992
under the caption "Excess of cost of acquired businesses over net assets, less
amortization" is $61.5 million of goodwill. Such goodwill relates to
mechanical/electrical services business units which the Company intends to
retain. Management believes that such goodwill has not been permanently
impaired. However, if the Company were to decide to divest certain of these
units, write-offs of goodwill and other assets might be required depending upon
the then existing market conditions and the future business prospects of the
retained business units.
SUPPLY OF WATER (INCLUDED IN DISCONTINUED OPERATIONS)
Revenues from the Company's water supply business were $59.8 million, $63.1
million and $59.2 million for the years ended December 31, 1992, 1991 and 1990,
respectively. Operating income was $4.8 million, $14.6 million and $13.3
million in 1992, 1991 and 1990, respectively. The decrease in revenues of 5.2%
in 1992 compared to 1991 was primarily due to reduced customer consumption as a
result of cool and wet
19
<PAGE>
weather conditions in the New York City area in the summer of 1992. The
increase in revenues of 6.6% in 1991 as compared to 1990 was the result of a
rate increase effective March 1991 and an increase in customer consumption as a
result of abnormally dry and hot weather during the summer of 1991.
On December 22, 1993, JWS, the New York State Consumer Protection Board,
Nassau County, certain other governmental bodies and a consumer advocate group
entered into an agreement that ended several regulatory and legal proceedings
involving JWS. The agreement was approved by the New York State Public Service
Commission (the "PSC") on February 2, 1994. The agreement provides for, among
other things, a moratorium on general rates charged by JWS until January 1997,
resolution of the economic issues raised by the PSC arising from its 1992
operational audit of JWS, settlement of related litigation and the dismissal of
an action brought against JWS by Nassau County of the State of New York
alleging violations of the Racketeer Influenced and Corrupt Organizations Act
and common law fraud. JWS also agreed, in consideration of avoided litigation
and other costs associated with the proceedings, to make payments over the next
three years totalling $11.7 million to customers in Nassau and Queens Counties
of the State of New York. In connection with this settlement, the Company
provided a charge of $7.0 million in 1992. See Note 17 to the Company's
Consolidated Financial Statements. Additionally, the agreement provides that
JWS will use its best efforts to bring about the separation of Jamaica Water
Securities Corp., a subsidiary of the Company which holds substantially all the
common stock of JWS, from the Company.
LIQUIDITY AND CAPITAL RESOURCES
For the year ended December 31, 1992, the Company's operations used $49.6
million in cash primarily to fund operating losses and working capital
requirements. From September 1992 to February 1994, the Company had no
available lines of credit and experienced significant cash outflow as a result
of operating losses, coupled with adverse publicity associated with the
restatements of its first and second quarter 1992 financial statements,
defaults under its loan agreements, and senior management changes. In February
1994, the Company obtained a $35.0 million debtor-in-possession credit facility
("DIP Loan") from Belmont Capital Partners II, L.P., an affiliate of Fidelity
Investments ("Belmont"), which is described in greater detail below.
Despite aggressive cash management measures that have been implemented on a
worldwide basis throughout the Company, operating cash flow continued to
deteriorate throughout 1993 with approximately $44.5 million of cash used to
fund operations through December 31, 1993. The Company's consolidated cash
balance decreased from $86.8 million at December 31, 1992 to $39.5 million at
December 31, 1993. The December 31, 1993 cash balance included $3.0 million in
foreign bank accounts. Such bank accounts are not available to support the
Company's domestic mechanical/electrical services business or to pay corporate
expenses. The negative operating cash flow reflects continued pressure to
accelerate payments of accounts payable and to a delay on the part of customers
in payment of accounts receivable caused by the Company's weakened financial
condition. Additionally, recurring operating losses, restructuring costs,
professional fees relating to debt restructuring negotiations and shareholder
litigation have adversely affected cash flow. Cash deposits made to secure
insurance obligations also negatively impacted cash flow.
As a consequence of the Company's financial difficulties, an asset
disposition program was initiated in the third quarter of 1992 with respect to
the Company's non-core businesses and certain other assets in order to raise
cash to reduce operating cash outflow and to reduce debt. A total of $139.0
million of net cash proceeds was realized from such program in 1992 including:
$84.1 million from the sale of five energy and environmental related
businesses, $21.1 million from the sale of the Company's computer lease
portfolio, $18.4 million from the sale of the Company's interest in a
hospital's central utility plant and $8.8 million from the sale of a rental
equipment business. The cash proceeds from these asset dispositions in 1992
were used to reduce debt and for working capital requirements. From January 1,
1993 to December 31, 1993, the Company received net cash proceeds of $43.4
million from the sale of certain overseas information services business units,
other non-core businesses and other assets. Such proceeds were used primarily
for working capital requirements.
20
<PAGE>
The DIP Loan agreement provides a credit facility to the Company of up to
$35.0 million at an interest rate of 12% per annum during the period of the
Company's Chapter 11 reorganization proceeding. Also, Belmont will receive, as
additional interest, a percentage of the securities to be issued under the
Company's plan of reorganization. The DIP Loan is secured by a first lien on
substantially all of the assets of the Company and most of its subsidiaries. As
of August 1994, the Company had drawn down $25.0 million under the DIP Loan.
The Company is in default of certain covenants of the DIP Loan. Pursuant to
written waivers of default, dated April 27, 1994, May 6, 1994 and August 2,
1994 the Company has been permitted by Belmont to draw on its line of credit.
Under the circumstances, any additional borrowings under the DIP Loan will
require further waivers of default.
The DIP Loan is intended to be repaid upon the effective date of the
Company's plan of reorganization. The Company is actively seeking a working
capital facility of approximately $40 million. The proceeds of this new
facility will be used to refinance the Company's borrowings under the DIP Loan
and to provide working capital to the reorganized Company. However, there can
be no assurance that the Company will be able to obtain a new working capital
facility or, if so, the amount of any such facility. Obtaining such a facility
is a condition to the confirmation of the Company's plan of reorganization.
In August 1993, the Company sold substantially all the assets of its U.S.
information services subsidiary to ENTEX Information Services, Inc. ("ENTEX"),
a newly organized company owned by a private investor and the management of the
U.S. information services subsidiary. As part of the consideration for its
sale, the Company received warrants to buy up to 10% of the purchaser's common
stock for a nominal amount. The Company has ascribed no value to these
warrants. Additionally, ENTEX assumed substantially all the debt and other
liabilities and obligations relating to the ongoing operations of the U.S.
information services subsidiary; that subsidiary retained certain lease
obligations and certain tax liabilities. The Company was also released from
approximately $210.0 million of its guarantees of indebtedness and similar
obligations of the subsidiary. In October 1993, this subsidiary filed a
voluntary petition under Chapter 7 of the U.S. Bankruptcy Code.
As described in Notes 1 and 3 to the Company's Consolidated Financial
Statements, the Company is in default of covenants contained in its loan
agreements under which approximately $501.0 million was outstanding at December
31, 1992, including $484.4 million owed to senior lenders and $16.6 million
owed to subordinated note holders. With respect to the defaulted senior loan
agreements, "standstill arrangements" were negotiated which covered the period
from mid-December of 1992 through April 30, 1993. Under the standstill
arrangements, the senior lenders agreed, in principle, to forebear the receipt
of principal and to accept payment of interest during such periods at reduced
rates ranging from 4% to 6.75%. Since April 30, 1993, no standstill arrangement
has been in place and the Company ceased making principal and interest
payments. However, interest continued to accrue under the terms of the
respective loan agreements which in certain circumstances included default rate
premiums of an additional 2% and in one case 4%. Interest ceased to accrue on
December 21, 1993, the date on which an involuntary bankruptcy petition was
filed against the Company. At December 31, 1993 and 1992, accrued interest on
defaulted debt was $43.3 million and $5.8 million, respectively. The Company
has pledged to the holders of its senior notes and bank indebtedness the common
stock of certain subsidiaries held for sale and the proceeds from the sale of
one of these subsidiaries. The combined net book value of these subsidiaries
was $23.3 million at December 31, 1992.
The Company has not made scheduled semiannual interest payments since
September 1, 1993 with respect to its 7 3/4% Convertible Subordinated
Debentures. All interest payments on such debt were previously made when due.
The outstanding principal balance of the debentures at December 31, 1992, in
the amount
21
<PAGE>
of approximately $7.0 million, is included in "Debt in default" in the
accompanying Consolidated Balance Sheet.
The Company's business restructuring plan contemplates the sale of a number
of domestic mechanical and electrical services business units and the
reorganization of the Company principally around a smaller international
mechanical/electrical services business which had revenues of approximately
$1.9 billion in both 1992 and 1993. As described above and in Notes 10 and 11
to the Company's Consolidated Financial Statements, the Company's business
restructuring plan contemplates the sale of its information services business,
certain of its mechanical/electrical business units, its water supply business
and certain non-core businesses. As a result, the net assets of businesses to
be sold have been classified in the accompanying Consolidated Balance Sheet as
of December 31, 1992 as "Net assets held for sale" and carried as either
current or long-term assets on the basis of their actual or expected
disposition dates.
The Company's proposed plan of reorganization contemplates that the creditors
of JWP INC. will exchange approximately $623 million of holding company debt
and other liabilities for approximately $139 million of recourse debt,
approximately $48 million of nonrecourse debt, 100% of the equity of the
Company and warrants to purchase common stock of the reorganized Company. All
of the new debt, except for approximately $67 million, is expected to be paid
from the proceeds of asset sales. As previously indicated, under the proposed
plan of reorganization, holders of the Company's common and preferred stock and
warrants of participation also will receive warrants to purchase common stock
of the reorganized Company in exchange for their equity interests.
JWP INC., the parent holding company, is the subject of the proceeding under
Chapter 11. The Company's mechanical/electrical, water supply and other
operating subsidiaries are not parties to this proceeding. All operating
subsidiary payments have been made in the ordinary course of business.
See "Results of Operations" with respect to the Company's ability to continue
as a going concern.
The Company's Canadian subsidiary, Comstock Canada, is negotiating with a
Canadian bank to obtain a Canadian $7.5 million (approximately $5.6 million)
secured demand loan facility. The new credit facility would include bank loans,
letters of credit and indemnity arrangements and would be secured by all the
assets of Comstock Canada and would be guaranteed by the Company. The new
credit facility would replace an expired demand secured facility, also
guaranteed by the Company, under which the lender has permitted Comstock Canada
to continue to borrow, subject to certain restrictive margin requirements. At
July 31, 1994, total outstanding bank loans were Canadian $0.4 million
(approximately U.S. $0.3 million). There can be no assurance that Comstock
Canada will obtain a new credit facility or, if so, the amount of any such
facility or whether the lender will continue to grant credit to Comstock Canada
without a new definitive credit agreement in place.
In June 1994, a number of the Company's U.K. subsidiaries entered into a
demand credit facility from a U.K. bank with an aggregate credit limit of
(Pounds)14.1 million (approximately U.S.$21.7 million). The credit facility
consists of the following components with the individual credit limits as
indicated: an overdraft line of up to (Pounds)7.0 million (approximately
U.S.$10.7 million), a facility for the issuance of guarantees, bonds and
indemnities of up to (Pounds)7.4 million (approximately U.S.$11.4 million) and
other credit facilities of up to (Pounds)0.75 million (approximately U.S.$1.2
million). The overdraft facility is secured by substantially all of the assets
of the Company's principal U.K. subsidiaries. The overdraft facility provides
for interest at the U.K. bank reference rate (5 1/2% as of June 1994) plus 3%.
This credit facility will expire in December 1994.
JWS, a subsidiary of the Company carried in "Net assets held for sale" in the
accompanying Consolidated Balance Sheet as of December 31, 1992, had two
revolving credit agreements each of which permitted unsecured borrowings of up
to $10.0 million with interest rates equal to the prime rate (7 1/4% at June
1994). Both agreements expired on April 30, 1994 and the borrowings thereunder
have been permitted by the lenders to remain outstanding. JWS is currently
negotiating new revolving credit agreements. As of December 31, 1992, JWS had
equal borrowings under each agreement aggregating $4.8 million.
For the years ended December 31, 1992, 1991 and 1990, capital expenditures
including those financed were $70.1 million, $58.8 million and $44.2 million,
respectively. Capital expenditures for the year ended December 31, 1992 include
$32.0 million for environmental related projects which were included in the
22
<PAGE>
businesses sold in the fourth quarter of 1992. The Company's
mechanical/electrical services business does not require significant
commitments for capital expenditures. The Company's water supply business
anticipates making capital expenditures approximating $57.0 million for the
utility plant over the five years ending December 31, 1997 which includes $7.5
million expended in 1993. These capital expenditures are expected to be
financed by internally generated funds from the water supply business with any
remaining long-term financing requirements during that period obtained from the
proceeds of newly issued first mortgage bonds and from bank loans. However, the
Company's financial difficulties are making it difficult for the water supply
business to finance its capital programs.
At December 31, 1992, the Company and a wholly-owned captive insurance
subsidiary ("Defender") had letters of credit outstanding totalling $38.2
million which in effect secure their workers' compensation, automobile and
general liability insurance obligations. The letters of credit were intended to
serve as collateral for the obligations of Defender to reimburse the Company's
unrelated insurance carriers for claims paid in respect of certain years'
insurance programs. In December 1993, these letters of credit were reduced to
$36.4 million. $34.9 million of such letters of credit expire in December 1994
and $1.5 million expire in February 1995. Since October 1992, neither the
Company nor Defender have been able to obtain additional letters of credit to
secure their insurance obligations and, as a result, have been required to make
cash collateral deposits to an unrelated insurance company to secure those
types of obligations. The deposits totalled $7.7 million as of December 31,
1992 and are included in Other Assets under the caption "Miscellaneous" in the
accompanying Consolidated Balance Sheet. Such deposits have increased to $29.7
million as of June 30, 1994. The Company and Defender expect to be required to
post additional cash collateral insurance deposits until the Company completes
its reorganization in the Chapter 11 proceedings. The need to provide cash
collateral has adversely affected the Company's cash flow.
The Company's proposed plan of reorganization contemplates that the letters
of credit, described above, will be drawn upon by the unrelated insurance
carriers and that the Company's obligations to Defender which were pledged as
collateral to the banks issuing such letters of credit, will be impaired in the
Chapter 11 proceeding as well as any related Company obligations to those
banks. The Company's unrelated insurance carriers have commenced partial draw
downs against certain of the letters of credit. Approximately $5 million has
been drawn down against the letters of credit through June 1994.
In 1993, the Company's French and Belgian information services subsidiaries
filed petitions in their respective countries seeking relief from their
creditors. The French and Belgian subsidiaries have outstanding unsecured
credit facilities guaranteed by the Company which aggregate approximately $5.9
million. Such amount has been provided for as a loss in the accompanying
Consolidated Statements of Operations for the year ended December 31, 1992.
The Company has not paid dividends on its preferred stock since September
1992. Cumulative unpaid dividends through December 31, 1993 aggregate $2.3
million.
At December 31, 1992, the Company had net operating loss carryforwards
("NOL") for U.S. Federal income tax purposes of approximately $220.0 million.
Because of significant tax losses in 1993, the NOL is estimated to have
increased to over $500.0 million as of December 31, 1993. If the Company
exchanges its existing indebtedness for newly issued equity and debt as
contemplated by the proposed plan of reorganization (See Notes 1 and 3 to the
Consolidated Financial Statements), a significant portion of the NOL may not be
available to reduce future U.S. taxable income. Additionally, due to recent
changes in U.S. Federal income tax laws, the timing of any such reorganization
could further impact and reduce the amount of the NOL.
See "Supply of Water" with respect to pending payments by JWS to its
customers in 1994 to 1996 totalling $11.7 million. The payments are expected to
be funded by JWS through cash on hand, cash flow from operations and additional
borrowings, if necessary.
In September 1992, the PSC issued an order that resulted in the suspension of
dividend payments to the Company by JWS for the last two quarters of 1992 and
for the year ended December 31, 1993. Dividends
23
<PAGE>
paid by JWS in 1992 and 1991 amounted to $1.2 million and $2.0 million,
respectively. As a result of the settlement agreement described in "Supply of
Water", JWS recommenced the payment of dividends in 1994.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
As discussed in Note 7 to the Consolidated Financial Statements, effective
January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 106 "Employers' Accounting for Postretirement Benefits Other than
Pensions". The adoption of this standard did not have a material impact upon
the Company's consolidated financial position or its results of operations.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 112 "Employers' Accounting for Postemployment
Benefits" which will be effective beginning in 1994. This standard will not
have a material impact upon the Company's consolidated financial position or
its results of operations.
24
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
JWP INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1992 1991
--------- -----------
AS RESTATED
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents............................. $ 86,836 $ 76,593
Accounts receivable, less allowance for doubtful
accounts
of $42,630 and $29,541............................. 458,273 1,038,723
Costs and estimated earnings in excess of billings on 67,817 132,644
uncompleted contracts...................................
Inventories........................................... 6,618 359,033
Prepaid expenses and other............................ 9,746 45,287
Net assets held for sale.............................. 32,894 --
--------- ----------
Total Current Assets.................................... 662,184 1,652,280
--------- ----------
Net assets held for sale................................ 85,611 --
Investments, notes and other long-term receivables...... 22,440 44,605
Property, plant and equipment, net...................... 51,087 323,439
Other Assets
Excess of cost of acquired businesses over net assets, 61,542 149,496
less amortization.......................................
Miscellaneous......................................... 24,720 64,007
--------- ----------
86,262 213,503
--------- ----------
Total Assets............................................ $ 907,584 $2,233,827
========= ==========
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Current Liabilities
Notes payable......................................... $ 6,452 $ 110,600
Current maturities of long-term debt and capital lease 2,634 44,012
obligations.............................................
Debt in default....................................... 501,007 --
Accounts payable...................................... 224,840 808,596
Billings in excess of costs and estimated earnings on 125,764 140,700
uncompleted contracts...................................
Accrued payroll and benefits.......................... 45,665 67,710
Other accrued expenses and liabilities................ 120,733 112,525
--------- ----------
Total Current Liabilities............................... 1,027,095 1,284,143
--------- ----------
Long-term debt.......................................... 4,111 425,080
Other long-term obligations and deferred credits........ 52,357 68,468
Shareholders' (Deficit) Equity
Preferred Stock, $1 par value, 25,000,000 shares
authorized, 425,000 shares of Series A issued and
outstanding........................................ 21,250 21,250
Common Stock, $.10 par value, 75,000,000 shares
authorized, 40,754,051 and 40,178,907 outstanding,
excluding 591,775 and 225,749 treasury shares in
1992 and 1991...................................... 4,075 4,018
Warrants of Participation............................. 576 576
Capital surplus....................................... 203,505 212,703
Cumulative translation adjustments.................... (3,930) 4,807
Retained (deficit) earnings........................... (401,455) 212,782
--------- ----------
Total Shareholders' (Deficit) Equity.................... (175,979) 456,136
--------- ----------
Total Liabilities and Shareholders' (Deficit) Equity.... $ 907,584 $2,233,827
========= ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
25
<PAGE>
JWP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS(IN THOUSANDS,
EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1992 1991 1990
---------- ----------- -----------
<S> <C> <C> <C>
AS RESTATED AS RESTATED
REVENUES................................. $2,404,577 $2,318,112 $2,057,607
---------- ----------- -----------
COSTS AND EXPENSES
Cost of sales.......................... 2,160,723 1,973,561 1,726,207
Selling, general and administrative.... 440,725 286,900 248,649
Restructuring charges.................. 38,741 -- --
---------- ----------- -----------
2,640,189 2,260,461 1,974,856
---------- ----------- -----------
OPERATING (LOSS) INCOME.................. (235,612) 57,651 82,751
Interest expense....................... (45,894) (46,240) (39,340)
Interest income........................ 1,713 2,348 2,713
Net (loss) on businesses sold or held
for sale............................... (76,078) (6,628) --
---------- ----------- -----------
(LOSS) INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME
TAXES AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE....................... (355,871) 7,131 46,124
Provision for income taxes............. 7,644 2,419 17,475
---------- ----------- -----------
(LOSS) INCOME FROM CONTINUING OPERATIONS
BEFORE
CUMULATIVE EFFECT OF ACCOUNTING CHANGE.. (363,515) 4,712 28,649
DISCONTINUED OPERATIONS
(Loss) income from operations, net of
income taxes........................... (203,739) 24,263 21,600
(Loss) from disposal of businesses..... (49,491) -- --
---------- ----------- -----------
(Loss) income from discontinued
operations............................. (253,230) 24,263 21,600
---------- ----------- -----------
CUMULATIVE EFFECT OF CHANGE IN METHOD OF
ACCOUNTING
FOR INCOME TAXES........................ 4,315 -- --
---------- ----------- -----------
NET (LOSS) INCOME........................ $ (612,430) $ 28,975 $ 50,249
========== =========== ===========
(LOSS) EARNINGS PER SHARE
Continuing operations.................. $ (9.00) $ 0.10 $ 0.75
Discontinued operations
(Loss) income from operations........ (5.02) 0.63 0.57
(Loss) from disposal of businesses... (1.22) -- --
---------- ----------- -----------
(Loss) income from discontinued
operations........................... (6.24) 0.63 0.57
---------- ----------- -----------
Cumulative effect of change in method
of accounting
for income taxes...................... 0.11 -- --
---------- ----------- -----------
Net (loss) income...................... $ (15.13) $ 0.73 $ 1.32
========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
26
<PAGE>
JWP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1992 1991 1990
--------- ----------- -----------
AS RESTATED AS RESTATED
<S> <C> <C> <C>
NET (LOSS) INCOME........................... $(612,430) $ 28,975 $ 50,249
ADJUSTMENTS TO RECONCILE NET (LOSS) INCOME
TO NET CASH
(USED IN) PROVIDED BY OPERATING ACTIVITIES
Depreciation and amortization............. 68,993 49,072 33,930
Restructuring charges applicable to 38,741 -- --
continuing operations.......................
Restructuring charges applicable to 25,950 -- --
discontinued operations.....................
Net loss from businesses sold or held for 76,078 6,628 --
sale........................................
Provision for losses on accounts and other 113,903 16,241 6,425
receivables.................................
Inventory valuation adjustments........... 59,787 5,300 --
Write-off of deferred debt issuance cost.. 2,876 -- --
Write-off of fixed assets and 11,167 8,200 --
miscellaneous assets........................
Write-off of goodwill and other 54,873 -- --
intangibles.................................
Stock compensation........................ 9,518 3,808 4,713
Deferred income taxes..................... 7,137 13,418 13,359
Loss from disposal of discontinued 49,491 -- --
operations..................................
Equity and other losses in unconsolidated 5,690 -- --
subsidiary................................
Cumulative effect of accounting change for (4,315) -- --
income taxes................................
Other, net................................ 21,112 10,829 (4,137)
--------- --------- --------
(71,429) 142,471 104,539
Change in Operating Assets and Liabilities
Excluding Effect
of Businesses Disposed of and Acquired
Decrease (increase) in accounts 73,379 (119,774) (35,592)
receivable..................................
Decrease (increase) in inventories and 123,884 (41,309) (35,293)
contracts in progress.......................
(Decrease) increase in accounts payable (190,752) 114,595 75,686
and accrued expenses........................
Changes in other assets and liabilities... 15,335 6,490 (23,568)
--------- --------- --------
NET CASH (USED IN) PROVIDED BY OPERATIONS... (49,583) 102,473 85,772
--------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt.............. 85,302 47,660 78,300
Payments of long-term debt and capital (68,514) (78,710) (39,055)
lease obligations...........................
Payment of Businessland 10 1/4% Senior -- (18,750) --
Notes.......................................
Proceeds from issuance of common stock and
exercise
of stock options....................... 1,911 2,169 4,827
Payment of preferred dividends............ (1,354) (711) --
Purchase of Company warrants.............. -- -- (4,000)
Acquisition of common stock for the (8,130) (7,877) (4,424)
treasury....................................
Increase (decrease) in notes payable, net. 30,258 89,544 (21,245)
--------- --------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES... 39,473 33,325 14,403
--------- --------- --------
CASH FLOWS FROM INVESTMENT ACTIVITIES
Proceeds from sale of businesses and other 138,971 10,066 --
assets.....................................
Acquisition of businesses, net of cash (15,899) (62,600) (31,682)
acquired....................................
Purchase of property, plant and equipment. (36,411) (56,000) (34,232)
Purchase of environmental facilities...... (32,044) -- --
Net disbursements for other investments... (9,695) (4,779) (15,134)
Cash balance of businesses held for sale (26,241) -- --
or sold.....................................
Other, net................................ 1,672 (2,619) (7,532)
--------- --------- --------
NET CASH PROVIDED BY (USED IN) INVESTMENT 20,353 (115,932) (88,580)
ACTIVITIES.................................
--------- --------- --------
INCREASE IN CASH AND CASH EQUIVALENTS....... 10,243 19,866 11,595
CASH AND CASH EQUIVALENTS AT BEGINNING OF 76,593 56,727 45,132
YEAR.......................................
--------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR.... $ 86,836 $ 76,593 $ 56,727
========= ========= ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
27
<PAGE>
JWP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DEFICIT) (IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE RETAINED
PREFERRED COMMON WARRANTS OF CAPITAL TRANSLATION EARNINGS SHAREHOLDERS'
STOCK STOCK PARTICIPATION SURPLUS ADJUSTMENTS (DEFICIT) EQUITY (DEFICIT)
--------- ------ ------------- -------- ----------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31,
1989................... $ -- $3,731 $576 $173,363 $ -- $134,269 $311,939
Common stock offering... -- 10 -- 1,794 -- -- 1,804
Common stock issued
in connection with
acquisitions........... -- 6 -- 1,903 -- -- 1,909
Purchase of Company
warrants............... -- -- -- (4,000) -- -- (4,000)
Exercise of stock -- 28 -- 2,995 -- -- 3,023
options.................
Foreign currency
translation adjustment. -- -- -- -- 2,836 -- 2,836
Other, net.............. -- 22 -- 2,731 -- -- 2,753
Net income, as restated. -- -- -- -- -- 50,249 50,249
------- ------ ---- -------- ------- --------- ---------
BALANCE DECEMBER 31,
1990 (AS RESTATED)..... -- 3,797 576 178,786 2,836 184,518 370,513
Common stock issued
in connection with
acquisitions........... -- 190 -- 29,048 -- -- 29,238
Preferred stock issued
in exchange for
Businessland's 10 1/4%
Senior Notes........... 21,250 -- -- -- -- -- 21,250
Foreign currency
translation adjustment. -- -- -- -- 1,971 -- 1,971
Preferred stock -- -- -- -- -- (711) (711)
dividends..............
Other, net.............. -- 31 -- 4,869 -- -- 4,900
Net income, as restated. -- -- -- -- -- 28,975 28,975
------- ------ ---- -------- ------- --------- ---------
BALANCE DECEMBER 31,
1991 (AS RESTATED)..... 21,250 4,018 576 212,703 4,807 212,782 456,136
Common stock issued
in connection with
acquisitions........... -- 10 -- 739 -- -- 749
Exercise of stock -- 14 -- 1,897 -- -- 1,911
options................
Acquisition of common
stock for the treasury. -- (57) -- (8,073) -- -- (8,130)
Guaranteed future value
of stock issued to
acquire businesses..... -- -- -- (12,308) -- -- (12,308)
Deferred compensation
and officer bonus...... -- 55 -- 9,463 -- -- 9,518
Foreign currency
translation adjustment. -- -- -- -- (8,737) -- (8,737)
Preferred stock -- -- -- -- -- (1,807) (1,807)
dividends...............
Other, net.............. -- 35 -- (916) -- -- (881)
Net loss................ -- -- -- -- -- (612,430) (612,430)
------- ------ ---- -------- ------- --------- ---------
BALANCE DECEMBER 31,
1992................... $21,250 $4,075 $576 $203,505 $(3,930) $(401,455) $(175,979)
======= ====== ==== ======== ======= ========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
28
<PAGE>
JWP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying financial statements have been prepared assuming that JWP
INC. (the "Company") will continue as a going concern. The matters discussed
below raise substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any adjustments relating
to the recoverability and classification of assets or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern. The Company's continuation as a going
concern is dependent upon its ability to restructure its indebtedness in
connection with its proceeding under Chapter 11 of the U.S. Bankruptcy Code,
obtain sufficient bonding to guarantee its performance on construction
contracts, return to profitability, obtain new credit facilities and otherwise
generate sufficient cash flow to meet its restructured and other obligations on
a timely basis.
The Company incurred a net loss of $612.4 million for the year ended December
31, 1992 and, has a working capital deficit of $364.9 million after the
reclassification of long-term debt in default (See Note 3) and a shareholders'
deficit at December 31, 1992 of $176.0 million. Many of the Company's
mechanical and electrical services contracts require surety bonds to guarantee
the performance of such contracts. In light of the Company's financial
condition, the Company's surety companies are issuing new bonds but are
reviewing bonding requests on a case-by-case basis for large construction
projects and those with durations of more than two years. Further, the Company
is experiencing significant constraints in its bonding line which has adversely
affected its operations. In addition, a surety company that had been the
primary source of surety bonds for certain subsidiaries, which together
comprised approximately 20% of the Company's 1993 revenues of those mechanical
and electrical companies which the Company currently plans to retain, is no
longer engaged in the business of issuing such bonds. As a result, these
subsidiaries are currently not receiving such bonds. However, the absence of
available bonding for these subsidiaries has not resulted in a material
reduction in their backlog. The Company and these subsidiaries are actively
engaged in discussions with another surety company which has undertaken due
diligence for the purpose of entering into a new surety bonding arrangement.
However, there can be no assurance that such a new surety bonding arrangement
will be entered into.
The Company is focused on returning to profitability and restructuring its
operations primarily around a smaller international mechanical/electrical
services business. The Company has formulated a business restructuring plan
which includes the sale of its information services business, water supply
business, several non-core businesses and certain mechanical/electrical
services operations and the closing or downsizing of unprofitable operations
(See Notes 10 and 11). The proceeds from the sale of those businesses and other
assets to date have been used for working capital and to reduce debt. There is
no assurance that the Company will be able to consummate the remaining sales
and, if consummated, whether the Company will realize the proceeds contemplated
by the plan.
As described in Note 3, the Company is in default of covenants contained in
its senior note agreements, bank credit agreement, 12% subordinated note
agreements and its 7 3/4% Convertible Subordinated Debentures and is presently
in a Chapter 11 proceeding. The outstanding amount of such debt in default at
December 31, 1992 is $501.0 million.
On December 21, 1993, three holders of the Company's 7 3/4% Convertible
Subordinated Debentures filed an involuntary petition under Chapter 11 of the
U.S. Bankruptcy Code against the Company. The Company on February 14, 1994
consented to the entry of an order for relief under Chapter 11 of the U.S.
Bankruptcy Code. At that time the Company adopted a proposed plan of
reorganization and its subsidiaries continue to operate in the normal course.
The proposed plan of reorganization, as modified, has the support of the
Official Unsecured Creditors Committee and the Official Unsecured Junior
Creditors and Interest Holders Committee. The proposed plan of reorganization
contemplates that the Company's creditors will exchange approximately $623
million of holding company debt and other liabilities for approximately
29
<PAGE>
$139 million of recourse debt, approximately $48 million of nonrecourse debt,
100% of the equity of the Company and warrants to purchase common stock of the
reorganized Company. All of the new debt, except for approximately $67 million,
is expected to be paid from the proceeds of asset sales. Holders of the
Company's common and preferred stock and warrants of participation also will
receive warrants to purchase common stock of the reorganized Company in
exchange for their equity interests.
The Company's mechanical/electrical services, water supply and other
operating subsidiaries are not parties to the Chapter 11 proceeding. All
operating subsidiary payments continue to be made in the ordinary course of
business. There can be no assurance, however, that the proposed plan of
reorganization will be consummated or, if so, its timing.
The Company has restated its financial statements for the years and quarters
ended December 31, 1991 and 1990 as well as for each of the quarters in the
nine month period ended September 30, 1992 based principally upon a review of
certain adjustments originally recorded in 1992. As a result, net income for
the year ended December 31, 1991 has been reduced from the previously reported
amount of $60.3 million to $29.0 million and earnings per share has been
reduced from $1.54 per share to $.73 per share. The 1991 restatement reflects
pre-tax charges of $47.9 million consisting of $36.7 million applicable to
continuing operations and $11.2 million related to discontinued operations. The
1991 restatement of continuing operations reflects a $4.5 million increase in
insurance reserves, a $6.6 million loss from the sale of a business which the
Company had decided to sell in 1991 and a $25.6 million reduction in the
carrying value of certain assets, principally receivables. Substantially all of
the restated charges in 1991 applicable to discontinued operations relate to
the Company's information services business and include $9.9 million of costs
and expenses relating to the acquisition of Businessland, Inc. which was
acquired by the Company in August 1991. These costs and expenses were
previously charged to reserves established as part of that acquisition.
Net income for the year ended December 31, 1990 has been reduced from the
previously reported amount of $59.3 million to $50.2 million and earnings per
share has been reduced from $1.56 per share to $1.32 per share. The restatement
of the 1990 operating results reflects pre-tax charges of $9.6 million,
consisting of $8.3 million related to continuing operations and $1.3 million
related to discontinued operations. The restatement of continuing operations in
1990 includes $4.8 million of adjustments to correct accounting for goodwill
and a net $3.5 million reduction in the carrying value of certain assets,
primarily long-term investments.
The restatement of the 1991 and 1990 operating results had the effect of
decreasing retained earnings at December 31, 1991 and 1990 by $40.4 million and
$9.1 million, respectively.
In April 1992, the Company announced its intention to sell its water supply
business. However, in July 1993, the Company's Board of Directors decided not
to proceed with the divestiture due to uncertainties created by the then
pending rate-related matters and litigation which are described in Note 17. In
December 1993, the Company's subsidiary, Jamaica Water Supply Company ("JWS"),
entered into an agreement with respect to the rate related proceedings and
litigation thereby eliminating significant uncertainties relating to the water
supply business. Subsequently, this agreement was approved by the New York
State Public Service Commission on February 2, 1994. Accordingly, the Company
reinstated its plan of divestiture in the first quarter of 1994. In March 1993,
the Company's Board of Directors approved the disposition of the Company's U.S.
information services subsidiary. The Board of Directors had previously decided
to sell the Company's overseas information services subsidiaries. Accordingly,
operating results for all periods presented have been reclassified to reflect
the Company's information services business and water supply business as
discontinued operations (See Notes 10 and 11).
30
<PAGE>
As described above and in Notes 10 and 11, the Company has developed a
business restructuring plan which contemplates the sale of its information
services business, certain of its mechanical/electrical services business
units, its water supply business and certain other non-core businesses. As a
result, the net assets of businesses to be sold have been classified in the
Consolidated Balance Sheet as of December 31, 1992 as "Net assets held for
sale" and carried as either current or long-term assets on the basis of their
actual or expected disposition dates.
As described in Note 17, a consolidated class action lawsuit for unspecified
damages was filed against the Company, certain former officers and directors,
four current directors, a former subsidiary officer and the Company's then
auditors, Ernst & Young. The complaint alleges violations of Section 10(b) of
the Securities and Exchange Act of 1934, Rule 10b-5 promulgated thereunder and
common law fraud and deceit on the part of the Company and other named
defendants. The Company has denied the material allegations contained in the
complaint. The parties are now engaged in discovery proceedings. However, under
the terms of its proposed plan of reorganization, no damages will be
recoverable from the Company by claimants in the class action litigation,
although they will receive warrants to purchase common stock of the reorganized
Company.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. Significant intercompany accounts and
transactions have been eliminated.
Certain reclassifications have been made to conform prior years' data to the
current presentation.
REVENUE RECOGNITION
Revenues on long-term contracts are recognized on the percentage-of-
completion method. Percentage-of-completion for the mechanical contracting
business is measured principally by the percentage of costs incurred and
accrued to date for each contract to estimated total costs for each contract
("cost to cost"). Certain of the Company's electrical contracting business
units measure percentage of completion by the percentage of labor costs
incurred and accrued to date for each contract to the estimated total labor
costs for such contract, while others are on the cost to cost method.
Provisions for estimated losses on uncompleted contracts are made in the period
in which such losses are determined. Changes in contract performance and
estimated profitability, including those arising from contract penalty
provisions and final contract settlements, may result in revisions to costs and
income and are recognized in the period in which the revisions are determined.
Profit incentives are included in revenue when their realization is reasonably
assured.
Accounts receivable at December 31, 1992 includes $85.2 million billed under
retainage provisions included in contracts. In accordance with industry
practice, certain of these receivables relate to contracts having production
cycles longer than one year and, therefore, a portion will not be realized
within one year. Disputes involving customers often arise in the normal course
of the Company's business, primarily on projects where the Company is a
subcontractor and is contesting with general contractors, owners or both, for
additional funds because of events such as delays or changes in contract
specifications. Such disputes, whether for claims or for unapproved change
orders in process of negotiation, are recorded at their estimated net
realizable value only when realization is probable and can be reliably
estimated. Claims against the Company are recognized when the loss is
considered probable and amounts are reasonably determinable. Accounts
receivable and costs and estimated earnings in excess of billings on
uncompleted contracts at December 31, 1992 include claims and change orders in
the process of negotiation which aggregate approximately $46.6 million net of
valuation allowances. A portion of these receivables were not realized in one
year.
31
<PAGE>
Costs and estimated earnings on uncompleted contracts and related amounts
billed are as follows:
<TABLE>
<CAPTION>
1992 1991
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Costs incurred on uncompleted contracts............... $ 2,796,376 $ 3,410,854
Estimated earnings.................................... 259,393 411,201
----------- -----------
3,055,769 3,822,055
Less billings to date................................. (3,113,716) (3,830,111)
----------- -----------
$ (57,947) $ (8,056)
=========== ===========
Such amounts are included in the accompanying Consolidated Balance Sheets
under the following captions:
<CAPTION>
1992 1991
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Costs and estimated earnings in excess of billings
on uncompleted contracts............................. $ 67,817 $ 132,644
Billings in excess of costs and estimated earnings
on uncompleted contracts............................ (125,764) (140,700)
----------- -----------
$ (57,947) $ (8,056)
=========== ===========
</TABLE>
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Utility plant and equipment,
which is classified as net assets held for sale as of December 31, 1992,
includes, in addition to direct labor and materials, such costs as related
employee benefits, taxes, interest and other costs attributable to the
construction activity. The water supply business provides for depreciation on
the straight-line basis at amounts equivalent to a composite rate of
approximately 2% of the average depreciable plant. All other subsidiaries
provide for depreciation by principally using the straight-line method over
estimated useful lives.
Property, plant and equipment consists of:
<TABLE>
<CAPTION>
1992 1991
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Utility plant and equipment................................... $ -- $164,160
Machinery and equipment....................................... 51,530 118,512
Furniture and fixtures........................................ 25,344 45,633
Rental equipment.............................................. -- 28,485
Land, buildings and leasehold improvements.................... 23,396 63,780
Energy and environmental facilities........................... -- 37,113
-------- --------
100,270 457,683
Accumulated depreciation and amortization..................... 49,183 134,244
-------- --------
$ 51,087 $323,439
======== ========
</TABLE>
32
<PAGE>
INVENTORIES
Inventories are stated at the lower of cost or market. The finished goods and
service spare parts inventories relate to discontinued operations and other
businesses held for sale and are included in net assets held for sale as of
December 31, 1992 (See Notes 10 and 11). Cost is determined by principally
using average costs. The following are the major classes of inventories as of
December 31:
<TABLE>
<CAPTION>
1992 1991
------ --------
(IN THOUSANDS)
<S> <C> <C>
Finished goods.................................................. $ -- $274,831
Service spare parts............................................. -- 42,604
Construction materials and other................................ 6,618 41,598
------ --------
$6,618 $359,033
====== ========
</TABLE>
NET ASSETS HELD FOR SALE
Net assets held for sale are stated at the lower of cost or estimated net
realizable value.
COST IN EXCESS OF NET ASSETS ACQUIRED
Cost in excess of net assets acquired (goodwill) is amortized on a straight
line basis over 40 years. The amounts included in the accompanying Consolidated
Balance Sheets are net of cumulative amortization at December 31, 1992 and 1991
of $6.9 million and $16.5 million, respectively. The Company periodically
reviews whether new events and circumstances warrant the write-off of goodwill
or a revision to the estimated useful life.
The Company's Board of Directors has approved a plan to downsize the
Company's North American mechanical/electrical services business and to sell
non-core businesses and certain mechanical/electrical business units. In 1992,
the Company wrote-off goodwill of $48.5 million related to such businesses to
reflect the net realizable value of businesses held for sale and the permanent
impairment of goodwill.
NET (LOSS) EARNINGS PER COMMON SHARE
Net (loss) earnings per common share has been calculated based on the
weighted average number of common shares outstanding and common share
equivalents relating to warrants and stock options outstanding when the effect
of such equivalents are dilutive (40,583,185, 38,800,000 and 38,100,000 shares
in 1992, 1991 and 1990, respectively). Per share amounts of (loss) income from
continuing operations and net (loss) income reflect amounts of dividends paid
and accrued on the Company's preferred stock. References to number of shares of
common stock and per share amounts have been adjusted to give effect to the
acquisition of Neeco, Inc. (see Note 9) and to reflect a 3-for-2 common stock
split, effected on July 16, 1990.
STATEMENTS OF CASH FLOWS
For purposes of the Consolidated Statements of Cash Flows, the Company
considers all highly liquid instruments with original maturities of three
months or less to be cash equivalents.
INCOME TAXES
Effective January 1, 1992, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). The adoption of SFAS 109 changed the Company's method of accounting for
income taxes from the deferred method as required by Accounting Principles
Board Opinion No. 11, "Accounting for Income Taxes," to an asset and liability
approach. Previously, the Company deferred the tax effects of timing
differences between financial reporting and taxable income. The asset and
liability approach requires the recognition of deferred tax liabilities and
assets for the
33
<PAGE>
expected future tax consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable for the period and the
change during the period in deferred tax assets and liabilities. Prior years'
financial statements have not been restated for such accounting change (See
Note 5).
At December 31, 1992 and January 1, 1992 (after having given effect to the
adoption of SFAS No. 109), the valuation allowances recorded against deferred
tax assets were $138.3 million and $0, respectively.
(3) DEBT IN DEFAULT
Debt in default at December 31, 1992 consists of (in thousands):
<TABLE>
<S> <C>
Notes payable to banks under revolving credit facility at prime plus $155,795
3/4%..................................................................
Senior notes payable to insurance companies, 9.1% to 10.95%........... 328,572
--------
Total senior debt..................................................... 484,367
Subordinated notes payable to insurance companies, 12%................ 9,600
7 3/4% Convertible Subordinated Debentures............................ 7,040
--------
$501,007
========
</TABLE>
The Company failed to make principal and interest payments and is in default
of various financial covenants contained in its senior notes and 12%
subordinated notes including minimum tangible net worth and minimum current
ratio. The revolving credit facility contains certain financial and other
covenants, including minimum tangible net worth and minimum current ratio,
under which the Company was also in default at December 31, 1992. As a result,
the entire amount of such notes and bank indebtedness has been classified in
the accompanying Consolidated Balance Sheet as "Debt in default". Additionally,
the Company has not made scheduled semiannual interest payments since September
1, 1993 with respect to its 7 3/4% Convertible Subordinated Debentures and,
accordingly, such debentures have been classified as "Debt in default" in the
accompanying Consolidated Balance Sheet.
Effective April 1993, the Company ceased making payments of principal and
interest under its revolving credit facility and its senior and subordinated
notes. Interest continued to accrue in accordance with the provisions of these
loan documents which in certain circumstances included default rates of an
additional 2% and in one case 4%. Interest ceased to accrue on December 21,
1993, the date on which an involuntary bankruptcy petition was filed against
the Company. The Company has pledged to the holders of its senior notes and
bank indebtedness the common stock of five subsidiaries held for sale and
certain proceeds of the sale of one of those subsidiaries which had a combined
net book value of $23.2 million as of December 31, 1992.
Certain of the Company's loan agreements contain covenants which restrict its
ability to pay dividends on its common stock. The Company does not meet the
financial ratio requirements under such covenants and consequently is
restricted from paying dividends on its common stock.
The Company's 7 3/4% Convertible Subordinated Debentures are convertible into
common stock at any time on or prior to September 1, 2012 at $30.11 per share
which is subject to change as defined in the indenture pursuant to which the
debentures were issued. The debentures are redeemable, at the Company's option,
on any date prior to maturity at redemption prices (expressed as percentages of
principal amount) ranging from 103.1% in 1993 to 100% in 1997 and thereafter,
plus accrued interest. In 1992, 1991 and 1990, the Company purchased $8.7
million, $7.6 million and $10.5 million of its 7 3/4% debentures, respectively.
In 1991, the Company also retired its $10.0 million 11% senior notes prior to
maturity. The Company realized a net gain of $1.8 million, $0.6 million and
$l.5 million in 1992, 1991 and 1990, respectively, from early retirement of
such debt.
34
<PAGE>
See Note 1 with respect to the contemplated exchange of the debt in default
for new debt and equity securities under the Company's proposed plan of
reorganization.
As of June 1994, the estimated fair value of the Company's obligations under
its revolving credit facility approximates $50 million or approximately 30% of
the amount of its pre-bankruptcy petition date principal and accrued interest.
The estimated fair value of the senior notes approximates $122 million or
approximately 34% of the amount of its pre-bankruptcy petition date principal
and accrued interest. Such valuations were based upon recent private
transactions involving the purchase and sale of a limited number of such debt
instruments. However, the estimated values described above are not necessarily
indicative of their fair market value because these debt instruments are not
actively traded or exchanged. The estimated fair value of the defaulted 12%
subordinated notes and 7 3/4% Convertible Subordinated Debentures is nominal.
Such valuations were based upon comparison with similarly rated securities and
are not necessarily indicative of the current market value.
(4) LONG-TERM DEBT
The following is a summary of the Company's long-term debt, excluding current
maturities of $1.9 million and $38.0 million in 1992 and 1991, respectively:
<TABLE>
<CAPTION>
1992 1991
------ --------
(IN THOUSANDS)
<S> <C> <C>
9.1% to 12% Senior Notes, due 1992 to 2005 (See Note 3)........ $ -- $330,119
7 5/8% to 11% First Mortgage Bonds, due 1995 to 2029........... -- 34,500
7 3/4% Convertible Subordinated Debentures, due 2012 (See Note -- 15,764
3).............................................................
5.5% Convertible Subordinated Debentures, due 2007............. -- 19,262
Bank loans under revolving credit agreements................... -- 4,300
Other long-term debt........................................... 4,111 21,135
------ --------
$4,111 $425,080
====== ========
</TABLE>
The aggregate amount of long-term debt maturing during the next five years
is: $1.0 million, $1.9 million, and $0.3 million in each of the next three
years.
The debt of JWS, described below, is carried as an element of "Net assets
held for sale" in the accompanying Consolidated Balance Sheet as of December
31, 1992 (See Note 11).
A series of first mortgage bonds issued by JWS requires annual redemption
payments of $2.0 million beginning April 1, 2020 and two other series require
annual redemption payments of $0.5 million each, commencing August 1, 1994 and
December 1, 2005, respectively. A fourth series aggregating $4.5 million is due
May 1, 1995. The utility plant and equipment of JWS, which has a net book value
of $131.9 million at December 31, 1992, is subject to a lien pursuant to the
Indenture under which the first mortgage bonds were issued. The fair value of
the first mortgage bonds approximates $41.6 million. There is no active quoted
market for the bonds. The fair value was determined primarily based upon sales
prices, or bid and asked quotes for similar debt securities.
JWS has two revolving credit agreements each of which permitted unsecured
borrowings of up to $10 million with interest at rates equal to the prime rate
(6% at December 31, 1992). Both of the agreements expired on April 30, 1994 and
borrowings thereunder have been permitted by the lenders to remain outstanding.
JWS is currently negotiating new credit agreements. Borrowings under the
revolving credit agreements are classified as long-term as it was the intent of
JWS to extend the agreements as they expire, refinance the borrowings under an
expiring agreement with funds borrowed under the other agreement, or refinance
borrowings under both agreements through the issuance of long-term securities.
As of December 31, 1992, JWS had equal borrowings outstanding under the
agreements aggregating $4.8 million. The fair value of these borrowings
approximates the carrying amounts.
35
<PAGE>
(5) INCOME TAXES
Effective January 1, 1992, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). The
cumulative effect of adopting SFAS 109 was to record an income tax benefit of
$4.3 million or $0.11 per share as of January 1, 1992. Such amount has been
reflected in the Consolidated Statements of Operations under the caption
"Cumulative Effect of Change in Method of Accounting for Income Taxes."
The Company files a consolidated Federal income tax return including all U.S.
subsidiaries. At December 31, 1992, the Company had a net operating loss carry-
forward ("NOL") for U.S. income tax purposes of approximately $220.0 million
expiring in years through 2007. As described in Note 1, under the Company's
proposed plan of reorganization, newly issued equity and debt securities will
be exchanged for existing debt of the Company. If the Company effectuates its
proposed plan of reorganization, a substantial portion of the NOL may not be
available to reduce future U.S. taxable income. Additionally, due to recent
changes in the U.S. Federal income tax laws, the timing of any such plan of
reorganization could further impact and reduce the amount of the NOL. The
Company also has an alternative minimum tax credit carry-forward of
approximately $2.0 million available to offset future regular income taxes
payable to the extent such regular taxes exceed alternative minimum taxes
payable.
U.S. income and foreign withholding taxes have not been provided for on
undistributed earnings of certain foreign subsidiaries. Such undistributed
earnings aggregated $16.2 million at December 31, 1992. The Company considers
these earnings to be permanently invested in the businesses and, under the tax
laws, not subject to such taxes until distributed as dividends.
The provision (benefit) for income taxes relating to continuing operations
consists of:
<TABLE>
<CAPTION>
1992 1991 1990
------ ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current
Federal.............................................. $ -- $ 663 $ 4,025
State and local...................................... 1,248 1,092 2,339
Foreign.............................................. 1,106 2,834 467
------ ------- -------
2,354 4,589 6,831
------ ------- -------
Deferred
Federal.............................................. 4,487 (5,440) 5,790
State and local...................................... (56) (156) 784
Foreign.............................................. 859 3,426 4,070
------ ------- -------
5,290 (2,170) 10,644
------ ------- -------
$7,644 $ 2,419 $17,475
====== ======= =======
</TABLE>
The provision (benefit) for income taxes relating to discontinued operations
consists of:
<TABLE>
<CAPTION>
1992 1991 1990
------ ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current
Federal.............................................. $ (237) $ (525) $ 9,984
State and local...................................... 7 (218) 2,633
------ ------- -------
(230) (743) 12,617
------ ------- -------
Deferred
Federal.............................................. 983 13,287 2,417
State and local...................................... 864 2,301 298
------ ------- -------
1,847 15,588 2,715
------ ------- -------
$1,617 $14,845 $15,332
====== ======= =======
</TABLE>
36
<PAGE>
Factors accounting for the variation from U.S. statutory income tax rates
relating to continuing operations are as follows:
<TABLE>
<CAPTION>
1992 1991 1990
--------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal income taxes at the statutory rate.......... $(120,996) $2,425 $15,682
State and local income taxes, net of federal tax.... 787 618 2,061
Amortization and write-off of intangibles........... 29,791 (488) 637
Valuation allowance against deferred tax asset...... 96,849 -- --
Other............................................... 1,213 (136) (905)
--------- ------ -------
$ 7,644 $2,419 $17,475
========= ====== =======
</TABLE>
Factors accounting for the variation from U.S. statutory income tax rates
relating to discontinued operations are as follows:
<TABLE>
<CAPTION>
1992 1991 1990
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal income taxes at the statutory rate............ $(85,548) $13,296 $12,557
State and local income taxes, net of federal tax...... 575 1,375 1,935
Amortization and write-off of intangibles............. 28,289 -- 327
Valuation allowance against deferred tax asset........ 58,409 -- --
Other................................................. (108) 174 513
-------- ------- -------
$ 1,617 $14,845 $15,332
======== ======= =======
</TABLE>
The sources of significant timing differences for 1991 and 1990 which gave
rise to deferred taxes and their effects were as follows:
<TABLE>
<CAPTION>
CONTINUING DISCONTINUED
OPERATIONS OPERATIONS
---------------- --------------
1991 1990 1991 1990
------- ------- ------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Difference between book and tax accruals,
principally contracts....................... $(1,804) $(2,523) $ 261 $ 437
Appraisal differences........................ 1,316 7,637 3,953 1,392
Depreciation................................. (258) 1,244 1,071 657
State and local deferred taxes, net of (103) 517 1,519 197
federal tax benefits.........................
Acquisition adjustments...................... (382) 1,972 -- (75)
Terminated leases and severance pay.......... -- -- 7,616 --
Other, net................................... (939) 1,797 1,168 107
------- ------- ------- ------
$(2,170) $10,644 $15,588 $2,715
======= ======= ======= ======
</TABLE>
37
<PAGE>
The components of the net deferred income tax liability as of December 31,
1992 are as follows (in thousands):
<TABLE>
<S> <C>
Deferred tax assets:
Net operating loss carry-forward.................................. $ 74,787
Excess of amounts expensed for financial statement purposes over
amounts
deducted for income tax purposes................................. 93,891
Other............................................................. 2,816
---------
Total deferred tax asset.......................................... 171,494
---------
Deferred tax liabilities:
Costs capitalized for financial statement purposes and
deducted for income tax purposes................................. 33,086
Foreign deferred tax liability.................................... 1,635
---------
Total deferred tax liability...................................... 34,721
---------
Net deferred tax asset before valuation allowance................... 136,773
Valuation allowance for net deferred tax asset...................... (138,274)
---------
Net deferred income tax liability................................... $ (1,501)
=========
</TABLE>
(Loss) income before income taxes from continuing operations consists of the
following:
<TABLE>
<CAPTION>
1992 1991 1990
--------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
United States...................................... $(342,304) $(11,013) $32,426
Foreign............................................ (13,567) 18,144 13,698
--------- -------- -------
$(355,871) $ 7,131 $46,124
========= ======== =======
</TABLE>
(Loss) income before income taxes from discontinued operations consists of
the following:
<TABLE>
<CAPTION>
1992 1991 1990
--------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
United States.................................... $(228,754) $36,010 $36,932
Foreign.......................................... (22,859) 3,098 --
--------- ------- -------
$(251,613) $39,108 $36,932
========= ======= =======
</TABLE>
The above amounts applicable to discontinued operations include a loss of
$49.5 million in 1992 with respect to the disposition of the Company's overseas
information services business and certain units of the domestic information
services business.
(6) CAPITAL STOCK AND WARRANTS
In August 1991, the Company issued 425,000 shares of preferred stock in
connection with the acquisition of Businessland, Inc. (See Note 9). The
preferred stock is convertible into common stock of the Company, at any time,
at the option of the holder at a conversion price of $20.00 per share, subject
to customary anti-dilution provisions and exchangeable for 8.5% Convertible
Subordinated Notes due 2006 of the Company in whole, but not in part, at the
option of the Company after July 31, 1993. The Company has had the option to
redeem the shares of preferred stock after July 31, 1993 at $50.00 per share.
Each share of preferred stock entitles the holder to receive cumulative cash
dividends at the annual rate of $4.25 per annum per share. The Company has not
paid dividends on its preferred stock since September 1992. Cumulative unpaid
dividends at December 31, 1992 aggregate $0.5 million.
In 1969, the Company distributed 1,152,649 warrants of participation to
holders of its common stock. The warrants of participation, which expire on
December 31, 1994, may entitle their holders to receive shares
38
<PAGE>
of common stock of the Company in the event that JWS disposes of all or any
significant portion of its water distribution system or the Company disposes of
any shares of JWS. The number of shares of common stock to be issued, if any,
will be determined on the basis of a specified formula and will be distributed
to warrant holders on a pro rata basis.
Under the Company's 1992 and 1991 Stock Option Plans, a maximum of 2,500,000
shares and 1,000,000 shares of common stock, respectively, have been reserved
for grant to key personnel. The per share exercise price of an option may not
be less than the fair market value of a share of common stock on the date of
grant. The options are exercisable at various dates and expire ten years from
the date of grant.
The 1986 Incentive Stock Option and Appreciation Plan, as amended (the
"Option Plan"), provides that incentive stock options ("ISOs"), non-qualified
stock options and stock appreciation rights ("SARs") may be granted to a
maximum of 1,125,000 shares of common stock. If ISOs are granted, the per share
exercise price of the option must be the fair market value of a share of common
stock on the date of grant. The per share exercise price of a non-qualified
stock option may be below the fair market value of a share of common stock on
the date of grant.
Neeco, Inc., a computer reseller which the Company acquired (See Note 9), had
outstanding stock options which were assumed by the Company on the date of
acquisition. The Neeco options were granted at not less than fair market value
at the date of grant, are exercisable at various dates and expire five years
from date of grant.
A summary of stock option transactions for the years ended December 31, 1992,
1991 and 1990 is as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
----------------------------------------
1992 1991 1990
----------- ------------- ------------
<S> <C> <C> <C>
Balance beginning of year............. 1,231,310 1,124,189 1,114,122
Granted............................... 3,079,680 395,075 306,414
Exercised............................. (145,706) (220,329) (278,644)
Lapsed or cancelled................... (939,045) (67,625) (17,703)
----------- ------------- ------------
Balance end of year................... 3,226,239 1,231,310 1,124,189
----------- ------------- ------------
Exercisable at year-end............... 747,965 598,196 580,439
----------- ------------- ------------
OPTION PRICE PER SHARE
----------------------------------------
Outstanding at December 31............ $3.00-21.05 $ 6.67-21.05 $ 6.67-21.05
Granted............................... 3.00-18.25 14.00-15.625 20.92-21.05
Exercised............................. 6.67-15.93 6.67-14.49 6.67-15.93
Lapsed or cancelled................... 3.50-21.05 6.67-21.05 6.67-15.93
</TABLE>
As described in Note 1, under the Company's proposed plan of reorganization,
the holders of the Company's existing preferred and common stock and warrants
of participation will receive warrants to purchase common stock of the
reorganized Company in exchange for their equity interests.
(7) RETIREMENT PLANS
JWS and a foreign subsidiary have defined benefit pension plans covering
substantially all eligible employees. The benefits under the plans are based on
wages and years of service with the respective company. The Company's policy is
to fund the minimum amount required by law.
In 1990, the Company curtailed the pension benefits under one of its U.S.
plans and realized a net gain of $3.7 million. Effective May 31, 1991, the
Company terminated that plan and replaced it with a new defined contribution
plan. The effect of the pension termination and settlement of the benefit
obligation was not material to the operating income of the Company.
39
<PAGE>
Net pension expense for defined benefit plans for 1992, 1991 and 1990
consists of the following components:
<TABLE>
<CAPTION>
DOMESTIC FOREIGN
------------------------- -------------------------
1992 1991 1990 1992 1991 1990
------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Service cost--benefits $ 1,305 $ 939 $ 5,089 $ 1,301 $ 1,484 $ 1,853
earned...................
Interest on projected 1,725 1,490 1,928 2,481 2,108 1,896
benefit obligations......
Actual return on plan (2,276) (2,331) (1,963) (5,473) (3,428) (2,241)
assets...................
Net amortization and 760 869 (267) 2,452 838 (89)
deferral.................
------- ------- ------- ------- ------- -------
Net pension expense...... $ 1,514 $ 967 $ 4,787 $ 761 $ 1,002 $ 1,419
======= ======= ======= ======= ======= =======
</TABLE>
The benefit obligations and funded status of the plans at December 31, 1992
and 1991 are as follows:
<TABLE>
<CAPTION>
DOMESTIC FOREIGN
---------------- ----------------
1992 1991 1992 1991
------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Accumulated benefit obligations:
Vested................................... $14,154 $14,379 $21,214 $20,009
Non-vested............................... 657 902 -- --
Impact of future salary increases.......... 8,579 9,235 3,393 3,200
------- ------- ------- -------
Projected benefit obligations.............. 23,390 24,516 24,607 23,209
Plan assets at market value................ 22,020 21,006 27,531 27,884
------- ------- ------- -------
(Deficiency) excess of plan assets over
projected benefit obligations............. (1,370) (3,510) 2,924 4,675
Unrecognized net (gain) loss from past
experience different from that assumed and
effect of changes in assumptions.......... (3,551) 32 (1,670) (3,181)
Unrecognized net obligation (asset) from
initial application of SFAS No. 87........ 854 925 (889) (1,189)
------- ------- ------- -------
(Accrued) prepaid pension.................. $(4,067) $(2,553) $ 365 $ 305
======= ======= ======= =======
</TABLE>
The assumptions used as of December 31, 1992, 1991 and 1990 in determining
the pension cost and liability shown above were as follows:
<TABLE>
<CAPTION>
DOMESTIC FOREIGN
---------------- ----------------
1992 1991 1990 1992 1991 1990
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Discount rate.................................. 7.5% 6.5% 7.25% 10% 11% 9%
Rate of salary progressions.................... 7% 7% 7% 7% 7% 7%
Rate of return on assets....................... 8% 8% 8% 10% 11% 10%
</TABLE>
The unrecognized net asset of the foreign plan is being amortized over 15
years. The U.S. plan assets are primarily invested in fixed income securities.
The foreign plan assets are invested 80% in equity securities and 20% in fixed
income securities.
The Company contributes to various union pension funds based upon wages paid
to union employees of the mechanical/electrical business units. Such
contributions approximated $41.6 million, $38.5 million and $36.0 million in
1992, 1991 and 1990, respectively.
40
<PAGE>
The Company has defined contribution retirement plans that cover its U.S.
non-union eligible employees. Contributions to these plans are based on a
percentage of the employee's base compensation. The expense recognized in 1992,
1991 and 1990 relating to continuing operations for the defined contribution
plans was $4.7 million, $4.7 million and $1.8 million, respectively.
Effective January 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 106, "Accounting For Postretirement Benefits
Other Than Pensions" (SFAS 106). The estimated present value of the accumulated
postretirement benefit obligations under SFAS 106 approximated $7.0 million at
January 1, 1993. The adoption of SFAS 106 did not have a material impact upon
the Company's Consolidated Statements of Operations.
(8) LEASE COMMITMENTS
The Company and its subsidiaries lease land, buildings and equipment under
various non-cancellable lease agreements. The lease agreements frequently
include renewal options and require the Company to pay for utilities, taxes,
insurance and maintenance expense.
Future minimum payments, by year and in the aggregate, under capital leases
and non-cancellable operating leases with initial or remaining terms of one
year or more relating to continuing operations consisted of the following at
December 31, 1992:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
(IN THOUSANDS)
<S> <C> <C>
1993......................................................... $ 848 $ 31,227
1994......................................................... 1,606 23,377
1995......................................................... 867 18,054
1996......................................................... 663 13,834
1997......................................................... 205 9,923
Thereafter................................................... 751 45,691
------ --------
Total minimum lease payments................................. 4,940 $142,106
========
Amounts representing interest................................ 1,005
------
Present value of net minimum lease payments (includes current $3,935
portion of $705).............................................
======
</TABLE>
The above operating lease table includes lease obligations retained by the
Company in connection with the sale of its domestic information services
business (See Note 10). Future minimum payments under non-cancellable operating
leases relating to discontinued operations are as follows (in thousands):
$11,564, $11,133, $8,993, $6,056, $4,905 and $10,130 in 1993, 1994, 1995, 1996,
1997 and thereafter, respectively.
"Other long-term obligations and deferred credits" at December 31, 1992 and
1991 include capital lease obligations of $3.2 million and $21.0 million,
respectively.
Rent expense relating to continuing operations for the years ended December
31, 1992, 1991 and 1990 was $26.6 million, $22.8 million and $21.3 million,
respectively. Rent expense relating to discontinued operations for the years
ended December 31, 1992, 1991 and 1990 was $20.7 million, $10.0 million and
$5.3 million, respectively.
(9) BUSINESS COMBINATIONS
In the fourth quarter of 1991, the Company completed the acquisition of
Businessland, Inc. ("Businessland"). Pursuant to the acquisition, the Company
paid $17.0 million in cash and exchanged 1,108,195 shares of its common stock
for all the outstanding common stock of Businessland. The Company
41
<PAGE>
acquired Businessland's 10 1/4% Senior Notes in the aggregate principal amount
of $50.0 million for an aggregate of $18.75 million in cash and 425,000 shares
of its $4.25 Convertible Exchangeable Preferred Stock with a liquidation
preference of $50.00 per share. Businessland was combined with the Company's
then existing information services business. The acquisition of Businessland
was accounted for by the purchase method of accounting. The Company sold the
rental operations of Businessland in 1991 for $10.1 million in cash. The sale
of the rental operations did not result in a gain or loss to the Company.
On May 22, 1990, the Company acquired Neeco, Inc. ("Neeco"), a computer
reseller. Neeco was combined with the Company's then existing information
services business. The acquisition was accounted for as a pooling of interests.
The Company issued 4,669,375 shares of its common stock to the former holders
of Neeco common stock.
Including the acquisition of Businessland, the Company paid approximately
$15.4 million and $133.7 million in 1992 and 1991, respectively, in cash, notes
and common stock for its acquisitions. Net tangible assets acquired in 1992 and
1991 were approximately $7.0 million and $80.3 million, respectively.
The acquisitions in 1992 and 1991 were accounted for by the purchase method
of accounting and, accordingly, the consolidated results of operations include
the results of the acquired companies from acquisition dates. Pro forma
combined revenues from continuing operations of the acquired businesses would
have been approximately $2.4 billion in 1991 and $2.5 billion in 1990, if the
acquisitions had taken place on January 1. Pro forma combined income from
continuing operations and net income per share from continuing operations would
have been approximately $7.3 million and $0.14, respectively, in 1991 and $31.4
million and $0.74, respectively, in 1990. Pro forma amounts for the year ended
December 31, 1992 are not materially different from the actual amounts.
(10) DISCONTINUED OPERATIONS
Discontinued operations includes the Company's information services business
and water supply business.
In 1992, the Company's information services business was negatively impacted
by several industry factors, such as rapid technology change, steep price
discounting and by the problems encountered with the integration of
Businessland.
In March 1993, the Company's Board of Directors approved the disposition of
the Company's U.S. information services business. The Board of Directors had
previously decided to sell the Company's overseas information services
business. Accordingly, operating results of the information services business
have been classified as discontinued operations. In August 1993, the Company
sold substantially all the assets of its U.S. information services business.
The Company did not realize a material gain or loss from the sale. The assets
of the U.S. information services business consisted primarily of inventory held
for resale and accounts receivable. Under the terms of the agreement, the
purchaser assumed the debt and other liabilities relating to the ongoing
operations of the business. The Company received warrants to buy up to 10% of
the purchaser's common stock for a nominal amount. A subsidiary of the Company
retained certain lease obligations aggregating $15 million, net of estimated
settlement amounts and subrentals, at December 31, 1992. Such lease obligations
relate to closed facilities and facilities identified to be closed. These lease
obligations are included in the accompanying Consolidated Balance Sheet under
the captions "Other accrued expenses and liabilities" and "Other long-term
obligations and deferred credits" in the amounts of $8.2 million and $6.8
million, respectively. At December 31, 1992, net assets of the information
services business aggregated approximately $5.0 million. Such amount is
included in current assets under the caption "Net assets held for sale" in the
accompanying Consolidated Balance Sheet.
42
<PAGE>
The information services business operated primarily in the United States,
Europe and Canada. The following presents information about operations in such
geographical areas:
<TABLE>
<CAPTION>
OPERATING IDENTIFIABLE
REVENUES (LOSS) INCOME ASSETS
---------- ------------- ------------
<S> <C> <C> <C>
(IN THOUSANDS)
1992
United States........................... $1,418,350 $(144,743) $378,913
Europe.................................. 245,497 (37,727) 78,072
Canada.................................. 28,573 (5,469) 10,186
---------- --------- --------
$1,692,420 $(187,939) $467,171
========== ========= ========
1991
United States........................... $1,106,711 $ 32,987 $723,759
Europe.................................. 91,088 1,824 116,094
Canada.................................. 15,970 (775) 16,781
---------- --------- --------
$1,213,769 $ 34,036 $856,634
========== ========= ========
</TABLE>
In 1990, the information services business was located only in the United
States. Revenues and operating income of the information services business in
1990 were $710.8 million and $29.6 million, respectively. The information
services business' operating loss in 1992 includes $41.3 million attributable
to the write-off of goodwill and other intangibles and $26.0 million primarily
relating to severance payments and facilities consolidation.
In connection with the plan to dispose of the overseas information services
business and certain other of its U.S. information services businesses, the
Company provided for a loss of $49.5 million in 1992. This loss represents the
estimated loss to be realized upon the disposition of such businesses. Such
loss includes $32.1 million related to the write-off of goodwill and other
intangible assets and $17.4 million for estimated losses to be incurred up to
the expected disposal dates and the write-down of other assets to estimated net
realizable value.
In April 1992, the Company announced its intention to sell its water supply
business. However, in July 1993, the Company's Board of Directors decided not
to proceed with the divestiture due to uncertainties created by the then
pending rate related proceedings and litigation. In December 1993, JWS entered
into an agreement with respect to the rate related proceedings and litigation.
Subsequently, the agreement was approved by the New York State Public Service
Commission on February 2, 1994. Accordingly, the Company reinstated its plan of
divestiture in the first quarter of 1994 and recorded a $7.4 million loss in
1993 to write-down the assets of the water supply business to estimated net
realizable value. The financial statements for all periods presented reflect
the water supply business as discontinued operations.
See Note 17 with respect to the status of a proceeding initiated in 1988 by
the City of New York to acquire by condemnation all of the water distribution
system of JWS that is located in New York City.
The assets of the water supply business consists primarily of utility plant
and equipment which are located in Nassau and Queens Counties in the State of
New York. The net assets of the water supply business, which aggregate $57.2
million at December 31, 1992, are classified as long-term assets in the
accompanying Consolidated Balance Sheet under the caption "Net assets held for
sale" because the disposition of the water supply business will not take place
until after 1993.
Revenues of the water supply business were $59.8 million, $63.1 million and
$59.2 million in 1992, 1991 and 1990, respectively. Operating income of the
water supply business was $4.8 million, $14.6 million and $13.3 million in
1992, 1991 and 1990, respectively. The 1992 results include a provision of $7.0
million related to the settlement of litigation referred to above.
43
<PAGE>
Combined operating results of discontinued operations including both the
information services and the water supply businesses are as follows:
<TABLE>
<CAPTION>
1992 1991 1990
---------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues........................................ $1,752,171 $1,276,876 $769,994
Costs and expenses.............................. 1,935,349 1,228,281 727,090
---------- ---------- --------
Operating (loss) income......................... (183,178) 48,595 42,904
Interest expense................................ 18,944 9,487 5,972
---------- ---------- --------
(Loss) income before taxes...................... (202,122) 39,108 36,932
Provision for income taxes...................... 1,617 14,845 15,332
---------- ---------- --------
(Loss) income from discontinued operations...... $ (203,739) $ 24,263 $ 21,600
========== ========== ========
</TABLE>
(11) OTHER BUSINESSES SOLD AND NET ASSETS HELD FOR SALE
On October 16, 1992, the Company completed the sale of five environmental
businesses for which it received net cash proceeds of $84.1 million. The five
businesses sold were two air pollution control businesses, JWP Air
Technologies, Inc. and JWP Amcec Corp., two sludge pelletization projects,
located in New York City and Baltimore, Maryland and Enviro-Gro Technologies
Co., a sludge processing business. The Company realized a net gain of
approximately $12.0 million from the sale of these businesses. The Company's
Board of Directors has approved a plan for the sale of the Company's remaining
energy and environmental related businesses, other non-core businesses and
certain mechanical/electrical services operations. In connection with this
asset disposition plan, a loss of $88.1 million was provided for in 1992. The
loss represents the loss on businesses sold and the estimated loss to be
realized upon the disposition of the businesses held for sale. The loss
consists of $24.1 million attributable to the write-off of goodwill and $64.0
million related to the write-down of other assets to net realizable value. In
1991, the Company incurred a loss of $6.6 million in connection with the sale
of a certain subsidiary. The operating results of these businesses as well as
the provisions for write-down of assets are included in (loss) income from
continuing operations.
Revenues and operating (loss) income of the other businesses sold and held
for sale for the years ended December 31, 1992, 1991 and 1990 are as follows:
<TABLE>
<CAPTION>
1992 1991 1990
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues........................................... $526,894 $501,696 $444,242
Operating (loss) income............................ (41,151) 15,325 12,592
</TABLE>
The condensed combined balance sheet relating to discontinued operations and
other net assets held for sale at December 31, 1992 is as follows (in
thousands):
<TABLE>
<S> <C>
Cash............................ $ 25,297
Accounts receivable, net........ 340,847
Costs and estimated earnings in
excess of billings............. 35,449
Inventories..................... 189,744
Other current assets............ 18,450
--------
609,787
</TABLE>
<TABLE>
<S> <C>
Notes payable................... $ 51,238
Current maturities of long-term
debt and capital lease
obligations.................... 8,582
Accounts payable................ 345,446
Billings in excess of costs and
estimated earnings............. 21,472
Accrued payroll and benefits.... 28,130
Other accrued expenses.......... 137,590
--------
592,458
Long-term debt.................. 74,178
Other long-term liabilities..... 41,887
Net assets held for sale-- 32,894
current.........................
Net assets held for sale--long- 85,611
term............................
--------
$827,028
========
</TABLE>
<TABLE>
<S> <C>
Property, plant and equipment, 200,080
net..............................
Other assets..................... 17,161
--------
$827,028
========
</TABLE>
44
<PAGE>
(12) RESTRUCTURING CHARGES
In 1992, the Company recorded $38.7 million of restructuring charges related
to continuing operations. The Company's business restructuring plan
contemplates the downsizing and consolidation of the Company's North American
mechanical/electrical services operations. The Company's strategy also provides
for the disposition of non-core businesses and certain mechanical/electrical
services operations. The restructuring charges consist of $10.8 million
applicable to permanent impairment of goodwill and $27.9 million for severance
payments, facilities consolidation costs, provisions for contract losses and
the write-down of certain assets to net realizable value.
(13) INSURANCE RESERVES
The Company is primarily insured through an indirect wholly-owned captive
insurance subsidiary ("Defender") for its workers' compensation, automobile and
general liability insurance. The insurance liability is determined actuarially
based on claims filed and an estimate of claims incurred but not yet reported.
The present value of such claims was determined as of December 31, 1992 using a
4% discount rate. The current portion of the insurance liability was $16.5
million and $6.4 million at December 31, 1992 and 1991, respectively. Such
amounts are included in "Other accrued expenses and liabilities" in the
accompanying Consolidated Balance Sheets. The noncurrent portion of the
insurance liability was $33.1 million and $12.5 million at December 31, 1992
and 1991, respectively. Such amounts are included in "Other long-term
obligations and deferred credits". The undiscounted liability was approximately
$56.0 million and $20.9 million at December 31, 1992 and 1991, respectively.
The Company has restated its 1991 financial statements among other things, to
increase its insurance liability by $4.5 million. The insurance liability in
1991 was increased primarily to provide for losses on incurred but not reported
claims.
At December 31, 1992, the Company and Defender had letters of credit
outstanding totalling $38.2 million which in effect secure their insurance
obligations. The letters of credit were intended to serve as collateral for the
obligations of Defender to reimburse the Company's unrelated insurance carriers
for claims paid in respect of certain years' insurance programs. In December
1993, these letters of credit were reduced to $36.4 million. $34.9 million of
such letters of credit expire in December 1994 and $1.5 million of such letters
of credit expire in February 1995. Since October 1992, neither the Company nor
Defender has been able to obtain additional letters of credit to secure their
insurance obligations and, as a result, have been required to make cash
collateral deposits to an unrelated insurance company to secure those type
obligations. The deposits totalled $7.7 million as of December 31, 1992 and are
included under the caption "Miscellaneous" in Other Assets in the accompanying
Consolidated Balance Sheet. Such deposits have increased to $29.7 million as of
June 30, 1994.
The Company's proposed plan of reorganization contemplates that the letters
of credit, described above, will be drawn upon by the unrelated insurance
carriers and that the Company's obligations to Defender, which were pledged as
collateral to the banks issuing such letters of credit, will be impaired in the
Chapter 11 proceeding as well as any related Company obligations to those
banks. The Company's unrelated insurance carriers have commenced partial draw
downs against certain of the letters of credit. Approximately $5 million has
been drawn down against the letters of credit through June 1994.
45
<PAGE>
(14) ADDITIONAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1992 1991 1990
-------- ------- -------
<S> <C> <C> <C>
(IN THOUSANDS)
Cash paid (refunded) during the year for:
Interest.......................................... $ 62,582 $54,258 $45,044
Income taxes...................................... (15,617) 14,400 13,850
<CAPTION>
Significant non-cash financing and investment trans-
actions are as follows:
<S> <C> <C> <C>
Debt assumed in acquisitions...................... $ 929 $93,662 $11,107
Debt issued to acquire companies.................. 2,566 9,648 1,750
Common stock issued for acquisitions.............. 749 29,238 1,804
Preferred stock issued to retire debt............. -- 21,250 --
Debt issued to acquire fixed assets............... -- -- 4,122
Fixed assets acquired under capital lease 1,616 2,760 5,831
obligations.........................................
</TABLE>
(15) SEGMENT INFORMATION
The following presents information about continuing operations by geographic
areas:
<TABLE>
<CAPTION>
OPERATING IDENTIFIABLE
REVENUES INCOME (LOSS) ASSETS
---------- ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
1992
United States............................. $1,793,350 $(220,242) $ 582,426
Europe.................................... 386,003 (15,985) 145,435
Canada.................................... 225,224 615 61,218
Net assets held for sale.................. -- -- 118,505
---------- --------- ----------
$2,404,577 $(235,612) $ 907,584
========== ========= ==========
1991
United States............................. $1,713,651 $ 42,706 $1,842,391
Europe.................................... 374,380 5,199 283,315
Canada.................................... 230,081 9,746 108,121
---------- --------- ----------
$2,318,112 $ 57,651 $2,233,827
========== ========= ==========
1990
United States............................. $1,712,517 $ 73,313 $1,323,201
Europe.................................... 345,090 9,438 152,871
---------- --------- ----------
$2,057,607 $ 82,751 $1,476,072
========== ========= ==========
</TABLE>
(16) SELECTED UNAUDITED QUARTERLY INFORMATION
<TABLE>
<CAPTION>
AS RESTATED
------------------------------
1992 QUARTERLY RESULTS MARCH 31 JUNE 30 SEPT. 30 DEC. 31 TOTAL
- - - - - - - - - ---------------------- --------- -------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues................ $ 582,580 $606,824 $ 609,553 $ 605,620 $2,404,577
Gross profit............ 80,469 82,563 60,918 19,904 243,854
(Loss) from continuing
operations before
cumulative effect of
accounting change...... (7,822) (31,525) (89,599) (234,569) (363,515)
(Loss) from discontinued
operations ............ (9,712) (22,489) (38,176) (182,853) (253,230)
Cumulative effect of
change in method of
accounting for income
taxes.................. 4,315 -- -- -- 4,315
--------- -------- --------- --------- ----------
Net (loss).............. $ (13,219) $(54,014) $(127,775) $(417,422) $ (612,430)
========= ======== ========= ========= ==========
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
AS RESTATED
--------------------------
1992 QUARTERLY RESULTS (CONTINUED) MARCH 31 JUNE 30 SEPT. 30 DEC. 31 TOTAL
- - - - - - - - - ---------------------------------- -------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(Loss) income per share:
Continuing operations.............. $(0.20) $(0.80) $(2.22) $ (5.78) $ (9.00)
Discontinued operations............ (0.25) (0.54) (0.94) (4.51) (6.24)
Cumulative effect of change in
method of accounting for income
taxes............................. 0.11 -- -- -- 0.11
------ ------ ------ ------- -------
Net (loss)......................... $(0.34) $(1.34) $(3.16) $(10.29) $(15.13)
====== ====== ====== ======= =======
</TABLE>
The loss from continuing operations in the fourth quarter of 1992 includes
the following: (i) restructuring charges of $13.9 million primarily for
consolidation and downsizing of certain North American mechanical/electrical
services business units, (ii) $70.2 million for losses attributable to assets
held for sale, (iii) valuation allowances of $56.1 million relating to accounts
receivable, work-in-progress on uncompleted contracts and inventory and (iv) a
valuation allowance of $24.0 million provided against deferred tax assets. The
loss from discontinued operations in the fourth quarter of 1992 includes the
following: (i) restructuring charges of $18.0 million relating to severance
payments and facilities consolidation, (ii) $37.6 million for losses
attributable to assets held for sale, (iii) valuation allowances of $62.4
million relating to accounts receivable and inventory and (iv) $29.3 million
relating to write-off of goodwill and other intangibles.
<TABLE>
<CAPTION>
AS
RESTATED
--------
1991 QUARTERLY RESULTS MARCH 31 JUNE 30 SEPT. 30 DEC. 31 TOTAL
- - - - - - - - - ---------------------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues....................... $520,613 $560,015 $585,410 $652,074 $2,318,112
Gross profit................... 86,761 89,065 91,993 76,732 344,551
Income (loss) from continuing 10,619 9,807 5,583 (21,297) 4,712
operations.....................
Income from discontinued 3,431 5,042 9,716 6,074 24,263
operations.....................
-------- -------- -------- -------- ----------
Net income (loss).............. $ 14,050 $ 14,849 $ 15,299 $(15,223) $ 28,975
======== ======== ======== ======== ==========
Income (loss) per share:
Continuing operations.......... $ 0.28 $ 0.26 $ 0.14 $ (0.58) $ 0.10
Discontinued operations........ 0.09 0.13 0.25 0.16 0.63
-------- -------- -------- -------- ----------
Net income (loss) per share.... $ 0.37 $ 0.39 $ 0.39 $ (0.42) $ 0.73
======== ======== ======== ======== ==========
</TABLE>
As discussed in Note 1, the Company has restated its operating results for
the quarters and years ended December 31, 1991 and 1990 and each of the
quarters in the nine month period ended September 30, 1992. The effect of the
restatement was to decrease net income and earnings per share for the fourth
quarter of 1991 and 1990 by $31.3 million and $9.1 million or $0.81 and $0.24
per share, respectively, and to decrease (increase) net loss and net loss per
share for each of the quarters in the nine month period ended September 30,
1992 as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
NET LOSS
QUARTER ENDED NET LOSS PER SHARE
------------- -------- ---------
<S> <C> <C>
March 31, 1992.......................................... $26,451 $ 0.65
June 30, 1992........................................... (153) (0.01)
September 30, 1992...................................... 7,554 0.19
</TABLE>
(17) LEGAL PROCEEDINGS
Since August 1992, nineteen purported class action lawsuits have been filed
against the Company arising out of the restatement of earnings, write-offs and
losses announced by the Company on August 4, 1992 and
47
<PAGE>
October 2, 1992. Pursuant to Stipulation and Court Order on January 15, 1993, a
single consolidated amended class action complaint (the "Complaint") was filed.
The Complaint names as defendants the Company, certain former officers and
directors, four current directors, a former subsidiary officer and the
Company's then outside auditor, Ernst & Young.
The Complaint alleges violations of Section 10(b) of the Securities and
Exchange Act of 1934, Rule 10b-5 promulgated thereunder and common law fraud
and deceit on the part of the Company and certain other defendants. Among other
things, the Company is alleged to have intentionally and materially overstated
its inventory, accounts receivable and earnings in various public
disseminations during the purported class period May 1, 1991 through October 2,
1992. The Complaint seeks an unspecified amount of damages. The Company denies
the material allegations in the complaint. The parties are now engaged in
discovery proceedings. However, under its proposed Chapter 11 plan of
reorganization, no damages will be recoverable from the Company by claimants in
the class action litigation, although they will receive warrants to purchase
common stock of the reorganized Company.
The Company has been informed by the Securities and Exchange Commission (the
"SEC") that it is conducting a private investigation to determine whether there
have been violations of certain provisions of the Federal securities laws
and/or the rules and regulations of the SEC in connection with the Company's
financial records, reports and public disclosures. The Company has been
cooperating with the SEC's staff and has voluntarily produced requested
documents and information. On April 12, 1994, the SEC's staff informed the
Company of its intention to recommend that the SEC file a civil injunction
action against the Company. The Company is currently engaged in discussions
with the SEC's staff concerning a possible consensual resolution of the matter.
In January 1992, the Public Service Commission of the State of New York
("PSC") ordered its staff to perform an audit covering all aspects of
operations of JWS. The audit report alleged that mismanagement and imprudence
on the part of JWS may have resulted in excess charges to its customers of up
to $10.6 million. Based on the audit report, in June 1992 the PSC instituted a
proceeding requiring JWS to demonstrate that its rates charged to customers are
not excessive and provided for an investigation of JWS's management practices.
As part of this proceeding and citing the audit report's assertion without
receiving the audit report in evidence, the PSC ordered that $10.6 million of
JWS's annual revenues be made temporary and subject to refund, effective August
6, 1992, pending the completion of the investigation.
Between December 1992 and May 1993, representatives of JWS, the PSC, consumer
advocate groups, the County of Nassau, the town of Hempstead and others
appeared and submitted testimony in the PSC proceedings. On June 3, 1993, the
PSC issued an order suspending hearings and appointed two administrative law
judges for the purpose of effecting a settlement. Negotiations among the
parties and the settlement judges were ongoing from that time.
In addition on February 5, 1993, the County of Nassau filed a complaint in
the Supreme Court of the State of New York alleging that JWS intentionally
filed false rate applications with the PSC and, as a result, for the period
from March 31, 1987 through March 31, 1992, JWS had earnings that exceeded its
projections by $8.7 million. The complaint alleged that this conduct
constituted violations of the Racketeer Influenced and Corrupt Organizations
Act ("RICO") and common law fraud.
On December 22, 1993, JWS, the New York State Consumer Protection Board,
Nassau County, certain other governmental bodies and a consumer advocate group
entered into an agreement that ended the several regulatory and legal
proceedings involving JWS described above. Subsequently, the agreement was
approved by the PSC on February 2, 1994. The agreement provides for, among
other things, a three year general rate case moratorium, resolution of the
economic issues raised by the PSC arising from its 1992 audit of JWS,
settlement of related litigation and the dismissal of Nassau County's RICO
lawsuit against JWS. JWS agreed, among other things, in consideration of
avoided litigation and other costs associated with the proceedings, to
48
<PAGE>
make payments over the next three years totalling $11.7 million to customers in
Nassau and Queens Counties in the State of New York. In connection with this
settlement, the Company provided a charge of $7.0 million in 1992. The
agreement also provides that JWS will use its best efforts to bring about the
separation of Jamaica Water Securities Corp., a subsidiary of the Company which
holds substantially all the common stock of JWS, from the Company.
In 1986, the State of New York enacted a statute requiring the City of New
York (the "City") to acquire by condemnation all of the JWS property
constituting or relating to its water distribution system located in the City
only if a Supreme Court of the State of New York (the "Supreme Court") decides
that the amount of compensation to be paid for the system is determined solely
by the income capitalization method of valuation. If the Court determines
compensation by a method other than the income capitalization method or the
award is for more than the rate base of the condemned assets, the statute
permits the City to withdraw the proceeding without prejudice or costs. In
1988, the City instituted a proceeding pursuant to the statute to acquire the
system which constitutes approximately 75% of JWS' water utility plant. JWS
argued at trial that the judicially recognized method for valuing public
utility property is by the method known as "Reproduction Cost New, Less
Depreciation". JWS also sought consequential and severance damages that would
result from separating the JWS Nassau County water supply system from that in
the City. The aggregate amount sought by JWS as of December 31, 1987 was
approximately $924.0 million. The City submitted its income capitalization
valuation, as of December 31, 1987, at approximately $63.0 million.
In June 1993, the Supreme Court dismissed the City's petition. The Supreme
Court concluded, among other things, that the statute is unconstitutional
because it directs the Court to render an advisory opinion.
In February 1994, the New York Court of Appeals held constitutional a nearly-
identical statute dealing with another water utility. In April 1994, upon a
request made by the City for reconsideration, the Supreme Court stated that it
would reconsider its prior decision in light of the February decision of the
Court of Appeals.
The Company cannot predict when or if the Supreme Court will conduct further
proceedings under the statute nor is it possible to predict what the decision
of the Supreme Court might be if it decides to value the JWS property or the
effect of the pending litigation on the proposed sale of JWS.
In 1993, the Company's French and Belgian information services subsidiaries
filed petitions in their respective countries seeking relief from their
creditors. The French and Belgian subsidiaries have outstanding unsecured
credit facilities which are guaranteed by the Company aggregating approximately
$5.9 million. Such amount has been provided for as a loss in the accompanying
Consolidated Statement of Operations for the year ended December 31, 1992.
As described in Note 10, in August 1993 the Company sold its U.S. information
services business and among other things, retained certain liabilities,
primarily lease obligations. In October 1993, the subsidiary formerly carrying
on this business filed a voluntary petition under Chapter 7 of the U.S.
Bankruptcy Code.
In connection with an investigation of the plumbing industry being conducted
by the New York County District Attorney's office, two subsidiaries of the
Company engaged in the plumbing business in New York City have received
subpoenas for certain of their books and records. The subsidiaries have
complied with those subpoenas. Additionally, certain employees of these
subsidiaries have been subpoenaed to testify as witnesses before a grand jury
and those employees have complied with the subpoenas.
The Company is involved in other legal proceedings and claims which have
arisen in the ordinary course of business. The Company cannot predict the
outcome thereof or the impact that an adverse result will have upon the
Company's financial position or results of operations.
49
<PAGE>
(18) OTHER
JWS is subject to a PSC order which requires that dividend payments by JWS
not exceed 50% of JWS's net income available to common shareholders for the
preceding twelve month period and subject further to a debt/equity ratio
restriction. Under such PSC order, approximately $2.4 million of JWS's retained
earnings were available for the payment of dividends and $52.7 million of JWS's
retained earnings were restricted as of December 31, 1992.
In September 1992, the PSC issued an order requiring additional subjective
certifications before the payment by JWS of cash dividends on its common stock.
This resulted in the suspension of dividend payments to the Company by JWS for
the last two quarters of 1992 and all of 1993. Dividends paid by JWS in 1992
and 1991 amounted to $1.2 million and $2.0 million, respectively. As a result
of the settlement agreement described in Note 17, JWS recommenced dividend
payments in 1994.
50
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
JWP INC.
We have audited the accompanying consolidated balance sheets of JWP INC. and
subsidiaries as of December 31, 1992 and 1991, and the related consolidated
statements of operations, shareholders' (deficit) equity, and cash flows for
each of the three years in the period ended December 31, 1992. Our audits also
included the financial statement schedules listed in the Index at Item 14(a).
These financial statements and schedules are the responsibility of the
Company's management. Our responsibility is to report on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our report.
As further described in Notes 1 and 3, the Company is not in compliance with
certain covenants with respect to its revolving credit facility, senior notes
and subordinated debt under which the Company owed $501 million at December 31,
1992. The Company has negotiated the restructuring of its debt and intends to
effect the restructuring through a proposed plan of reorganization under an
ongoing proceeding under Chapter 11 of the U.S. Bankruptcy Code. The proposed
plan of reorganization also contemplates a business restructuring plan to
divest certain businesses, the proceeds of which, to date, have been used for
working capital and to reduce debt. There is no assurance that the Company will
be able to consummate the remaining sales and, if consummated, whether the
Company will realize the proceeds contemplated by the plan. Further, the
Company cannot predict the results of the reorganization, if completed, or
provide any assurance that the proposed plan of reorganization will be
completed or, if so, its timing. If the Company is not successful in these
efforts there is the likelihood that a liquidation would result.
As more fully described in Note 17, the Company has been named as a defendant
in various litigation. The Company is presently unable to predict the outcome
of this litigation, and the impact, if any, that the ultimate resolution of
such litigation will have upon the Company and its financial statements.
The accompanying consolidated financial statements have been prepared
assuming that JWP INC. will continue as a going concern. As more fully
described in Note 1, the Company has a working capital deficiency of $364.9
million and a shareholders' deficit of $176.0 million at December 31, 1992. In
addition, the Company has incurred a loss of $612.4 million for the year ended
December 31, 1992 that has significantly weakened the Company's financial
condition. The Company's surety companies are issuing new bonds required to
guarantee the Company's performance on construction contracts, but are
reviewing bonding requests on a case-by-case basis for large construction
projects and those with durations of more than two years in light of the
Company's financial condition. The matters discussed in this and the two
preceding paragraphs raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the possible inability of JWP INC. to continue as a going
concern.
Because of the possible material effects on the 1992 consolidated financial
statements referred to above of the matters described in the three preceding
paragraphs, we are unable to, and do not, express an opinion on these
consolidated financial statements or the related financial statement schedules.
51
<PAGE>
As discussed in Note 5, in 1992 the Company changed its method of accounting
for income taxes.
In our opinion, the 1991 and 1990 consolidated financial statements referred
to above present fairly, in all material respects, the consolidated financial
position of JWP INC. and subsidiaries at December 31, 1991, and the
consolidated results of their operations and their cash flows for each of the
two years in the period ended December 31, 1991, in conformity with generally
accepted accounting principles. Also, in our opinion, the related 1991 and 1990
financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
As discussed in Note 1, as a result of a correction of errors, the Company
has restated its 1991 and 1990 financial statements.
Ernst & Young LLP
New York, New York
June 30, 1994
52
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On February 9, 1994, the Company informed Ernst & Young ("E & Y"), the
independent accountant which was previously engaged as the principal accountant
to audit the consolidated financial statements of the Company and its
subsidiaries, that it would not be reappointed auditors for the year ended
December 31, 1993. The Company continued to engage E & Y to complete (a) an
audit of the Company's financial statements for the year ended December 31,
1992 and (b) an audit of the financial statements of the Company for the years
ended December 31, 1991 and 1990, as such financial statements were to be
restated.
E & Y has completed its audit of the Company's consolidated financial
statements for the year ended December 31, 1992. E & Y's report on the
financial statements for the year ended December 31, 1992 contains a disclaimer
of opinion because of uncertainties as to the Company's ability to continue as
a going concern, the Company's default under certain of its debt obligations, a
class action complaint filed against, among others, the Company, certain of its
former officers and certain directors in January 1993, an investigation by the
Securities and Exchange Commission and its Chapter 11 bankruptcy proceeding
described in Notes 1 and 17 to the Company's Consolidated Financial Statements.
In addition, the management of the Company has restated its financial
statements for the years ended December 31, 1991 and 1990 and E & Y has audited
such restatements and issued an unqualified opinion.
The decision to dismiss E & Y was recommended by management and approved by
both the Company's Audit Committee and Board of Directors on February 9, 1994.
During the Company's fiscal years ended December 31, 1992 and 1991 and the
subsequent period preceding the dismissal of E & Y, there were no disagreements
with E & Y on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of E & Y, would have caused it to make a
reference to the subject matter of the disagreements in connection with its
report, except for the following:
During 1993, the Company reviewed its previously issued 1991 financial
statements for possible restatement. In conjunction with that review,
management formed a view that a reserve for certain inventory at a subsidiary
was understated at December 31, 1991 by an amount within a range of $4 million
and $12 million. E & Y did not believe that the available information supported
management's view that an error as defined in APB Opinion No. 20 had occurred
pertaining to this item. The matter was resolved to E & Y's satisfaction.
During 1993, in connection with its audit of the Company's 1992 financial
statements E & Y informed the Company:
(A) of certain material weaknesses or reportable conditions in the internal
control structure of the Company and two subsidiaries of the Company
and that such internal controls were inadequate to develop reliable
financial statements;
(B) of the need to expand significantly the scope of its audit of the
Company's consolidated financial statements for the year ended December
31, 1992; and
(C) of the need for the Company to review its previously issued financial
statements for the years ended December 31, 1991 and 1990 to determine
whether such financial statements needed to be restated.
Further, in connection with its audit of the Company's consolidated financial
statements for the year ended December 31, 1992 and in considering whether the
Company's financial statements for the years ended December 31, 1991 and 1990
required restatement, E & Y raised questions about the representations of the
Company's prior management. The matter was discussed with the Audit Committee.
53
<PAGE>
The Company has authorized E & Y to respond fully to the inquiries of the
successor accountant concerning the subject matters described above.
Engagement of New Independent Accountant.
On February 9, 1994, the Company engaged Deloitte & Touche independent
accountant ("D & T"), as the principal accountant to audit the consolidated
financial statements of the Company and its subsidiaries, as of and for the
year ended December 31, 1993.
In 1992, at the request of the Board of Directors of the Company, D & T
consulted on certain accounting issues.
Later in 1992, at the request of the Board of Directors of the Company, D & T
consulted on the Company's accounting policies, procedures and controls and on
the appropriate application of generally accepted accounting principles to
specific transactions.
In 1993, at the request of the Company, D & T provided consulting services
with respect to certain accounting matters as to which management requested
advice, in order to assist management in evaluating the impact of such matters
on its 1992 financial statements and subsequently assisted management relative
to earlier periods.
In 1993, D & T performed certain review procedures of the Company's interim
consolidated financial statements for the quarters ended March 31, 1993, June
30, 1993 and September 30, 1993.
In 1993, at the request of the Jamaica Water Supply Company, a subsidiary of
the Company, D & T conducted a special review of that subsidiary's internal
control structure in connection with New York State Public Service Commission
rate related proceedings.
In 1993, at the request of the Company, D & T performed audits of certain of
the Company's retirement and welfare plans.
54
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors
Andrew T. Dwyer, Age 45; Chairman of the Board of Directors of Resource
Recycling Technologies, Inc. since May 1993 and an independent business
consultant since July 1993. From July 1, 1993 to December 31, 1993, Mr. Dwyer
was a consultant to the Company. Mr. Dwyer served as Chairman of the Board of
Directors of the Company from April 1987 through June 1993 and as its Chief
Executive Officer from April 1987 to April 1993. Mr. Dwyer also served as
President of the Company from 1985 until January 1992 when Mr. David L. Sokol
became President. Mr. Dwyer resumed such position in October 1992 following Mr.
Sokol's resignation. He resigned as the Company's President in April 1993 and
as its Chairman in June 1993. Mr. Dwyer has been a director of the Company
since 1977.
Frank T. MacInnis, Age 47; Chairman of the Board, President and Chief
Executive Officer of the Company since April 18, 1994. From April 1990 to April
1994 Mr. MacInnis served as President and Chief Executive Officer, and from
August 1990 to April 1994 Chairman of the Board, of Comstock Group Inc., a
nationwide electrical contracting company. From 1986 to April 1990, Mr.
MacInnis was Senior Vice President and Chief Financial Officer of Comstock
Group, Inc. In addition, from 1986 to April 1994 Mr. MacInnis was also
President of Spie Group Inc. which owns Comstock Group Inc., Spie Construction
Inc., a Canadian pipeline construction company, and Spie Horizontal Drilling
Inc., a U.S. company engaged in under the water drilling for pipelines and
communications cable.
Innis O'Rourke, Jr., Age 72; Arbitrator for the New York Stock Exchange and
the American Arbitration Association for more than the past five years. Mr.
O'Rourke has been a director of the Company since 1986. He is also a director
of GP Financial Corp.
Craig C. Perry, Age 44; Senior Vice President, with responsibility for sales
and account maintenance, of Marsh & McLennan, Inc., an international insurance
brokerage firm, since March 1991. For more than five years prior thereto, he
was a senior executive of Johnson & Higgins, an insurance brokerage firm, with
responsibility for mergers and acquisitions and the account management
department. Mr. Perry has been a director of the Company since 1987.
Edmund S. Twining, Jr., Age 78; Private investor for more than the past five
years. He has served as a director of the Company or its subsidiaries since
1971.
Executive Officers
In addition to Mr. MacInnis, the following are the executive officers of the
Company.
Sheldon I. Cammaker, Age 54; Executive Vice President and General Counsel of
the Company for more than the past five years.
Leicle E. Chesser, Age 47; Executive Vice President and Chief Financial
Officer of the Company since May 1994. From April 1990 to May 1994 Mr. Chesser
served as Executive Vice President and Chief Financial Officer of Comstock
Group Inc. and from 1986 to May 1994 he was also Executive Vice President and
Chief Financial Officer of Spie Group Inc.
Joseph A. Gallo, Age 42; Senior Vice President of the Company since April
1993, a Vice President of the Company from November 1991 to April 1993, and
Treasurer of the Company for more than the past five years.
Jeffrey M.Levy, Age 41; Senior Vice President of the Company since December
1993 and Chief Operating Officer of the Company since February 1994. From May
1992 to December 1993, Mr. Levy was President
55
<PAGE>
and Chief Executive Officer of the Company's subsidiary JWP
Mechanical/Electrical Services (East), Inc. From January 1991 to May 1992 Mr.
Levy served as Executive Vice President and Chief Operating Officer of Lehrer
McGovern Bovis, Inc., a construction management and construction company. From
December 1988 to December 1990, Mr. Levy was Vice President of Stone & Webster
Engineering Corporation which is engaged in the design and construction of
power, industrial and petrochemical facilities; Mr. Levy was responsible for
that company's New York operations.
Stephen H. Meyers, Age 52; Senior Vice President-Finance since January 1993.
Mr. Meyers served as Senior Vice President-Administration and Chief Financial
Officer, Controller and Treasurer of American Annuity Group, Inc., formerly
named Sprague Technologies, Inc. ("STI"), from March 1992 to December 1992,
which at that time was engaged in the worldwide manufacture of electronic
components. He was Senior Vice President-Finance and Administration of STI from
May 1989 to March 1992 and Senior Vice President of STI from May 1987 to May
1989.
Philip M. McGinn, Age 43; Vice President of the Company since August 1992 and
Controller of the Company for more than the past five years.
56
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following Summary Compensation Table sets forth the compensation awarded
to, earned by or paid to each of the Chief Executive Officer, the other four
most highly compensated executive officers of the Company, and Messrs. David L.
Sokol and Ernest W. Grendi for whom disclosure is being provided pursuant to
applicable rules of the Securities and Exchange Commission (the "SEC")
(collectively the "named executive officers") during the fiscal years ended
December 31, 1992, 1991 and 1990 for services rendered in all capacities to the
Company and its subsidiaries. Other than Messrs. Sokol and Grendi, the persons
listed in the Summary Compensation Table were the five executive officers of
the Company as of December 31, 1992, the end of the Company's 1992 fiscal year.
However, since December 31, 1992, there have been several changes in the
management of the Company. As a result thereof, certain of the persons
appearing in the table below, Messrs. Andrew T. Dwyer and Stephen H. Kornfeld
and Ms. Susan B. Garelli, are no longer employees of the Company. These changes
in management and the employment agreements and severance arrangements, if any,
of the executive officers of the Company referred to above are described in
greater detail under "Employment Contracts and Termination of Employment and
Change of Control Arrangements" below.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS(7)
------------------- ----------------------
NUMBER OF
SECURITIES
RESTRICTED UNDERLYING
OTHER ANNUAL STOCK OPTIONS/ ALL OTHER
NAME AND PRINCIPAL SALARY(5) BONUS COMPENSATION(6) AWARD(S)(8) SARS(9) COMPENSATION(10)
POSITION YEAR ($) ($) ($) ($) (#) ($)
- - - - - - - - - ------------------ ---- --------- --------- --------------- ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Andrew T. Dwyer......... 1992 620,100 None None None 20,125 13,110
Chairman of the Board, 1991 574,425 None Not Applicable None None Not Applicable
President and Chief 1990 554,000 1,020,000 Not Applicable 2,441,043 None Not Applicable
Executive Officer
Sheldon I. Cammaker..... 1992 362,600 50,000 None 54,375 37,622 13,110
Executive Vice 1991 356,750 None Not Applicable 327,856 None Not Applicable
President and General 1990 341,000 None Not Applicable 489,937 None Not Applicable
Counsel
Susan B. Garelli(1)..... 1992 213,680 30,000 None 38,250 32,560 8,280
Senior Vice President-- 1991 141,250 None Not Applicable 121,427 None Not Applicable
Human Resources 1990 -- -- -- -- -- --
Stephen H. 1992 446,760 None 186,201 None 40,833 None
Kornfeld(2)(3)......... 1991 -- -- -- -- -- --
Senior Vice President 1990 -- -- -- -- -- --
of the Company and
Chairman of the Board
and Chief Executive
Officer of JWP
International, Inc.
Philip M. McGinn(2)..... 1992 135,000 25,000 None 18,125 14,235 7,850
Vice President, Chief 1991 -- -- -- -- -- --
Accounting Officer and 1990 -- -- -- -- -- --
Controller
David L. Sokol(1)(4).... 1992 298,730 3,396,875 92,925 None 15,000 None
President and Chief 1991 -- -- -- None None --
Operating Officer from 1990 -- -- -- None None --
January 27, 1992 to
October 1, 1992
Ernest W. Grendi........ 1992 383,325 None None None 13,414 13,110
Executive Vice 1991 382,830 None Not Applicable 850,000 None Not Applicable
President from January 1990 366,800 1,020,000 Not Applicable 548,915 None Not Applicable
1, 1990 to October 7,
1992
</TABLE>
57
<PAGE>
- - - - - - - - - --------
(1) As Ms. Garelli joined the Company in April 1991, amounts shown for her for
1991 reflect less than a full year of compensation. The blanks opposite her
name indicate that during 1990 Ms. Garelli was not employed by the Company,
and accordingly, there is no compensation information to report for her in
respect of such year. Mr. Sokol joined the Company in January 1992. The
blanks opposite his name indicate that during 1991 and 1990 Mr. Sokol was
not employed by the Company and accordingly, there is no compensation
information to report for him in respect of such years.
(2) Mr. Kornfeld and Mr. McGinn, although employed by the Company in 1990 and
1991, were appointed executive officers in May and August 1992,
respectively. Therefore, as required by the SEC pursuant to applicable
rules, amounts shown for 1992 include amounts paid to Mr. Kornfeld and Mr.
McGinn during that portion of the year that preceded their appointment as
executive officers. The blanks opposite their names indicate that for no
portion of 1991 or 1990 was either Mr. Kornfeld or Mr. McGinn an executive
officer of the Company, and accordingly, no compensation information is
required to be disclosed as to either individual in respect of such years.
(3) The amounts referred to as salary include (a) $328,683 paid as fixed fees
to Kornfeld Associates, a corporation owned by Mr. Kornfeld and members of
his immediate family, as consideration for providing his services to the
Company to perform duties relating to the Company's international
operations outside the United Kingdom, and (b) 78,000 British pounds paid
to him by the Company's subsidiary Drake & Scull Engineering Ltd. ("D&S").
Mr. Kornfeld was an officer of the Company and certain of its subsidiaries,
including JWP International, Inc. and D&S. The dollar amounts shown for him
in the table assume an exchange rate of $1.5138 to 1 British Pound. The
amounts paid to Kornfeld Associates were paid in U.S. Dollars.
(4) The bonus amount shown for Mr. Sokol is comprised of the value of 150,000
shares of common stock granted to Mr. Sokol as an inducement to him to join
the Company in 1992 plus a special bonus of $1,000,000 in cash paid to him
during that year. See "Employment Contracts and Termination of Employment
and Change of Control Arrangements--Other Arrangements."
(5) Amounts shown include amounts named executive officers earned but chose to
defer pursuant to the Company's 401(k) Retirement Savings Plan (the "401(k)
Plan"). Pursuant to the 401(k) Plan, during fiscal years 1992, 1991 and
1990, Messrs. Dwyer and Cammaker each deferred $8,728, $8,475 and $7,979,
respectively, and during fiscal year 1992, Ms. Garelli and Messrs. McGinn,
Sokol and Grendi each deferred $8,728. Mr. Kornfeld, as an employee of one
of the Company's foreign subsidiaries (see Note 3 above), was not eligible
to participate in the 401(k) Plan, and Ms. Garelli was not eligible to
participate in the 401(k) Plan for 1991. Mr. Grendi elected not to
participate in the 401(k) Plan for 1991 and 1990. Amounts shown for 1991
and 1992 also include, in the case of each of the named executive officers
other than Mr. Kornfeld, the amounts applied to payment of their respective
medical insurance premiums made pursuant to the Company's Premium
Conversion Plan (the "Medical Plan"), a Cafeteria Plan established under
Section 125 of the Internal Revenue Code of 1986, as amended. Pursuant to
the Medical Plan, during 1992 Messrs. Dwyer, Cammaker and Grendi and Ms.
Garelli each had applied $1,251 to the Medical Plan, Mr. Sokol had $923
applied and Mr. McGinn had $1,034 applied and, during 1991, Messrs. Dwyer,
Cammaker and Grendi each had applied $960 to the Medical Plan and Ms.
Garelli had $554 applied. The Medical Plan was not in effect during 1990.
Mr. Kornfeld, as an employee of a foreign subsidiary, was not eligible to
have any portion of his salary applied to premiums in respect of the
Medical Plan.
(6) The personal benefits provided to the named executive officers did not
exceed the disclosure threshold established by the SEC pursuant to
applicable rules, except with regard to Messrs. Kornfeld and Sokol. Other
annual compensation for Mr. Sokol consisted of reimbursement for relocation
expenses and the cost of increased tax liability to him caused by receipt
of such reimbursement for relocation. Other annual compensation for Mr.
Kornfeld consisted of the payment by the Company of Mr. Kornfeld's housing
and associated utility expenses in the United Kingdom at an estimated cost
to the Company of approximately $144,681, the payment of a personal travel
allowance and the furnishing of a car. These amounts were paid in British
Pounds and assume an exchange rate of $1.5138 to 1 British Pound. No
58
<PAGE>
other compensation required to be reported under this column was paid or
payable to any of the named executive officers, including Mr. Kornfeld.
(7) The column designated by the SEC to report Long-Term Incentive Plan Payouts
has been excluded because the Company has no long-term incentive
compensation plans and has not had any such plan during any portion of
fiscal years 1992, 1991 or 1990.
(8) All awards of restricted shares of the Company's common stock reported in
this column were received pursuant to the Company's Senior Incentive
Compensation and Restricted Stock Award Plan (the "Senior Incentive Plan").
As of December 31, 1992, the aggregate number of shares of restricted stock
(including shares granted other than under the Senior Incentive Plan) held
by a named executive officer and the aggregate dollar value of such shares
(calculated by multiplying the aggregate number of shares held by such
named executive officer by $3.875, the closing price on the New York Stock
Exchange of the Company's unrestricted common stock on December 31, 1992)
was: Mr. Dwyer, 1,478,503 shares ($4,089,911); Mr. Cammaker, 52,649 shares
($204,015); Ms. Garelli, 7,834 shares ($30,357); and Mr. Grendi 146,261
shares ($566,761). The restricted stock awards to the named executive
officers (other than Mr. Dwyer) reported in the table vests or vested as
follows: awards made in respect of 1992 to Messrs. Cammaker and McGinn
vested 50% on January 2, 1994 and vest 50% on January 2, 1995; awards made
in respect of 1992 to Ms. Garelli vested on May 31, 1993 when she ceased to
be an employee of the Company; awards made in respect of 1991 to Mr.
Cammaker vested 50% on January 2, 1993 and 50% on January 2, 1994; awards
made in respect of 1991 to Ms. Garelli vested on May 31, 1993; and awards
made in respect of 1991 to Mr. Grendi vested on October 7, 1992 when he
ceased to be an officer of the Company; and the award made in respect of
1990 to Mr. Cammaker became fully vested on January 2, 1993 and the award
made in respect of 1990 to Mr. Grendi vested 50% on January 2, 1992 and 50%
on October 7, 1992. Mr. Dwyer's restricted stock award in respect of 1991
was to vest in thirds on January 2, 1994, 1995 and 1996 and his restricted
stock award in respect of 1990 was to vest two-thirds on January 2, 1994
and one-third on January 2, 1995. However, Mr. Dwyer's restricted stock
award, became subject to a new vesting schedule described more fully under
"Employment Contracts and Termination of Employment and Change of Control
Arrangements." Mr. Dwyer received 141,014 shares of restricted stock in
respect of 1991 which had a market value as of December 31, 1991 of
$2,185,717. Because of the restatement of the Company's 1991 financial
results, Mr. Dwyer voluntarily surrendered these shares to the Company.
Dividends, if paid on unrestricted shares of common stock, will be paid at
the same rate and at the same time on the restricted shares of common
stock. No dividends have been paid on the unrestricted shares of common
stock, and hence not on the restricted shares, during the fiscal years
covered by this table.
(9) The awards set forth in this column are of stock options only. The Company
does not award stock appreciation rights ("SARs").
(10) The amounts reported in the column include matching contributions made by
the Company during fiscal year 1992 for the account of the named executive
officers pursuant to the 401(k) Plan as follows: Messrs. Dwyer, Cammaker,
McGinn, Sokol and Grendi and Ms. Garelli, each $1,800. The amounts
reported also include contributions made during 1993 in respect of 1992 by
the Company for the account of the named executive officers pursuant to
the Company's Money Purchase Plan as follows: Mr. Dwyer, $6,866; Mr.
Cammaker, $6,866; Mr. Grendi, $6,866; Ms. Garelli, $6,480; and Mr. McGinn,
$3,630. Mr. Sokol was not eligible to participate in the Money Purchase
Plan. The amounts reported also include contributions made during 1992 in
respect of the 1991 fiscal year for the account of the named executive
officers pursuant to the Company's Employee Stock Ownership Plan ("ESOP")
as follows: Mr. Dwyer, $4,444; Mr. Cammaker, $4,444; Mr. Grendi, $4,444;
and Mr. McGinn, $2,420. Mr. Kornfeld was not eligible to participate in
any of the plans referred to in this footnote and Ms. Garelli was not
eligible to participate in the ESOP for 1991.
59
<PAGE>
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The following table sets forth certain information concerning grants to the
named executive officers of stock options to purchase common stock of the
Company during fiscal year ended December 31, 1992 under the Company's 1986
Stock Option and Appreciation Plan and under the Company's 1991 Stock Option
Plan. As indicated under the Summary Compensation Table above, the Company does
not grant SARs of any kind.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
GRANTED(1)(#) FISCAL YEAR ($/SH)(2) DATE VALUE($)(3)
------------- ------------ ----------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Andrew T. Dwyer......... 20,125 0.77% 10.00 July 12, 1997 152,346
Sheldon I. Cammaker..... 12,622 0.48% 10.00 July 12, 1997 94,792
25,000 0.95% 3.50 October 7, 2002 52,250
Susan B. Garelli........ 7,560 0.29% 10.00 July 12, 1997 57,229
25,000 0.95% 3.50 October 7, 2002 52,250
Stephen H. Kornfeld..... 15,833 0.60% 10.00 July 12, 1997 119,856
25,000 0.95% 3.50 October 7, 2002 52,250
Philip M. McGinn........ 4,235 0.16% 10.00 July 12, 1997 32,059
10,000 0.38% 3.50 October 7, 2002 20,900
Ernest W. Grendi........ 13,414 0.51% 10.00 July 12, 1997 101,543
David L. Sokol.......... 15,000 0.57% 10.00 July 12, 1997 113,550
</TABLE>
- - - - - - - - - --------
(1) Grants reported in this column are grants of stock options only. Mr.
Dwyer's option was granted on July 13, 1992, as were the options expiring
July 12, 1997 listed for each of the other named executive officers. These
options become exercisable at a rate of 1/36 of the shares with respect to
which the option was awarded per month commencing as of August 1, 1992. The
options expiring October 7, 2002 for certain of the named executive
officers were granted on October 8, 1992. These options become exercisable
at a rate of 1/3 of the shares with respect to which the option was awarded
per year commencing October 8, 1993. As a result of the changes in
management referred to above, the options indicated as expiring July 12,
1997 granted to Messrs. Dwyer, Kornfeld, Sokol, Grendi and Ms. Garelli have
lapsed, except options to purchase 5,717 shares remain exercisable by Mr.
Kornfeld until August 31, 1994.
(2) The exercise price is the fair market value on the date of grant,
determined by calculating the average of the high and low market prices of
the common stock on the date of the grant on the New York Stock Exchange.
The options expiring October 7, 2002 become exercisable and remain
exercisable only while the recipient is an employee of the Company or its
subsidiaries or within two months after termination of employment. The
options expiring July 12, 1997 become exercisable and remain exercisable
only while the recipient is an employee of the Company or its subsidiaries
or within one year after termination of employment. The options are
transferable solely by will or by the laws of descent or distribution. No
SARs, performance units or other instruments were granted in tandem with
the stock options reported herein.
(3) Grant date present value was calculated using the Black-Scholes option
pricing model which involves an extrapolation of future price levels based
solely on past performance. The present value as of the date of grant,
calculated using the Black-Scholes method, is based on assumptions about
future interest rates, dividend yield and stock price volatility. In
calculating the present value as of the date of grant of the options
reported in the table, the Company assumed an interest rate of 14% per
annum, an annual dividend yield of zero and volatility of 35%. The
Company's proposed plan of reorganization in its Chapter 11 proceeding
contemplates the rejection of all option agreements, and accordingly, the
Company believes the options are valueless.
60
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table sets forth certain information concerning unexercised
options to purchase common stock of the Company held at the end of fiscal year
1992 by the named executive officers. None of the named executive officers
exercised any options during fiscal year 1992. No named executive officer has
any SARs.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS/SARS AT THE-MONEY OPTIONS/SARS AT
FY-END (#) FY-END ($)(1)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- - - - - - - - - ---- ------------------------- -------------------------
<S> <C> <C>
Andrew T. Dwyer............. 95,099/17,330 0/0
Sheldon I. Cammaker......... 35,503/35,868 0/25,000
Susan B. Garelli............ 1,050/31,510 0/25,000
Stephen H. Kornfeld......... 2,199/38,634 0/25,000
Philip M. McGinn............ 1,588/15,647 0/10,000
Ernest W. Grendi............ 43,440/11,551 0/0
David L. Sokol.............. 2,083/0 0/0
</TABLE>
- - - - - - - - - --------
(1) For purposes of this column, value is calculated based on the aggregate
amount of the excess of $3.81 (the average of the high and low prices of
the common stock of the Company as reported on the New York Stock Exchange
on December 31, 1992) over the relevant exercise price for the shares of
common stock with respect to which the options are exercisable.
EMPLOYMENT CONTRACTS AND TERMINATION OF
EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
Employment Agreements
The Company has entered into an Employment Agreement (the "Agreement"), dated
as of April 18, 1994, with Mr. Frank T. MacInnis providing for his employment
as Chief Executive Officer and President of the Company during the period April
18, 1994 through December 31, 1997. The Agreement provides that the term of
employment will automatically be extended for successive one-year periods
unless the Company or Mr. MacInnis gives written notice not to extend at least
six months prior to the end of such period. The Company is also to use its best
efforts to insure his election as Chairman of the Board of Directors of the
Company.
Pursuant to the Agreement, the Company is to pay Mr. MacInnis an annual base
salary of $600,000 and to increase such base salary on the first day of each
calendar year during his employment by at least the percentage increase for the
prior year in the relevant consumer price index. In addition, Mr. MacInnis is
entitled to receive an annual bonus, which, for the period ending on December
31, 1994, will be no less than $150,000. For each calendar year thereafter, Mr.
MacInnis' bonus will be determined by a formula agreed upon by Mr. MacInnis and
the Compensation Committee of the Board of Directors of the Company. In
addition to his salary and bonus, Mr. MacInnis has been paid a one-time cash
payment of $250,000 and is to receive an option (the "Option") to purchase
200,000 shares of common stock of the Company at a price equal to the average
market price for the common stock over that 20 day trading period preceding the
issuance of the Option. The Option will be issued three months plus 20 days
after the Effective Date of the Company's plan of reorganization in its Chapter
11 proceeding (as defined in the JWP Plan of Reorganization).
61
<PAGE>
Under the terms of the Agreement, Mr. MacInnis has been provided with certain
benefits customarily accorded to the Company's senior executive officers as
well as supplemental benefits such that he will become fully vested in the
Company's Money Purchase Plan and 401(k) Plan. In addition, Mr. MacInnis is
entitled to $600.00 per month for leasing (plus maintenance and insurance) of
an automobile; reimbursement for all initiation fees and monthly dues for
membership in a club suitable for entertaining clients of the Company; all
legal expenses incurred by him in connection with the Agreement; and the cost
of any increased tax liability to him caused by the receipt of these fringe
benefits.
If Mr. MacInnis' employment is terminated during the term of the Agreement by
the Company other than for Cause (as defined in the Agreement) or he terminates
his employment for Good Reason (as defined in the Agreement), Mr. MacInnis will
be entitled to receive a cash payment equal to the sum of: (i) the greater of
(A) his base salary at the highest annual rate in effect during his employment
from the date of termination through December 31, 1997 or (B) two times his
base salary at its then current annual rate and (ii) an amount equal to the
product of the highest bonus paid to him during his employment (but in no event
less than $150,000) times (A) the number of full or partial years remaining
from the date of termination through December 31, 1997 or (B) two, whichever is
greater; however, in the event of a termination following a Change in Control
(as defined in the Agreement), the factor of two in clause (i)(B) above will be
increased to three. In addition, Mr. MacInnis will be entitled to receive all
unpaid amounts in respect of any bonus for any calendar year ending before the
date of termination.
During fiscal year 1992, the Company had employment contracts with each of
Ernest W. Grendi, which expired December 31, 1992, Andrew T. Dwyer, which
expired June 30, 1993, and Sheldon I. Cammaker, expiring December 31, 1998,
pursuant to which each served as a senior executive officer of the Company. Mr.
Dwyer received a base salary at the rate of $485,000 per annum, which salary
gave effect to a Company-wide 10% salary reduction and salary freeze
implemented July 1, 1992, and further voluntary salary reductions. Mr. Grendi
received a base salary at the rate of $383,324 and Mr. Cammaker received a base
salary at the rate of $340,787 per annum, which salaries gave effect to the
Company-wide salary reduction and freeze. In addition, pursuant to the terms of
their employment contracts, Messrs. Dwyer and Grendi were and Cammaker is
eligible to receive annual bonuses.
Additionally, pursuant to their contracts, Messrs. Dwyer, Grendi and Cammaker
were entitled to units under the Company's Senior Incentive Plan, which expired
by its terms as of December 31, 1993. The Senior Incentive Plan provided for
participation in an incentive pool that was determined annually and consisted
of an amount equal to 12% of the Company's pre-tax consolidated earnings after
deducting an amount equal to a 10% after-tax return on stockholders equity. As
the value of the pool was based on the performance of the Company, it
fluctuated from year to year as did the amounts distributed to plan
participants. No one received any compensation from the incentive pool for the
1992 or the 1993 fiscal years because the Company suffered losses in those
years. Awards based on the value of the pool could have taken the form of cash,
restricted stock or a combination thereof. The Senior Incentive Plan made
provision for valuing awards of units made pursuant to such plan had there been
a change in control of the Company before the plan expired.
Each of the above-referenced employment contracts provides that, in the event
of a change in control of the Company and within two years thereafter the named
executive officer is terminated or elects to terminate his employment, the
named executive officer will be compensated as follows: Mr. Dwyer would have
been entitled to retain any shares of restricted stock of the Company
previously issued to him and to be paid an amount equal to the sum of (i)
$875,000, (ii) $835,000, multiplied by each full calendar year remaining under
his employment agreement, and (iii) $425,000 less, with respect to clause
(iii), the base salary already paid to him for the year of termination; and Mr.
Cammaker would be entitled to retain any shares of restricted stock of the
Company previously issued to him and to be paid an amount equal to the sum of
(i) $470,000, (ii) $320,000 multiplied by each full calendar year remaining
under his employment agreement, and (iii) $320,000 less, with respect to clause
(iii), the base salary already paid to him for the year of termination.
Mr. McGinn does not have a formal employment agreement with the Company.
However, between August 5, 1992 and August 31, 1993, Mr. McGinn did have an
arrangement with the Company providing
62
<PAGE>
for certain benefits in the event he was terminated by the Company without
cause before September 1, 1993. If such termination had occurred, the agreement
provided that he would have received a minimum of twelve months separation pay
and the continuation of his other employee benefits. This arrangement was not
renewed.
Mr. Meyers has an employment agreement with the Company without a fixed term.
Mr. Meyers receives an annual base salary of $225,000 and is eligible for an
annual bonus. Upon joining the Company, Mr. Meyers received a grant of an
option to purchase 50,000 shares of common stock, at an exercise price of
$3.625 per share (the fair market value of a share of common stock on the date
of grant, January 15, 1993), in addition to a grant of 50,000 shares of
restricted stock. The restricted stock vests, and the stock options become
exercisable, one-third in January 1994, one-third in January 1995 and one-third
in January 1996.
Mr. Edward F. Kosnik joined the Company in November 1992 as Executive Vice
President and Chief Financial Officer. In April 1993 he succeeded Mr. Dwyer as
President and Chief Executive Officer and became Chairman of the Board as of
July 1, 1993 following Mr. Dwyer's resignation from that position. In April
1994 Mr. Kosnik resigned as Chairman of the Board, President and Chief
Executive Officer of the Company. When Mr. Kosnik joined the Company he
received an employment agreement without a fixed term. Prior to becoming
President and Chief Executive Officer, his base salary was at the rate of
$400,000 per annum in accordance with the terms of his employment agreement,
and thereafter his salary was at the annual rate of $500,000. Pursuant to the
employment agreement, Mr. Kosnik received an option to purchase 100,000 shares
of common stock, at an exercise price of $3.00 per share (the fair market value
of a share of common stock on the date of grant, November 24, 1992), in
addition to a grant of 100,000 shares of restricted stock. The restricted stock
was to vest, and the stock options were to become exercisable, one-third in
November 1993, one-third in November 1994 and one-third in November 1995. Mr.
Kosnik's employment agreement also provided that he was eligible for an annual
bonus. In December 1993 Mr. Kosnik indicated a desire to leave the Company, and
in order to induce him to remain with the Company for a period of time to
enable the Company to find a successor, Mr. Kosnik was paid $250,000 in 1994 in
addition to his base salary and in addition to a bonus of $80,000 paid to him
in respect of 1993. Following his resignation, Mr. Kosnik's options lapsed and
he forfeited 66,667 shares of the restricted stock issued to him that had not
vested.
Termination Arrangements
Mr. Dwyer's employment contract with the Company expired by its terms on June
30, 1993 and was not renewed. Upon the expiration of his contract, Mr. Dwyer
entered into a consulting agreement (the "Consulting Agreement") and a
separation agreement (the "Separation Agreement") with the Company. Pursuant to
the Consulting Agreement, during the period July 1, 1993 through December 31,
1993 Mr. Dwyer received a consulting fee for services rendered to the Company
in the aggregate amount of $242,500 payable in equal weekly installments, as
well as reimbursement for reasonable out-of-pocket expenses incurred by him in
the performance of his consulting duties. In addition, the Separation Agreement
provided for a severance payment in the aggregate amount of $200,000 payable
during the period January 1, 1994 through June 30, 1994 in equal weekly
installments. Under the terms of the agreements, for the period from July 1,
1993 through July 1, 1994, the Company was to pay the insurance premiums to
continue Mr. Dwyer's then current coverage under the Company's medical, dental
and other insurance plans, subject to the provisions of such plans, in the same
proportion as is paid from time to time for senior executives of the Company,
and during the period July 1, 1993 through December 31, 1993 the Company paid
to him $700 per month as an automobile allowance. No amounts have been paid to
Mr. Dwyer under the agreements since February 14, 1994 when the Company
consented to the entry of an order for relief thereby commencing its Chapter 11
proceeding. The Consulting Agreement prohibited Mr. Dwyer during the period
from July 1, 1993 through December 31, 1993 from entering into any business or
performing any services for another entity that competes with the Company. The
Separation Agreement has a similar non-compete clause, although it allows Mr.
Dwyer to solicit the business of the Company's customers, suppliers and joint
venturers in connection with good faith competition. This clause runs from
January 1, 1994 through December 31, 1994. The Separation Agreement also
includes provisions restricting the sale by Mr. Dwyer of those of his shares
(approximately 1,613,482 shares as of June 30, 1993) of the Company's common
stock which are considered
63
<PAGE>
"restricted securities" for purposes of Rule 144 promulgated under the
Securities Act of 1933, as amended (the "Act"). Generally, the agreement
provides that these shares may not be sold until they vest and, upon vesting,
only pursuant to an effective registration statement under the Act or pursuant
to an exemption from registration under the Act. Subject to certain conditions,
the agreement provides for the shares to vest in increments of 100,000 shares a
month or such lesser number of shares as will ensure compliance with the sales
volume limitations of Rule 144 that apply to sales of restricted securities by
affiliates of an issuer. Further, in the event that Mr. Dwyer breaches the non-
compete provisions of the Consulting Agreement, all of his restricted shares
that shall not have vested as of the date of breach are to be immediately
forfeited. As Mr. Dwyer is no longer an officer of the Company but still serves
on the Board of Directors, he receives compensation identical to that paid to
other non-employee directors. See "Director Compensation." As a non-employee
director of the Company's subsidiary Jamaica Water Securities Corp. and a
member of the Executive Committee of such board, Mr. Dwyer also receives
directors' fees payable to all such directors of that corporation. Those fees
consist of an annual fee of $10,000, $600 for each meeting of the Board of
Directors attended, and $600 for each meeting of the Executive Committee of the
Board attended.
On September 1, 1993, Mr. Kornfeld left the Company's employ. As part of the
terms of his separation, Mr. Kornfeld, the Company and certain of its
subsidiaries entered into a letter agreement of severance providing Mr.
Kornfeld with a lump sum payment in the amount of $99,910.80 and monthly
payments in the amount of $26,617.65 for each of the twelve months commencing
October 1, 1993. These amounts are paid in British Pounds. The foregoing
numbers assume an exchange rate of $1.5138 to 1 British Pound. The agreement
also provides for Mr. Kornfeld to receive continuing health insurance benefits
comparable to that provided to him prior to termination and use of the car
provided to him by the Company prior to his resignation, although Mr. Kornfeld
will be responsible for all costs and expenses of operation of the car. These
benefits cease on the last business day of September 1994. Additionally, the
agreement provides that the Company and certain of its subsidiaries agree to
indemnify Mr. Kornfeld for his actions as an officer and director of the
Company and its subsidiaries.
Ms. Garelli ceased to be employed by the Company on May 31, 1993. Pursuant to
the terms of her separation arrangement, Ms. Garelli was entitled to receive an
aggregate of $208,745, payable in installments. The arrangement also provided
for her to receive continuing health insurance benefits for one year comparable
to those provided prior to termination. Amounts payable to her under the
separation agreement have not been paid since the entry of an order for relief
on February 14, 1994 commencing the Company's Chapter 11 proceeding.
Other Arrangements
In January 1992, the Company issued to Mr. David L. Sokol, President of the
Company from January 27, 1992 to October 1, 1992, 150,000 shares of common
stock as an inducement to him to join the Company. In connection therewith, Mr.
Sokol agreed not to sell more than one-third of the shares prior to January
1993 and not more than two-thirds prior to January 1994. Upon joining the
Company, Mr. Sokol received a base salary at the rate of $450,000 per annum
until June 30, 1992 and, as a consequence of the Company's 10% salary reduction
program, at the rate of $405,000 per annum until he resigned in October 1992.
In addition, during 1992 the Company paid to Mr. Sokol a special bonus of
$1,000,000 in cash and released him from the covenant restricting the sale of
the 150,000 shares of the common stock of the Company that had been granted to
him in January 1992.
Effective as of June 25, 1993, the Company adopted the JWP INC. Employees'
Severance Pay/Stay Bonus Plan (the "Plan") in order to encourage designated
employees of the parent corporation to continue their employment over the next
two years while the Company is restructuring its business operations. As
amended, the Plan provides that a Plan participant will be entitled to receive
a pre-determined amount of severance pay if his employment with the Company is
terminated for reasons other than death, disability, voluntary resignation or
"for cause" as defined in the Plan during the two-year period commencing on
June 25, 1993 and ending on June 24, 1995. Certain Plan participants will also
be entitled to receive a pre-determined "stay bonus" if they remain
continuously employed with the Company during the period commencing on June 25,
1993 and ending on the earlier of September 30, 1994 or the date an order
confirming
64
<PAGE>
a plan of reorganization of the Company in its Chapter 11 proceeding is signed
by the United States Bankruptcy Court.
All severance pay and/or stay bonuses payable under the Plan represent an
obligation of the Company and are to be paid from its general assets.
Notwithstanding the foregoing, the Company may, from time to time, in its sole
discretion, make contributions to a taxable, irrevocable trust ("Trust") to
pre-fund all or a portion of a Plan participant's benefits to which he may
become entitled. Payments from the Trust to Plan participants shall be in
discharge of the Company's liability under the Plan to such participants to the
extent such benefits are paid from the Trust. In addition, the assets of the
Trust, which would be allocated to accounts to be established for the benefit
of Plan participants, will not be subject to the claims of the Company's
creditors in a bankruptcy or other insolvency proceeding under federal or state
law. Although the Plan participants would have a secured interest in the
contributions made by the Company and credited to their respective accounts, if
any, they would have no interest, secured or unsecured, in the income of the
Trust (including unrealized capital gains), which income would be distributed
quarterly to the Company, which will be responsible for the payment of any
federal, state or local taxes payable on such income. To date $969,514 has been
contributed to the Plan, and amounts payable as stay bonuses have been fully
funded.
As soon as practicable following the date a Plan participant becomes entitled
to receive a stay bonus or severance pay under the Plan, the Company is to
direct the Trustee under the Trust (the "Trustee") to distribute to him in a
lump sum the lesser of: the amount credited to his account, if any, in the
Trust, or the amount of his stay bonus or severance pay benefit to which he is
then entitled to the extent, if any, of the amount credited to his Trust
account. To the extent that the amount credited to his Trust account is less
than such benefit, he is to receive the balance from the Company, either in a
lump sum or in weekly installments (not exceeding 52 installments), at such
times and in such amounts, as determined by the Committee administering the
Plan, in its sole discretion.
Payments under the Plan are subject to federal, state and local income tax
withholding and all other applicable federal, state and local taxes. The
Trustee and the Company, as the case may be, are to withhold from any payments
it makes all applicable federal, state and local withholding taxes and the
employee will be required to file any necessary certificate or other form in
connection therewith prior to receiving any payments.
In the event that a Plan participant dies or becomes disabled prior to
becoming entitled to any benefit payable under the Plan, his right to such
benefit will be forfeited. In the event a Plan participant dies after becoming
entitled to a benefit payable under the Plan, but prior to recovering the full
amount of such benefit, his designated beneficiary or his estate (if no
beneficiary has been designated) will be entitled to receive such unpaid
benefits on the date or dates that the Plan participant would have received
them while living.
The Plan is to be administered by an administrative committee appointed by
the Board of Directors, which consists of such number of persons as shall from
time to time be determined by the Board of Directors. Members of the committee
may be officers, directors, or employees of the Company or others and shall
hold office at the pleasure of the Board of Directors and without compensation,
unless otherwise determined by the Board of Directors. The committee is charged
with the operation and administration of the Plan. The committee has the power
to interpret and construe the Plan, to determine all questions arising under
the Plan, and to adopt and amend from time to time such rules and regulations
necessary for the administration of the Plan which are not inconsistent with
the terms and provisions of the Plan. Notwithstanding the foregoing, the Board
of Directors retains the power to determine all questions of eligibility,
status and rights of Plan participants.
The Plan terminates automatically, effective as of August 24, 1995, unless
the termination date is deferred to a later date by the Board of Directors of
the Company ("Deferred Termination Date"). The Board of Directors of the
Company may amend, suspend or terminate the Plan or any portion thereof at any
time prior to the later of June 24, 1995 or any Deferred Termination Date;
provided, however, that unless the
65
<PAGE>
written consent of a Plan participant is obtained, no such amendment or
termination shall adversely affect the rights of any Plan participant. Upon
termination of the Plan, all Plan benefits not payable from the Trust shall be
paid by the Company within 60 days of such termination date. Upon termination
of both the Plan and the Trust, any assets remaining in the Trust after all
benefits payable under the Plan have been paid in full shall be returned to the
Company.
Under the terms of the Plan the following executive officers of the Company
would be entitled to receive a severance payment as follows: Sheldon I.
Cammaker-$340,788; Joseph A. Gallo-$200,000; Jeffrey M. Levy-$247,500; Stephen
H. Meyers-$337,500. In addition, under the Plan the following executive
officers would be entitled to receive a stay bonus as follows: Mr. Cammaker-
$170,400; Mr. Gallo-$100,000; Mr. Meyers-$112,500; and Mr. Philip M. McGinn-
$72,500.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As of December 31, 1992, Ms. Diana D. Brooks, Mr. Bertram Harnett, Mr. Thomas
W. Keesee and Mr. Edmund S. Twining, all of whom were then non-employee
directors, served on the Compensation and Personnel Committee. Ms. Brooks
ceased to serve as a director of the Company, and hence as a member of the
Compensation and Personnel Committee on July 1, 1993. Messrs. Harnett and
Keesee ceased to serve as directors of the Company and hence as members of the
Compensation and Personnel Committee on October 14, 1993.
Mr. Twining was Secretary of the Company from July 1981 to January 1988. In
fiscal year 1992, the Company's subsidiary Jamaica Water Supply Company
retained the law firm of Harnett, Lesnick & Kahn, P.A., of which Bertram
Harnett, then a director of the Company and a member of the Compensation and
Personnel Committee, is a member. During fiscal year 1992, JWS paid legal fees
in the amount of $30,000 to Harnett, Lesnick & Kahn, P.A.
DIRECTOR COMPENSATION
Each director who is not an officer of the Company ("non-employee director")
receives annual compensation in the amount of $25,000 for all services as a
director. In addition, each non-employee director receives $1,000 for each
meeting of the Board and $1,000 for each meeting of a committee of the Board of
Directors attended by the director during the fiscal year. Each non-employee
director who chairs a committee of the Board receives an additional $2,500 per
annum. Directors who also serve as officers of the Company do not receive
compensation for services rendered as directors. See "Employment Contracts and
Termination of Employment and Change of Control Arrangements--Termination
Arrangements" for information regarding consulting and separation payments to
Mr. Dwyer, a director.
At the annual meeting held on May 21, 1992, the stockholders approved the
1991 Stock Option Plan for Non-Employee Directors (the "Non-Employee Directors
Option Plan"), pursuant to which the Company made a one-time grant to each non-
employee director of an option to purchase 2,500 shares of common stock at
$14.00 per share, which option expires May 23, 2002.
The Company also maintains a Directors' Retirement Plan, as amended (the
"Directors' Retirement Plan"), for non-employee directors of the Company. Under
the Directors' Retirement Plan, a director who retires on or after age 65 with
at least five years of service as a director (less in the case of directors
serving as of December 12, 1991) is entitled to an annual retirement benefit.
The annual retirement benefit will equal the product of (i) ten percent (10%)
of the annual compensation paid to the retiring director on the date of the
retiring director's retirement (excluding meeting fees paid to the director)
and (ii) the number of the retiring director's years of service (up to ten) as
a director (but not less than five in the case of directors in office on
December 12, 1991). In the alternative, a retiring director may elect to
receive a fixed annual retirement benefit equal to 100% of the annual
compensation paid to the retiring director during his last year as a director
for a number of years equal to those he served as a director of the Company,
but in no event more than nine years. In the case of directors presently
serving, the benefit determined pursuant to this alternative method will be
calculated based on a minimum of five years service. Four former directors had
been receiving retirement benefits under the Directors' Retirement Plan.
However, since February 14, 1994, following the date of entry of an order for
relief commencing the Company's Chapter 11 proceeding, no payments have been
made under the Directors' Retirement Plan.
66
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of the Company's common stock and its warrants of participation as of
July 15, 1994 by its current directors and each of the named executive officers
for its fiscal year ended December 31, 1992, and all its directors and
executive officers as a group. No person is known to the Company to be the
beneficial owner of more than five percent of the Company's common stock.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL
OWNERSHIP AS OF PERCENT
NAME OF BENEFICIAL OWNER TITLE OF CLASS JULY 15, 1994 OF CLASS
------------------------ ------------------------- --------------- --------
<S> <C> <C> <C>
Andrew T. Dwyer........... Common Stock 1,509,874(a) 3.7
Warrants of Participation 15,687(a) 1.4
Edward F. Kosnik.......... Common Stock 33,333 +
Innis O'Rourke, Jr........ Common Stock 5,025* +
Craig C. Perry............ Common Stock 2,500* +
Edmund S. Twining, Jr..... Common Stock 52,072* +
Sheldon I. Cammaker....... Common Stock 127,257++ +
Susan B. Garelli.......... Common Stock -- +
Stephen H. Kornfeld....... Common Stock 74,166(b)++ +
Philip M. McGinn.......... Common Stock 11,157++ +
David L. Sokol............ Common Stock -- +
Ernest W. Grendi.......... Common Stock -- +
All directors and execu-
tive
officers as a group (10
persons)................. Common Stock 1,837,269(c) 4.5
Warrants of Participation 15,687 1.4
</TABLE>
- - - - - - - - - --------
(a) Includes 248,825 shares and 15,687 warrants of participation held by the
Estate of Martin Dwyer, Jr., of which Andrew T. Dwyer is a co-executor, as
to which securities he disclaims beneficial ownership. In addition,
includes 30,465 shares owned by his wife, as to which shares Mr. Dwyer
disclaims beneficial ownership.
(b) Includes 1,048 shares owned by Mr. Kornfeld's wife and 7,329 shares held by
him and his wife as trustees of trusts for the benefit of their children,
as to which shares Mr. Kornfeld disclaims beneficial ownership.
(c) Includes 105,319 shares issuable upon the exercise of stock options granted
under the Company's stock option plans, as to which shares the directors
and executive officers have the right to acquire beneficial ownership
within sixty days of July 15, 1994.
* Includes 2,500 shares issuable upon the exercise of stock options granted
under the Company's 1991 Stock Option Plan for Non-Employee Directors, as to
which shares such director has the right to acquire beneficial ownership
within sixty days of July 15, 1994.
+ Represents less than 1% of the Company's common stock.
++ Includes, for each of the persons set forth below, the number of shares
listed beside such person's name, which shares are issuable upon the
exercise of stock options granted under the Company's stock option plans, as
to which shares such persons have the right to acquire beneficial ownership
within sixty days of July 15, 1994: Sheldon I. Cammaker, 51,199 shares;
Philip M. McGinn, 6,157 shares; and Stephen H. Kornfeld, 5,717 shares.
67
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In fiscal year 1992, the Company retained the law firm of Harnett, Lesnick &
Kahn, P.A. of which Bertram Harnett, then a director, is a member. During
fiscal year 1992, the Company's subsidiary Jamaica Water Supply Company paid
$30,000 in legal fees to that firm.
In connection with the acquisition in 1988 of a business from Mr. Stephen H.
Kornfeld, formerly a Senior Vice President of the Company, the Company entered
into a lease with Mr. Kornfeld with respect to the premises then occupied by
the business. The lease provides for a ten year term that began December 2,
1988 and ends November 30, 1998. Under the provisions of the lease, the Company
pays to Mr. Kornfeld annual rental of $210,000. In addition, the Company is
responsible for the costs of occupying and maintaining the building and all
real estate taxes to the extent such taxes exceed $10,000 plus an amount equal
to the taxes payable for the taxable year in which the Company entered into the
lease.
68
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)1. The following consolidated financial statements of JWP INC. and
Subsidiaries are included in Part II--Item 8:
Consolidated Balance Sheets as of December 31, 1992 and 1991.
Consolidated Statements of Operations for the Years Ended December 31,
1992, 1991 and 1990.
Consolidated Statements of Cash Flows for the Years Ended December 31,
1992, 1991 and 1990.
Consolidated Statements of Shareholders' (Deficit) Equity for the Years
Ended December 31, 1992, 1991 and 1990.
Notes to Consolidated Financial Statements.
(a)2. The following financial statement schedules are included in Part IV of
this Report:
<TABLE>
<CAPTION>
SCHEDULES
---------
<C> <S>
II Amounts Receivable from Related Parties and Underwriters,
Promoters, and Employees Other Than Related Parties.
III Condensed Financial Information of JWP INC.
VII Guarantees of Securities of Other Issuers.
VIII Valuation and Qualifying Accounts.
IX Short-Term Borrowings.
</TABLE>
Schedules other than those listed above are omitted for the reason that
they are not applicable or the required information is shown in the
Consolidated Financial Statements or Notes thereto.
(a)3. Exhibits--See Exhibit Index--Page 79
(b) Reports on Form 8-K--Form 8-K; Date of Report: October 2, 1992
69
<PAGE>
SCHEDULE II
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND
EMPLOYEES OTHER THAN RELATED PARTIES
<TABLE>
<CAPTION>
DEDUCTIONS BALANCE AT END OF PERIOD
--------------------- -----------------------------
BALANCE AT BEGINNING AMOUNTS AMOUNTS
NAME OF DEBTOR OF PERIOD ADDITIONS COLLECTED WRITTEN OFF CURRENT NOT CURRENT
- - - - - - - - - -------------- -------------------- --------- --------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Year ended December 31,
1992
Notes receivable:
Joseph W. Barnett
Corporate Secretary.. $132 -- $16 -- $116 --
---- ---- --- --- ------------ -----------
Total............... $132 -- $16 -- $116 --
==== ==== === === ============ ===========
Year ended December 31,
1991
Notes receivable:
Joseph W. Barnett
Corporate Secretary.. -- $132 -- -- $132 --
---- ---- --- --- ------------ -----------
Total............... -- $132 -- -- $132 --
==== ==== === === ============ ===========
</TABLE>
Note: The note is non-interest bearing, unsecured and non-recourse.
70
<PAGE>
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF JWP INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1992 1991
-------- --------
(IN THOUSANDS)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents................................. $ 59,963 $ 2,244
Prepaid expenses and other current assets................. 7,565 4,430
Net assets held for sale.................................. 32,894 --
-------- --------
Total Current Assets........................................ 100,422 6,674
Net assets held for sale.................................... 85,611 --
Investments, notes and other long-term receivables.......... 4,678 7,614
Property and equipment, net................................. 3,499 6,068
Other assets, principally investments in and amounts due
from wholly-owned subsidiaries............................. 161,397 927,708
-------- --------
Total Assets................................................ $355,607 $948,064
======== ========
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY:
Current Liabilities:
Notes payable--banks...................................... $ -- $ 95,100
Current maturities of long-term debt...................... 1,686 20,127
Debt in default........................................... 501,007 --
Accrued expenses and other current liabilities............ 26,843 16,704
-------- --------
Total Current Liabilities................................... 529,536 131,931
-------- --------
Long-term debt.............................................. 822 349,255
Other long-term obligations and deferred credits............ 1,228 10,742
Shareholders' (Deficit) Equity:
Common Stock.............................................. 4,075 4,018
Other shareholders' (deficit) equity...................... (180,054) 452,118
-------- --------
Total Shareholders' (Deficit) Equity........................ (175,979) 456,136
-------- --------
Total Liabilities and Shareholders' (Deficit) Equity........ $355,607 $948,064
======== ========
</TABLE>
71
<PAGE>
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF JWP INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1992 1991 1990
--------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Management fees from wholly-owned subsidiaries.. $ 29,825 $ 27,280 $ 26,145
Interest income from wholly-owned subsidiaries.. 3,243 9,673 10,791
Other interest income........................... 899 603 692
--------- -------- --------
33,967 37,556 37,628
--------- -------- --------
Costs and expenses net:
General, administrative and other expenses.... 48,371 19,159 12,206
Interest expense.............................. 43,568 42,414 36,158
Net loss on businesses sold or held for sale.. 76,078 6,628 --
Provision for losses on disposal of 49,491 -- --
discontinued operations.......................
--------- -------- --------
217,508 68,201 48,364
--------- -------- --------
(Loss) income before income taxes, equity in net
(loss) income of subsidiaries and cumulative
effect of accounting change.................... (183,541) (30,645) (10,736)
(Benefit) for income taxes...................... -- (10,395) (4,068)
Equity in net (loss) income of subsidiaries-- (229,465) 24,962 35,317
continuing operations...........................
Equity in net (loss) income of subsidiaries-- (203,739) 24,263 21,600
discontinued operations.........................
Cumulative effect of accounting change.......... 4,315 -- --
--------- -------- --------
Net (Loss) Income........................... $(612,430) $ 28,975 $ 50,249
========= ======== ========
</TABLE>
72
<PAGE>
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF JWP INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1992 1991 1990
--------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Net (Loss) Income................................. $(612,430) $28,975 $50,249
Adjustments to Reconcile Net (Loss) Income to Cash
(Used in)
Operating Activities
Depreciation and amortization................... 3,790 2,641 1,313
Write-off of deferred debt issuance cost........ 2,876 -- --
Provision for losses on net assets held for sale
or sold........................................ 76,078 6,628 --
Provision for losses on disposal of discontinued
operations..................................... 49,491 -- --
Cumulative effect of accounting change for in-
come taxes..................................... (4,315) -- --
Equity loss (income) of consolidated subsidiar-
ies............................................ 433,204 (49,225) (56,917)
Other, net...................................... 17,962 1,743 2,384
--------- ------- -------
(33,344) (9,238) (2,971)
Change in Current Assets and Liabilities
(Increase) decrease in receivables and other
current assets................................. (3,135) 87 (5,000)
Increase (decrease) in accrued expenses......... 11,317 (7,532) 243
--------- ------- -------
Net Cash (Used in) Operations..................... (25,162) (16,683) (7,728)
--------- ------- -------
Cash Flows from Financing Activities
Proceeds from long-term debt.................... 60,000 30,000 70,000
Payments of long-term debt and capital lease ob-
ligations...................................... (23,789) (45,375) (29,118)
Proceeds from issuance of common stock and exer-
cise
of stock options............................... 1,911 2,169 4,827
Payment of preferred dividends.................. (1,354) (711) --
Purchase of Company warrants.................... -- -- (4,000)
Acquisition of common stock for the treasury.... (8,130) (7,877) (4,424)
Increase (decrease) in notes payable, net....... 695 96,800 (2,300)
--------- ------- -------
Net Cash Provided by Financing Activities......... 29,333 75,006 34,985
--------- ------- -------
Cash Flows from Investment Activities
Proceeds from sale of businesses and other as-
sets........................................... 138,971 10,066 --
(Increase) decrease in investments and amounts
due from
wholly-owned subsidiaries...................... (63,884) 27,611 17,357
Acquisition of businesses....................... (19,581) (97,667) (39,845)
Purchase of property and equipment.............. (1,958) (1,392) (982)
--------- ------- -------
Net Cash Provided by (Used in) Investment Activi- 53,548 (61,382) (23,470)
ties............................................. --------- ------- -------
Increase (Decrease) in Cash and Cash Equivalents.. 57,719 (3,059) 3,787
Cash and Cash Equivalents at Beginning of Year.... 2,244 5,303 1,516
--------- ------- -------
Cash and Cash Equivalents at End of Year.......... $ 59,963 $ 2,244 $ 5,303
========= ======= =======
</TABLE>
73
<PAGE>
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF JWP INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The Company's investment in subsidiaries is stated at cost plus equity in
undistributed earnings (loss) of subsidiaries since dates of acquisition, less
write-offs related to permanent impairment of cost in excess of net assets
acquired. Net assets held for sale consist of the net assets of wholly-owned
subsidiaries that the Company plans to sell. Such net assets are stated at
estimated net realizable value. These financial statements should be read in
conjunction with the Company's consolidated financial statements.
(2) LONG-TERM DEBT
The following is a summary of the Company's long-term debt, excluding current
maturities of $1.7 million and $20.1 million in 1992 and 1991, respectively:
<TABLE>
<CAPTION>
1992 1991
----------------
(IN THOUSANDS)
<S> <C> <C>
9.1% to 12% Senior Notes, due 1992 to 2005................. $ -- $ 330,119
7 3/4% Convertible Subordinated Debentures, due 2012....... -- 15,764
Other long-term debt....................................... 822 3,372
----- ---------
$ 822 $ 349,255
===== =========
</TABLE>
For a discussion and description of debt in default and long-term debt refer
to Notes 1, 3 and 4 of the consolidated financial statements of JWP INC. and
Subsidiaries.
(3) INCOME TAXES
Effective January 1, 1992, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). The adoption of SFAS 109 changed the Company's method of accounting for
income taxes from the deferred method (APB 11) to an asset and liability
approach. Previously, the Company deferred the past tax effects of timing
differences between financial reporting and taxable income. The asset and
liability approach requires the recognition of deferred tax liabilities and
assets for the expected future tax consequences of temporary differences
between the financial statement carrying amounts and the tax bases of assets
and liabilities. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax expense
is the tax payable for the period and the change during the period in deferred
tax assets and liabilities. Prior years' financial statements have not been
restated for the accounting change. The cumulative effect of adopting SFAS 109
was to record an income tax benefit of $4.3 million or $0.11 per share as of
January 1, 1992.
At December 31, 1992 and January 1, 1992 (after having given effect to the
adoption of SFAS No. 109), the valuation allowances recorded against deferred
tax assets were $138.3 million and $0, respectively.
(4) GUARANTEES
JWP INC. guarantees various obligations and credit agreements of its wholly-
owned subsidiaries. At December 31, 1992 such guarantees included the
following: (i) a mortgage note payable in the amount of $6.2 million secured by
land and building, having a net book value of $6.2 million at December 31,
1992, (ii) short and long-term credit facilities aggregating $5.2 million with
French banks for French subsidiary, (iii) short-term credit facilities
aggregating $2.2 million with various German banks for a German subsidiary,
(iv) a demand note payable by a Canadian subsidiary in the amount of $6.5
million at December 31, 1992 and (v) short-term credit facilities of $2.5
million for a Belgian subsidiary. JWP also guarantees certain leases, contracts
and performance bonds of its subsidiaries.
74
<PAGE>
In 1993, the Company's French and Belgian information services subsidiaries
filed petitions in their respective countries seeking relief from their
creditors. Equity in net loss of discontinued subsidiaries includes a loss of
$5.9 million which represents the portion of the Company's guarantees of the
French and Belgian subsidiaries credit facilities which are unsecured.
75
<PAGE>
JWP INC. AND SUBSIDIARIES
SCHEDULE VII--GUARANTEES OF SECURITIES OF OTHER ISSUERS
DECEMBER 31, 1992
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F COL. G
- - - - - - - - - ----------------------- ------------- --------------- ----------- ---------- ---------------------- -----------------------
AMOUNT NATURE OF ANY DEFAULT
NAME OF ISSUER OWNED BY AMOUNT IN BY ISSUER OF SECURITIES
OF SECURITIES TITLE OF PERSON OR TREASURY GUARANTEED IN
GUARANTEED BY ISSUE OF PERSONS FOR OF ISSUER PRINCIPAL, INTEREST,
PERSON EACH CLASS TOTAL AMOUNT WHICH OF SINKING FUND OR
FOR WHICH OF SECURITIES GUARANTEED STATEMENT SECURITIES NATURE OF REDEMPTION PROVISIONS,
STATEMENT IS FILED GUARANTEED AND OUTSTANDING IS FILED GUARANTEED GUARANTEE OR PAYMENT OF DIVIDENDS
- - - - - - - - - ----------------------- ------------- --------------- ----------- ---------- ---------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Erlanger Land Co....... Mortgage $6.2 million Principal and interest None
</TABLE>
76
<PAGE>
JWP INC. AND SUBSIDIARIES
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
----------------------
BALANCE AT CHARGED TO CHARGED TO NET ASSETS BALANCE
BEGINNING COSTS AND OTHER HELD END OF
DESCRIPTION OF YEAR EXPENSES ACCOUNTS(2) DEDUCTIONS(1) FOR SALE YEAR
- - - - - - - - - ----------- ---------- ---------- ----------- ------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Allowance for doubtful
accounts
Year ended December $29,541 $113,903 $10,591 $(78,715) $(32,690) $42,630
31, 1992..............
Year ended December
31, 1991,
as restated.......... $14,564 $ 16,241 $13,091 $(14,355) $ -- $29,541
Year ended December $11,552 $ 6,425 $ 4,055 $ (7,468) $ -- $14,564
31, 1990................
</TABLE>
- - - - - - - - - --------
(1) Deductions represent uncollectible balances of accounts receivable written
off, net of recoveries.
(2) Amounts primarily represent valuation accounts related to companies
acquired.
77
<PAGE>
JWP INC. AND SUBSIDIARIES
SCHEDULE IX
SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
WEIGHTED MAXIMUM AVERAGE WEIGHTED
AVERAGE AMOUNT AMOUNT AVERAGE
BALANCE INTEREST OUTSTANDING OUTSTANDING INTEREST RATE
CATEGORY OF AGGREGATE AT END RATE AT END DURING THE DURING THE DURING THE
SHORT-TERM BORROWINGS OF PERIOD OF PERIOD PERIOD PERIOD(1) PERIOD(2)
- - - - - - - - - --------------------- --------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Year Ended December 31,
1992
Notes payable to $162,247 7.16% $240,384 $189,442 6.12%
banks(3)................
Year Ended December 31,
1991
Notes payable to $110,600 6.07% $231,400 $143,800 7.64%
banks(3)................
Year Ended December 31,
1990
Notes payable to $ 58,500 10.00% $128,415 $ 94,788 9.86%
banks(3)................
Commercial paper(4)... $ 4,000 8.38% $ 16,500 $ 4,249 8.58%
</TABLE>
- - - - - - - - - --------
(1) The average amount outstanding during the period was computed by dividing
the average monthly principal balances by 12.
(2) The weighted average interest rate during the period was computed by
dividing the actual interest expense by average short-term debt
outstanding.
(3) Notes payable to banks include borrowings under lines of credit
arrangements which are reviewed annually for renewal. The balance at
December 31, 1992 includes debt in default of $155,795.
(4) Commercial paper matures generally four months from date of issue with no
provisions for the extension of its maturity.
78
<PAGE>
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. INCORPORATED BY
- - - - - - - - - ----------- REFERENCE TO REGISTRANT'S
-------------------------
<S> <C> <C>
3 (a-1) Certificate of Incorporation filed Exhibit 3 (a-1) to Annual Report on
March 31, 1987 Form 10-K for fiscal year ended
December 31, 1988
3 (a-2) Copy of Agreement and Plan of Merger Exhibit (b) to Current Report on Form
dated April 1, 1987 between JWP INC., a 8-K for August 4, 1987
New York corporation, and JWP INC. a
Delaware corporation
3 (a-3) Certificate of Amendment to Certificate Exhibit 3 (a-3) to Annual Report on
of Incorporation filed May 17, 1990 Form 10-K for fiscal year ended
December 31, 1990
3 (a-4) Certificate of Designation filed August Exhibit 4.1 to Quarterly Report on Form
15, 1991 10-Q for the quarter ended June 30,
1991
3 (b) By-Laws Exhibit 3 (b) to Annual Report on Form
10-K for fiscal year ended December 31,
1988
4 (a-1)* Form of Subordinated Note Agreement Exhibit B to Current Report on Form 8-K
executed April 10, 1986 between the for April 11, 1986
Registrant and each of several
insurance companies
4 (a-2)* Composite Conformed Copy of Note Exhibit 4 (a-8) to Annual Report on
Agreements dated as of March 10, 1987 Form 10-K for fiscal year ended
between the Registrant and each of December 31, 1986
several insurance companies
4 (a-3)* Conformed Copy of Note Agreement dated Exhibit 4 (a- ) to Annual Report on
as of December 15, 1987 between the Form l0-K for fiscal year ended
Registrant and each of several December 31, 1987
insurance companies
4 (a-4)* Conformed Copy of Senior Note Purchase Exhibit 4 (a-9) to Annual Report on
Agreement dated as of November 15, 1988 Form 10-K for fiscal year ended
between Registrant and each of several December 31, 1988
insurance companies
4 (a-5)* Conformed Copy of Senior Note Agreement Exhibit 4 (a-11) to Annual Report on
dated as of November 16, 1989 between Form 10-K for fiscal year ended
Registrant and each of several December 31, 1989
insurance companies
4.6* Indenture dated as of September 1, Exhibit 4 (a) to Quarterly Report on
1987, as amended by First and Second Form 10-Q for the quarter ended June
Supplemental Indentures, pursuant to 30, 1990
which 7 3/4% Convertible Subordinated
Debentures of NEECO, Inc. were assumed
by Registrant
4.7* Senior Note Agreement executed November Exhibit 4.13 to Form S-3 Registration
14, 1990 between Registrant and The Statement No. 33-38381
Prudential Insurance Company of America
4.8* Composite Conformed Copy of Senior Note Exhibit 4.14 to Form S-3 Registration
Agreement executed November 28, 1990 Statement No. 33-38381
between Registrant and each of several
insurance companies
</TABLE>
79
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. INCORPORATED BY
- - - - - - - - - ----------- REFERENCE TO REGISTRANT'S
-------------------------
<S> <C> <C>
4.9* Conformed Copy of Senior Note Agreement Exhibit 4.15 to Form S-3 Registration
executed November 28, 1990 between Statement No. 33-43104
Registrant and Provident National
Assurance Co.
4.10* Conformed Copy of Senior Note Agreement Exhibit 4.15 to Form S-3 Registration
executed March 14, 1991 among JWP, New Statement No. 33-39550
York Life Insurance Company and New
York Life Insurance, an annuity
corporation
4.11* Composite Conformed Copy of Senior Note Exhibit 4.16 to Annual Report on Form
Agreement executed March 6, 1992 10-K for fiscal year ended December 31,
between the Registrant and several 1991
purchasers
4.12* Form of Amended and Restated Credit Page
Agreement dated as of September 11,
1992 between Registrant and several
banks
4.13* Form of Amendment dated as of September Page
30, 1992 between Registrant and several
banks with respect to the Amended and
Restated Credit Agreement dated
September 11, 1992
4.14* Form of Credit Agreement dated as of Page
February 14, 1994 among Registrants,
certain subsidiaries thereof and
Belmont Capital Partners II, L.P.
10 (a-1)* First Mortgage Indenture ("Mortgage") Exhibit B-l to Form S-l, Registration
dated December 1, 1936 of a subsidiary Statement No. 2-3995 of JWS
of Registrant, Jamaica Water Supply
Company ("JWS")
10 (a-2)* Supplemental Indenture to First Exhibit 1 to Annual Report on Form 10-K
Mortgage dated December 1, 1953 of JWS for fiscal year ended December 31, 1953
10 (a-3)* Supplemental Indenture to First Exhibit 1 to Current Report on Form 8-K
Mortgage dated May 1, 1962 of JWS for August 1962 of JWS
10 (a-4)* Supplemental Indenture to First Exhibit 4.21 to Form S-1, Registration
Mortgage dated May 1, 1970 of JWS Statement No. 2-62590
10 (a-5)* Supplemental Indenture to First Exhibit 4.22 to Form S-1, Registration
Mortgage dated February 15, 1975 of JWS Statement No. 2-62590
10 (a-6)* Supplemental Indenture to First Exhibit 4.23 to Form S-1, Registration
Mortgage dated January 1, 1978 Statement No. 2-62590
10 (a-7)* Supplemental Indenture to Mortgage Exhibit 10 (a-7) to S-1, Registration
dated as of April 1, 1981 of JWS Statement No. 2-86988
10 (a-8)* Supplemental Indenture to Mortgage Exhibit 10 (a-8) to Form S-1
dated as of August 1, 1983 of JWS Registration Statement No. 2-86988
10 (a-9)* Supplemental Indenture to Mortgage Exhibit 10 (a-9) to Annual Report on
dated as of December 1, 1984 10-K for fiscal year December 31, 1985.
10 (b-1)* Agreement and Plan of Merger dated as Exhibit (c) (2) to the Schedule 14D-1
of June 3, 1991 among Businessland,
Inc., JWP INC., and JWP Acquisition,
Inc.
10 (b-2)* Asset Purchase Agreement dated July 16, Exhibit 2 to Form 8-K; Date of Report:
1993 by and among JWP INC., JWP August 6, 1993
Information Services, Inc. and ENTEX
Information Services, Inc.
10 (c-1)* Employment Agreement dated as of Exhibit 10 (e) to Annual Report on Form
September 14, 1987 between the 10-K for fiscal year ended December 31,
Registrant and Sheldon I. Cammaker 1987
</TABLE>
80
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. INCORPORATED BY
- - - - - - - - - ----------- REFERENCE TO REGISTRANT'S
-------------------------
<S> <C> <C>
10 (c-2)* Amendment dated March 15, 1988 to Exhibit 10 (f) to Annual Report on Form
Employment Agreement dated as of 10-K for fiscal year ended December 31,
September 14, 1987 between Registrant 1987
and Sheldon I. Cammaker
10 (d)* Letter Agreement dated November 16, Page
1992 between the Registrant and Edward
F. Kosnik
10 (e)* Letter Agreement dated December 21, Page
1992 between the Registrant and Stephen
H. Meyers
10 (f)* Amended and Restated Stock Option and Exhibit 10 to Form S-8 (No. 3-25151)
Appreciation Rights Plan
10 (g)* Senior Incentive Compensation and Exhibit B to Proxy Statement for Annual
Restricted Stock Award Plan Meeting of Stockholders held May 17,
1989
10 (h)* 1991 Stock Option Plan Exhibit A to Proxy Statement for Annual
Meeting of Stockholders held May 16,
1991
10 (i)* Directors' Retirement Plan Exhibit 10 (i) to Annual Report on Form
10-K for fiscal year ended December 31,
1991
10 (j)* 1991 Stock Option Plan for Non-Employee Exhibit A to Proxy Statement for Annual
Directors Meeting of Stockholders held May 21,
1992
10 (k)* 1992 Stock Option Plan Page
10 (l)* Separation Agreement dated as of June Page
30, 1993 between Registrant and Andrew
T. Dwyer
10 (m)* Consulting Agreement dated as of June Page
30, 1993 between JWP
Mechanical/Electrical Services, Inc.,
and Andrew T. Dwyer
10 (n)* Restricted Stock Agreement dated as of Page
November 24, 1992 between Registrant
and Edward F. Kosnik
10 (o)* Restricted Stock Agreement dated as of Page
January 3, 1992 between Registrant and
David L. Sokol
10 (p)* Letter Agreement dated as of June 30, Page
1993 between Drake & Scull Holdings
Ltd. and Registrant and Steven H.
Kornfeld
10 (q)* Letter Agreement dated August 21, 1992 Page
between Registrant and David L. Sokol
10 (r)* JWP Inc. Employees' Severance Pay/Stay Page
Bonus Plan, as amended and restated as
of March 16, 1994
10 (s)* Restricted Stock Agreement dated as of Page
January 15, 1993 between Registrant and
Stephen H. Meyers
10 (t)* Employment Agreement dated as of April Page
18, 1994 between Registrant and Frank
T. MacInnis
21 List of Significant Subsidiaries Page
27 Article 5, Financial Data Schedule Page
</TABLE>
Pursuant to Item 601 (b)(4)(iii) of Regulation S-K, upon request of the
Securities and Exchange Commission, the Registrant hereby undertakes to furnish
a copy of any unfiled instrument which defines the rights of holders of long-
term debt of the Registrant's subsidiaries.
- - - - - - - - - --------
* Required to be filed as an exhibit to this Form 10-K pursuant to Item 14(c)
of the Annual Report Form 10-K.
81
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
JWP INC.
Date: September 20, 1994 Frank T. MacInnis
By:
----------------------------------
Frank T. MacInnis Chairman of the
Board of Directors, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on September 20, 1994.
Frank T. MacInnis* Chairman of the
- - - - - - - - - ------------------------------- Board of Directors,
Frank T. MacInnis President, and Chief
Executive Officer
Andrew T. Dwyer * Director
- - - - - - - - - -------------------------------
Andrew T. Dwyer
Innis O'Rourke, Jr. * Director
- - - - - - - - - -------------------------------
Innis O'Rourke, Jr.
Craig C. Perry * Director
- - - - - - - - - -------------------------------
Craig C. Perry
Edmund S. Twining, Jr. * Director
- - - - - - - - - -------------------------------
Edmund S. Twining, Jr.
Leicle E. Chesser Executive Vice
- - - - - - - - - ------------------------------- President and Chief
Leicle E. Chesser Financial Officer
(principal financial
officer from May
1994 to date)
Stephen H. Meyers Senior Vice
- - - - - - - - - ------------------------------- President Finance
Stephen H. Meyers (principal financial
officer from January
1993 to May 1994 and
principal accounting
officer from May
1994 to date)
- - - - - - - - - --------
*Constituting the entire Board of Directors of JWP INC.
82
<PAGE>
EXHIBIT 4.12
AMENDED AND RESTATED
CREDIT AGREEMENT
dated as of September 11, 1992
among
JWP INC.,
as Borrower,
THE BANKS NAMED HEREIN,
as Lenders,
FLEET BANK
(formerly Norstar Bank),
as Agent and Issuing Bank,
and
CREDIT SUISSE,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
and
CHEMICAL BANK,
as Co-Lead Managers
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS....... 2
1.1. Certain Defined Terms...................... 2
1.2. Computation of Time Periods................ 24
1.3. Accounting Terms and Computation of
Financial Information..................... 25
(a) GAAP.................................... 25
(b) GAAP for Financial Covenants............ 25
(c) Certain Accounting Principles........... 25
1.4. Construction............................... 25
ARTICLE II
AMOUNTS AND TERMS OF THE LOANS
AND THE FACILITY LETTERS OF CREDIT...... 26
2.1. The Facility............................... 26
(a) Loans................................... 26
(b) Notes................................... 26
(c) Facility Letters of Credit.............. 27
2.2. Making of the Loans........................ 29
(a) Notice of Borrowing..................... 29
(b) Authorized Persons...................... 29
(c) Funding................................. 30
(d) Several Obligations..................... 30
(e) Termination of Swingline Commitments.... 30
2.3. Issuance of and Other Provisions in Regard to
Facility Letters of Credit................ 30
(a) Request for Issuance.................... 30
(b) Drawing and Reimbursement............... 32
(c) Obligations Absolute.................... 34
(i)
<PAGE>
Page
----
(d) Compensation............................ 36
2.4. Fees....................................... 36
(a) Commitment Fee.......................... 36
(b) Agent's Fee............................. 37
(c) Co-Lead Managers' Fee................... 37
(d) Participation Fees...................... 37
(e) Payment; Fees Fully Earned.............. 37
2.5. Reduction of Commitments................... 37
(a) Mandatory Reductions.................... 37
(b) Optional Reduction...................... 38
(c) Reduction of Letter of Credit Facility.. 39
(d) Reduction of Outstanding Credit......... 39
2.6. Repayment of Loans......................... 39
2.7. Interest.................................... 39
(a) Pre-Default Interest.................... 39
(b) Default Interest........................ 39
2.8. Prepayments; Deposits in L/C Cash Collateral
Account................................... 39
(a) Optional Prepayment..................... 39
(b) Mandatory Prepayment.................... 40
(c) Deposits in L/C Cash Collateral Account. 41
2.9. Increased Costs, Etc....................... 41
(a) Increased Cost.......................... 41
(b) Capital................................. 41
2.10. Payments.................................. 42
(a) Time for Payment........................ 42
(b) Set-Off................................. 43
(c) Computation............................. 43
(d) Distribution of Payments................ 43
(e) Interest on Overdue Payment............. 44
2.11. Taxes..................................... 44
(a) No Withholding.......................... 44
(b) Other Taxes............................. 45
(c) Indemnity............................... 45
(ii)
<PAGE>
Page
----
(d) Evidence of Payment..................... 46
(e) Change in Lending Office................ 46
(f) Survival of Covenant.................... 46
2.12. Sharing of Payments, Etc.................. 46
2.13. Use of Proceeds........................... 47
2.14. Pro Rata Treatment........................ 47
2.15. Evidence of Debt; Loan Accounts........... 47
(a) Evidence of Debt........................ 47
(b) Maintenance of Loan Accounts............ 48
(c) Agent's Register........................ 48
(d) Entries Conclusive and Binding.......... 48
2.16. Increase in the Commitments............... 48
ARTICLE III
CONDITIONS PRECEDENT............. 49
3.1. Conditions Precedent to Restatement
Effective Date............................ 49
(a) Diligence Examination................... 49
(b) Delivery of Certain Documents........... 50
(c) Pledge Agreement........................ 53
(d) Pledged Stock Certificates.............. 53
(e) Truth of Representations and Warranties. 53
(f) No Default.............................. 53
(g) No Material Adverse Change.............. 53
(h) Other Items............................. 53
(i) Payment of Fees and Expenses............ 53
(j) No Action Against Lenders............... 54
3.2. Conditions Precedent to Each Borrowing and
Issuance.................................. 54
(a) Restatement Effective Date.............. 54
(b) Accuracy of Certain Facts............... 54
(c) Receipt of Notices and Other Items...... 55
3.3. Determinations Under Section 3.1........... 55
(iii)
<PAGE>
Page
----
ARTICLE IV
REPRESENTATIONS AND WARRANTIES........ 56
4.1. Representations and Warranties of the
Borrower.................................. 56
(a) Corporate Existence..................... 56
(b) Subsidiaries; Designated Subsidiaries... 56
(c) Corporate Power; Authorization.......... 57
(d) Approvals and Notices................... 57
(e) Enforceable Obligations................. 58
(f) Financial Conditions.................... 58
(g) Future Financial Performance............ 59
(h) Accuracy and Completeness of Information 59
(i) No Material Litigation.................. 60
(j) No Margin Stock......................... 60
(k) No ERISA Events......................... 60
(l) ERISA Plans............................. 60
(m) No Withdrawal Liability................. 60
(n) Multiemployer Plans..................... 60
(o) Other Events............................ 61
(p) Environmental Matters................... 61
(q) Material Contracts...................... 62
(r) Payment of Taxes........................ 62
(s) Investment Company Act; Public Utility
Holding Company Act.................... 63
(t) Funded Debt Agreements; Existing Debt... 63
(u) Tax Consolidation....................... 64
(v) Ownership of Property; Liens............ 64
ARTICLE V
COVENANTS OF THE BORROWER.......... 64
5.1. Affirmative Covenants...................... 64
(a) Compliance with Laws, Etc............... 64
(b) Payment of Taxes, Etc................... 64
(c) Maintenance of Insurance................ 65
(d) Preservation of Corporate Existence, Etc.65
(e) Visitation Rights....................... 65
(f) Keeping of Books........................ 65
(iv)
<PAGE>
Page
----
(g) Maintenance of Properties, Etc.......... 65
(h) Maintenance of Current Ratio............ 66
(i) Maintenance of Adjusted Current Ratio... 66
(j) Maintenance of Consolidated Working
Capital................................ 66
(k) Maintenance of Consolidated Tangible
Net Worth.............................. 66
(l) Maintenance of Fixed Charges Coverage
Ratio.................................. 66
(m) Consolidated Funded Debt................ 67
(n) EBIT.................................... 67
(o) Reporting Requirements.................. 67
(p) Transactions with Affiliates............ 71
(q) Further Assurances...................... 72
5.2. Negative Covenants......................... 72
(a) Debt.................................... 72
(b) Liens................................... 74
(c) Guarantees.............................. 75
(d) Mergers................................. 77
(e) Dispositions of Assets.................. 77
(f) Restricted Payments and Restricted
Investments............................ 78
(g) Sale and Leaseback...................... 81
(h) Maintenance of Ownership of Subsidiaries 82
(i) Compliance with ERISA................... 82
(j) Plan Amendments......................... 82
(k) Charter Amendments...................... 83
(l) Accounting Changes...................... 83
(m) Acquisitions............................ 83
(n) Optional Prepayment of Funded Debt...... 83
(o) Amendment of Funded Debt Agreements..... 83
(p) Capital Expenditures.................... 83
ARTICLE VI
EVENTS OF DEFAULT.............. 84
6.1. Events of Default.......................... 84
ARTICLE VII
THE AGENT.................. 88
7.1. Authorization and Action................... 88
(v)
<PAGE>
Page
----
7.2. Reliance, Etc.............................. 89
7.3. Affiliates................................. 90
7.4. Lender Credit Decision..................... 90
7.5. Indemnification............................ 90
7.6. Successor Agent and Issuing Bank........... 91
ARTICLE VIII
MISCELLANEOUS................ 92
8.1. Amendments, Etc............................ 92
8.2. Notices, Etc............................... 93
8.3. No Waiver; Remedies........................ 94
8.4. Costs and Expenses......................... 94
8.5. Right of Set-off........................... 95
8.6. Binding Effect............................. 95
8.7. Assignments and Participations............. 96
8.8. Governing Law; Submission to Jurisdiction;
Waiver of Jury Trial...................... 99
8.9. Execution in Counterparts..................100
8.10. Borrower's Acknowledgment.................100
8.11. Release of Pledged Designated Subsidiaries
Stock....................................100
(vi)
<PAGE>
EXHIBITS
- - - - - - - - - --------
EXHIBIT A Form of Promissory Note
EXHIBIT B Notice of Borrowing
EXHIBIT C Notice of Effectiveness
EXHIBIT D Opinion of Counsel to Borrower
EXHIBIT E Opinion of Counsel to Agent
EXHIBIT F Form of Additional Lender Agreement
EXHIBIT G Form of Assignment and Acceptance
SCHEDULES
- - - - - - - - - ---------
Schedule 1.1-A Existing Accounts Receivable and
Financing Programs of Borrower
Schedule 1.1-B Outstanding Funded Debt of the Water Companies
Schedule 1.1-C Existing Funded Debt Agreement and Existing Debt
of Borrower and its Restricted
Subsidiaries
Schedule 1.1-D Existing Subsidiaries of the Borrower
Schedule 1.1-E Shares in Money Market or Mutual Funds
Schedule 1.1-F Project Subsidiaries of the Borrower
Schedule 4.1(f) Reports Required to be filed with the SEC
Schedule 5.2(b) Existing Liens of the Borrower
Schedule 8.2 Notice and Lending Office
Addresses of Lenders
(vii)
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT dated as of September 11, 1992
(as amended, supplemented or modified from time to time, this "Agreement") among
---------
JWP INC., a Delaware corporation (the "Borrower"), the banks listed on the
--------
signature pages of this Agreement or any additional Lender Agreement (as
hereinafter defined) (together with their respective permitted assignees from
time to time, the "Lenders"), FLEET BANK (formerly Norstar Bank), as issuer of
-------
letters of credit under the Letter of Credit Facility (as hereinafter defined)
(in such capacity, together with any successor thereto appointed pursuant to
Article VII, the "Issuing Bank") and as agent for the Lenders and the Issuing
------------
Bank (in such capacity, together with any successor appointed pursuant to
Article VII, the "Agent"), and CREDIT SUISSE, BANK OF AMERICA NATIONAL TRUST AND
-----
SAVINGS ASSOCIATION and CHEMICAL BANK, as Co-Lead Managers for the Lenders (in
such capacity, the "Co-Lead Managers").
----------------
R E C I T A L S
---------------
WHEREAS, the Borrower, the Lenders (or their predecessors-in-interest)
and the Agent are parties to a Credit Agreement dated as of June 28, 1990, as
amended by Amendments dated as of June 28, 1991, November 27, 1991 and June 30,
1992 (as so amended, the "Original Credit Agreement") pursuant to which the
-------------------------
Lenders have made loans and established certain credit facilities for the
Borrower, available on the terms and subject to the conditions set forth in the
Original Credit Agreement; and
WHEREAS, the parties hereto wish to amend and restate the Original
Credit Agreement in its entirety as set forth below;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto hereby agree that,
subject to the terms and conditions set forth below, the Original Credit
Agreement is hereby amended and restated to read in its entirety as follows:
<PAGE>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Certain Defined Terms. As used in this Agreement, each
---------------------
of the following terms shall have the meaning ascribed thereto below (such
meaning to be applicable to both the singular and plural forms of the term
defined):
"Accounts Receivable Financing" means any financing program pursuant
-----------------------------
to which the Borrower or one or more of its Restricted Subsidiaries may from
time to time transfer its accounts receivable or participation interests in a
pool of its accounts receivable to a special purpose corporation, trust or any
other entity (a "financing vehicle") established for purposes of providing
-----------------
accounts receivable financing, which program may require the Borrower or its
Restricted Subsidiaries to transfer specified additional accounts receivable to
such financing vehicle or retain all or any portion of the risk of loss on the
portfolio of accounts receivable acquired by such financing vehicle, and any
other similar arrangements having economic effects substantially identical in
all material respects provided that in respect of any such other arrangements
--------
the Borrower shall have provided to the Lenders substantially final copies of
the documentation showing the terms thereof at least 20 days prior to such
arrangements becoming effective and any contract being made thereunder and all
Lenders shall have approved such terms (such consent not to be unreasonably
withheld); and provided further, that "Accounts Receivable Financing" shall not
----------------
include (i) any traditional secured lending on the security of accounts
receivable, (ii) any Floor Plan Financing, (iii) any disposition of receivables
under any such financing program or other arrangements for which the implicit
cost of financing thereof exceeds the Reference Rate as in effect from time to
time (other than any such financing program or other arrangements existing on
the date of this Agreement and disclosed in Schedule 1.1-A or (iv) any
disposition of receivables under any such financing program or other
arrangements other than one for which the effective cost is treated as interest
expense in accordance with GAAP or reflected on the income statement of the
Borrower and its Restricted Subsidiaries as a loss on sale. Each Accounts
Receivable Financing existing on the date of this Agreement shall be disclosed
in Schedule 1.1-A.
"Additional Lender" has the meaning specified in Section 2.16.
-----------------
"Additional Lender Agreement" has the meaning specified in Section
---------------------------
2.16.
-2-
<PAGE>
"Adjusted Water Company Investments" shall mean, at any date (i) in
----------------------------------
the case of any computation pursuant to Section 5.2(f)(ii)(C)(1)(a), the then
amount of Water Company Investments made with respect to any Water Company
multiplied by a fraction, the numerator of which is the amount of the dividend
being paid pursuant to said subclause and the denominator of which is the net
after-tax proceeds derived from the sale of such Water Company; (ii) in the case
of any computation pursuant to Section 5.2(f)(ii)(C)(1)(b), the then amount of
Water Company Investments made with respect to any Water Company multiplied by
a fraction, the numerator of which is the fair market value of the shares of
common stock of such Water Company so to be distributed and the denominator of
which is the fair market value of all the shares of capital stock (common and
preferred) of such Water Company; (iii) in the case of any computation pursuant
to Section 5.2(f)(ii)(C)(1)(c), the then amount of Water Company Investments
made with respect to any Water Company multiplied by a fraction, the numerator
of which is the fair market value of the shares of preferred stock of such Water
Company so to be distributed and the denominator of which is the fair market
value of all of the shares of capital stock (common and preferred) of such Water
Company; and (iv) in the case of any computation pursuant to Section
5.2(f)(ii)(C)(1)(d), the then amount of Water Company Investments made with
respect to any Water Company multiplied by the fraction determined pursuant
thereto.
"Affiliate" means, as to any Person, any other Person that, directly
---------
or indirectly, controls, is controlled by or is under common control with such
Person or is a director or officer of such Person. For purposes of this
definition, the term "control" (including the terms "controlling", "controlled
by" and "under common control with") of a Person means the possession, direct or
indirect, of the power (whether or not exercised) to vote 15% or more of the
securities having ordinary voting power for the election of directors of such
Person or to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agent" has the meaning specified in the preamble to this Agreement.
-----
"Agent's Account" means the account of the Agent maintained by the
---------------
Agent at its office at 56 East 42nd Street, New York, New York 10017, or such
other account of the Agent as shall be specified by it to the relevant parties.
"Agent's Fee" has the meaning specified in Section 2.4(b).
-----------
"Agreement" has the meaning specified in the preamble hereto.
---------
-3-
<PAGE>
"Assignment and Acceptance" means an assignment and acceptance made
-------------------------
by a Lender and an Eligible Assignee, and accepted by the Agent, in
substantially the form of Exhibit G hereto.
"Available Facility Amount" means, on any date of determination, the
-------------------------
amount of the Facility then in effect minus the sum of (i) Outstanding Loans on
-----
such date and (ii) Facility Letter of Credit Obligations on such date.
"Base Rate" means, on any date, a rate per annum equal to the sum of
---------
(a) 0.75% (75 basis points) plus (b) the higher of (i) the Federal Funds Rate
and (ii) the Reference Rate, each as in effect on such date.
"Board of Directors" of any corporation means the Board of Directors
------------------
of such corporation or a duly constituted committee thereof having authority
over matters to which the action proposed to be taken or authorized relates.
"Borrower" has the meaning specified in the preamble to this Agree-
--------
ment.
"Borrower's Account" means the account of the Borrower maintained
------------------
with the Agent at the office of the Agent specified in writing from time to time
by the Borrower.
"Borrowing" means a borrowing consisting of Loans made on the same day
---------
by the Lenders.
"Borrowing Date" means any Business Day on which a Borrowing is made
--------------
by the Borrower.
"Business Day" means a day of the year on which banks are not required
------------
or authorized to close within the State of New York.
"Businessland" means JWP Information Services (East), Inc., a
------------
California corporation (formerly named Businessland Inc.)
"Capital Expenditures" means all expenditures for any fixed assets or
--------------------
improvements, or for replacements, substitutions or additions thereto, which
have a useful life of more than one year.
"Capitalized Leases" has the meaning specified in clause (e) of the
------------------
definition of the term "Debt".
-4-
<PAGE>
"Cash Proceeds" means, with respect to any sale, lease, transfer or
-------------
other disposition of any asset by any Person or the issuance of securities or
incurrence of Funded Debt by any Person, the amount of cash received by such
Person in connection with such transaction (including cash proceeds of any prop-
erty received in consideration of any such transaction). All proceeds of
insurance paid on account of the loss of or damage to any such asset and awards
of compensation for any such asset taken by condemnation or eminent domain
shall be deemed to be Cash Proceeds.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Co-Lead Managers" has the meaning specified in the preamble to this
----------------
Agreement.
"Co-Lead Managers' Fee" has the meaning specified in Section 2.4(c).
---------------------
"Commitment" means, with respect to each Lender that is a signatory
----------
hereto, (a) prior to the Restatement Date, the "Commitment" of such Lender under
(and as defined in) the Original Credit Agreement and (b) from and after the
Restatement Date, the amount set forth opposite such Lender's name on the
signature pages hereto under the caption "Commitment" or, if such Lender has
entered into one or more Assignments and Acceptances, and with respect to each
other Lender, the amount set forth for such Lender in the Register maintained
by the Agent pursuant to Section 8.7(c) as such Lender's "Commitment", as such
amount may be reduced pursuant to Section 2.5.
"Commitment Fee" has the meaning specified in Section 2.4(a).
--------------
"Consolidated Current Assets" means, at any date, the aggregate amount
---------------------------
of all Current Assets of the Borrower and its Restricted Subsidiaries on a
consolidated basis at such date.
"Consolidated Current Liabilities" means, at any date, the aggregate
--------------------------------
amount of all Current Liabilities of the Borrower and its Restricted
Subsidiaries on a consolidated basis at such date (including, on and after
September 18, 1992, the Loans).
"Consolidated Fixed Charges" means, for any period, the sum of (a) the
--------------------------
aggregate Consolidated Interest Expense for such period, plus (b) scheduled
----
payments of principal during such period with respect to Funded Debt (other than
the Loans) of the Borrower and its Restricted Subsidiaries, plus (c) all
----
dividends
-5-
<PAGE>
paid in cash during such period on the Borrower's and/or its Restricted
Subsidiaries' preferred stock, plus (d) all Capital Expenditures of the Borrower
----
and its Restricted Subsidiaries in such period, plus (e) all lease expenses
----
(other than payments in respect of Capitalized Leases) accrued in such period,
plus (f) all income and franchise taxes (other than deferred taxes) of the
- - - - - - - - - ----
Borrower or its Restricted Subsidiaries in such period; provided that there
--------
shall be excluded from Consolidated Fixed Charges, all items referred to in
clauses (a) through (f) above (to the extent not already excluded therefrom)
relating to discontinued operations.
"Consolidated Funded Debt" means, at any date, the aggregate amount of
------------------------
all Funded Debt of the Borrower and its Restricted Subsidiaries on a
consolidated basis.
"Consolidated Interest Expense" means, for any fiscal period of the
-----------------------------
Borrower, consolidated interest expense of the Borrower and its Restricted Sub-
sidiaries determined in conformity with GAAP, excluding any such interest
expense relating to discontinued operations.
"Consolidated Net Income" means, for any period, the consolidated net
-----------------------
income (or net loss) of the Borrower and its Restricted Subsidiaries (adjusted
for minority interests) for such period taken as a single accounting period
determined in conformity with GAAP, provided that there shall be excluded
--------
therefrom (i) any gains or losses on the sale of any assets or capital stock of
the Water Companies, (ii) any gains or losses resulting from the sale,
conversion or other disposition of capital assets, (iii) any gains resulting
from the write-up of assets (other than the write-up of current assets as a
result of revaluations or realignment of currencies), (iv) the income (or loss)
of any Person which is not a Restricted Subsidiary except to the extent of
dividends or other distributions actually paid to the Borrower or any
Restricted Subsidiary during such period, (v) any income (or loss) of any Person
acquired by the Borrower or any Restricted Subsidiary through purchase, merger
or consolidation or otherwise for any period prior to the time of acquisition,
(vi) the income of any Restricted Subsidiary to the extent that the declaration
or payment of dividends or similar distributions by such Restricted Subsidiary
is not at the time permitted by operation of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such Restricted Subsidiary (other than with respect to
Businessland or the Water Companies as to restrictions existing on the date
hereof), (vii) any extraordinary gains and (viii) income or losses relating to
discontinued operations.
"Consolidated Net Worth" means, as of the time of any determination
----------------------
thereof, the sum of (a)(i) the par value (or value stated on the books of the
-6-
<PAGE>
Borrower) of the capital stock of the Borrower, plus (or minus in the case of a
---- -----
deficit) (ii) the amount of consolidated surplus of the Borrower and its
Restricted Subsidiaries, plus (or minus any accumulated deficit) (iii) the
---- -----
amount of consolidated retained earnings of the Borrower and its Restricted
Subsidiaries (adjusted to exclude from retained earnings attributable to any
period since June 30, 1992 those items set forth in clauses (i) through (viii)
of the definition of "Consolidated Net Income"), plus (or minus) (iv) any
---- -----
cumulative currency translation adjustment, minus (b) any amounts of par value
-----
or surplus attributable to mandatorily redeemable (on the happening of a
contingency or otherwise) capital stock, in each case determined in conformity
with GAAP.
"Consolidated Tangible Net Worth" means, as of the time of any
-------------------------------
determination thereof, the excess of (A) Consolidated Net Worth, over (B) the
----
sum of (i) the then Net Amount of Restricted Investments, plus (ii) treasury
----
stock, goodwill, trademarks, trade names, patents and deferred charges of the
Borrower and its Restricted Subsidiaries, unamortized debt discount of the
Borrower and its Restricted Subsidiaries and all other intangible assets of the
Borrower and its Restricted Subsidiaries.
"Consolidated Total Capitalization" shall mean, at any date, the sum
---------------------------------
of (i) Consolidated Funded Debt plus (ii) Consolidated Net Worth minus (iii) the
---- -----
aggregate fair market value (determined at the time of issuance) attributable to
any stock of the Borrower or any Restricted Subsidiary issued in payment for the
acquisition after December 31, 1991 of any Person that upon such acquisition
(after giving effect to any series of related transactions) would be a Foreign
Restricted Subsidiary, all or substantially all of the assets of any Person that
upon acquisition (after giving effect to any series of related transactions)
would be owned by a Foreign Restricted Subsidiary or any business division,
group or line of business of any Person that upon such acquisition (after giving
effect to any series of related transactions) would be owned by a Foreign
Restricted Subsidiary.
"Consolidated Total Tangible Assets" means, at any date of deter-
----------------------------------
mination thereof, the total of all assets appearing on a consolidated balance
sheet of the Borrower and its Restricted Subsidiaries as of such date prepared
in accordance with GAAP, excluding (i) the then Net Amount of Restricted Invest-
ments, (ii) treasury stock, goodwill, trademarks, trade names, patents and de-
ferred charges, unamortized debt discount and (iii) all other intangible assets
of the Borrower and its Restricted Subsidiaries.
"Consolidated Working Capital" means, at any date of determination
----------------------------
thereof, Consolidated Current Assets minus Consolidated Current Liabilities.
-----
-7-
<PAGE>
"Current Assets" of any Person means all assets of such Person that,
--------------
in accordance with GAAP, would be classified as current assets of such Person.
"Current Liabilities" of any Person means all items that, in accord-
-------------------
ance with GAAP, would be classified as current liabilities of such Person,
including, without limitation, the current portion of Funded Debt.
"Debt" of any Person means (a) all indebtedness of such Person for
----
borrowed money, whether or not such borrowing is classified as a liability of
such Person or is required to be so classified in accordance with GAAP; (b) all
obligations of such Person to pay for the deferred purchase price of property
or services, which purchase price (i) is due twelve (12) months or more from
the date of incurrence of the obligation in respect thereof or (ii) is evidenced
by a note or similar instrument (including, without limitation, any such
indebtedness which is non-recourse to such Person personally but is secured by
assets of such Person), or (iii) constitutes Floor Plan Financing; (c) all
obligations of such Person evidenced by notes, bonds, debentures or other
similar instruments; (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person other than sales agreements issued by vendors in the
ordinary course of business involving purchase money security interests that are
and remain unperfected by such vendors (even though the rights and remedies of
the seller or lender under such agreement in the event of default are limited to
repossession or sale of such property); (e) all obligations of such Person as
lessee under leases that have been or should be, in accordance with GAAP,
recorded as capital leases ("Capitalized Leases"); (f) all obligations,
------------------
contingent or otherwise, of such Person under acceptance, letter of credit or
similar facilities (other than trade letters of credit, except to the extent of
unpaid reimbursement obligations with respect thereto) (provided that for pur-
--------
poses of Section 5.2(a)(iv) only, the obligations specified in this clause (f)
shall not be considered Debt); (g) all Debt referred to in clauses (a) through
(f) above guaranteed directly or indirectly by such Person, or in effect
guaranteed directly or indirectly by such Person through an agreement (i) to pay
or purchase such Debt or to advance or supply funds for the payment or purchase
of such Debt, (ii) to purchase, sell or lease (as lessee or lessor) property, or
to purchase or sell services, primarily for the purpose of enabling the debtor
to make payment of such Debt or to assure the holder of such Debt against loss,
(iii) to advance or supply funds to maintain working capital or equity capital
of another Person or otherwise to maintain the net worth or solvency of such
Person (including any agreement in the nature of a support arrangement to pay
for property or services irrespective or whether such property is received or
such services are rendered) or (iv) otherwise to assure a creditor against loss
(provided that a guarantee of
--------
-8-
<PAGE>
obligations (other than for the payment of Debt) of a Subsidiary under a
contract to furnish equipment or other goods or construction or operating
services otherwise permitted by Section 5.2(c)(i) or (ii) shall not be Debt);
(h) in the case of the Water Companies, the aggregate voluntary or involuntary
liquidation price (whichever is greater) of all preferred shares of the Water
Companies held by any Person other than the Borrower or a Restricted Subsidiary
and (i) all Debt referred to in clauses (a) through (h) above secured by (or for
which the holder of such Debt has an existing right, contingent or otherwise, to
be secured by) any Lien on property (including, without limitation, accounts and
contract rights) owned by such Person, even though such Person has not assumed
or become liable for the payment of such Debt.
"Default" means any Event of Default or any event that would, with the
-------
giving of notice or the lapse of time or both, constitute an Event of Default.
"Designated Subsidiary" means each of Software House, Inc., JWP Air
---------------------
Technologies, Inc. and JWP AMCEC Corp.
"Dollars" or "$" means dollars in lawful currency of the United States
------- -
of America.
"EBIT" means, for any period in respect of the Borrower and its
----
Restricted Subsidiaries, Consolidated Net Income for such period plus, to the
----
extent deducted in computing such Consolidated Net Income, the sum of (a)
Consolidated Interest Expense for such period and (b) income and franchise taxes
for such period, excluding any such taxes relating to discontinued operations.
"EBIT Period" shall have the meaning given such term in Section
-----------
5.1(n).
"Eligible Assignee" means (a) a commercial bank organized under the
-----------------
laws of the United States, or any State thereof, and having total capital and
surplus in excess of $500,000,000 and (b) a commercial bank organized under the
laws of any other country that is a member of the OECD, or a political sub-
division of any such country, and having total capital and surplus in excess of
$500,000,000 (or the foreign currency equivalent thereof) provided that such
--------
bank is acting through a branch or agency located in the United States.
"Environmental Law" means any law, rule, regulation, order, writ,
-----------------
judgment, injunction, decree, determination or award relating to the environment
or to the release of any materials into the environment, including, without
limitation, the Clean Air Act, as amended, the Clean Water Act of 1977, as
amended,
-9-
<PAGE>
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, the Hazardous Materials Transportation Act, as amended, and
the Resource Conservation and Recovery Act of 1976, as amended.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"ERISA Affiliate" means any Person that for purposes of the Code or
---------------
Title IV of ERISA is a member of the Borrower's controlled group, or under
common control with the Borrower, within the meaning of Section 414 of the Code
and the regulations promulgated and rulings issued thereunder, and any other
Subsidiary of the Borrower.
"ERISA Event" means (a) a reportable event, within the meaning of
-----------
Section 4043 of ERISA, unless the 30-day notice requirement with respect thereto
has been waived by the PBGC; (b) the provision by the administrator of any Plan
of a notice of intent to terminate such Plan in a "distress termination",
pursuant to Section 4041 of ERISA; (c) the cessation of operations at a facility
in the circumstances described in Section 4062(e) of ERISA; (d) the withdrawal
by the Borrower or an ERISA Affiliate from a Multiple Employer Plan during a
plan year for which it was a substantial employer, as defined in Section
4001(a)(2) of ERISA; (e) the failure by the Borrower or any ERISA Affiliate to
make a payment to a Plan required under Section 302(f)(1) of ERISA; (f) the
adoption of an amendment to a Plan requiring the provision of security to such
Plan, pursuant to Section 307 of ERISA; (g) the institution by the PBGC of
proceedings to terminate a Plan, pursuant to Section 4042 of ERISA, or the
occurrence of any event or condition that would constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, a Plan; or (h) the failure to maintain the minimum funding standard
required by Section 412 of the Code with respect to any Plan for a plan year, or
the request or grant of a request for a waiver of such standard under Section
412(d) of the Code with respect to any Plan for a plan year.
"Events of Default" has the meaning specified in Section 6.1.
-----------------
"Excess Floor Plan Financing Amount" means the excess, if any, of the
----------------------------------
aggregate outstanding principal amount of Floor Plan Financing over the lesser
----
of (i) the market value of inventory or (ii) the cost of inventory of the
Borrower or any Restricted Subsidiary in which a security interest has been
granted to secure such payables.
-10-
<PAGE>
"Excess Secured Amount" has the meaning specified in Section
---------------------
5.2(b)(vi).
"Excluded Debt" means (a) subordinated Debt of Businessland in an
-------------
amount not exceeding the amount of such Debt permitted to be outstanding as
Existing Debt, (b) Funded Debt constituting Existing Debt to the extent
permitted to be secured by existing Liens pursuant to Section 5.2(b)(ii), (c)
Funded Debt related to industrial revenue, pollution control or similar bonds to
the extent permitted by Section 5.2(a)(v), (d) Funded Debt secured by Liens
permitted by Section 5.2(b)(vi)(c) and (e) Funded Debt of the Water Companies
outstanding on the Restatement Date and listed in Schedule 1.1-B including any
extension, renewal or replacement thereof, provided that the aggregate principal
--------
amount of such Funded Debt of the Water Companies for the purposes of this
definition shall not exceed the principal amount thereof outstanding on the
Restatement Date.
"Existing Debt" means Debt of the Borrower and its Restricted Sub-
-------------
sidiaries outstanding on the date hereof and listed in Schedule 1.1-C, in an
aggregate principal amount not in excess of the principal amount thereof out-
standing on the date hereof.
"Facility" means the aggregate amount of the Lenders' Commitments.
--------
The Letter of Credit Facility shall be a sub-facility of the Facility.
"Facility Letter of Credit" means (a) each outstanding letter of
-------------------------
credit issued by the LOC Bank (as defined in the Original Credit Agreement) for
the account of the Borrower pursuant to Article III of the Original Credit
Agreement and (b) each letter of credit issued by the Issuing Bank for the
account of the Borrower pursuant to Section 2.1(c) hereof.
"Facility Letter of Credit Obligations" means, at any time, the sum of
-------------------------------------
(x) the maximum amount then available to be drawn under all Facility Letters of
Credit outstanding at such time (assuming the occurrence of, and compliance
with, all conditions for drawing) plus (y) the aggregate of all unpaid
Reimbursement Obligations at such time.
"Federal Funds Rate" means, for any period, a fluctuating interest
------------------
rate per annum equal for each day during such period to the weighted average
(rounded upwards, if necessary, to the nearest 1/100 of one percent) of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which
-11-
<PAGE>
is a Business Day, the average (rounded upwards, if necessary, to the nearest
1/100 of one percent of the quotations for such day on such transactions re-
ceived by the Agent from three Federal funds brokers of recognized standing
selected by the Agent.
"Fees" means, collectively, the Agent's Fee, the Commitment Fee, the
----
Co-Lead Managers' Fees, the Participation Fees, Letter of Credit Fee and the
Issuing Bank's Fee.
"Fixed Charges Coverage Ratio" means, for any period, the ratio
----------------------------
determined at the end of such period of (i) Operating Cash Flow for such period
to (ii) Consolidated Fixed Charges for such period.
- - - - - - - - - --
"Floor Plan Financing" means the extension of credit terms by a
--------------------
manufacturer or vendor of computer products to the Borrower or one or more
Restricted Subsidiaries in connection with the sale by such manufacturer or ven-
dor of such computer products which payables are secured by the inventory pur-
chased thereby of the Borrower or the Restricted Subsidiary to which credit has
been extended (but that is secured by no other assets, except (a) proceeds of
such inventory (within the meaning of the Uniform Commercial Code in effect in
the relevant jurisdiction) and (b) Liens on certain assets of Businessland and
Extel/JWP Information Systems, Inc. pursuant to an existing arrangement with IBM
Credit Corporation.
"Foreign Restricted Subsidiary" means any Foreign Subsidiary, other
-----------------------------
than an Unrestricted Subsidiary.
"Foreign Subsidiary" means any Subsidiary of the Borrower identified
------------------
as such on Schedule 1.1-D and, in addition, any Subsidiary acquired, incor-
porated or otherwise established by the Borrower or any of its Subsidiaries
after the Restatement Date which is organized under the laws of a jurisdiction
other than the United States of America, any state thereof or the District of
Columbia.
"Fully Secured" means, with respect to any Facility Letter of Credit
-------------
that has been issued for the account of the Borrower hereunder but not yet drawn
in full, that the contingent obligation of the Borrower to reimburse the Issuing
Bank for any such drawing thereafter made shall be secured by cash collateral
specifically held by the Fleet Bank, for and on behalf of the Agent, the Issuing
Bank and the Lenders, for such purposes in an amount equal to the undrawn
amount of such Facility Letter of Credit or otherwise be secured in a manner
acceptable to the Agent and the Issuing Bank.
-12-
<PAGE>
"Funded Debt" of any Person means Debt of such Person which by its
-----------
terms or by the terms of any instrument or agreement relating thereto matures,
or which is otherwise payable or unpaid, more than one year from, or is directly
or indirectly renewable or extendible at the option of the debtor to a date more
than one year (including an option of the debtor under a revolving credit or
similar agreement (including, without limitation, Capitalized Leases) obligating
the lender or lenders to extend credit over a period of more than one year)
from, the date of creation thereof. In the case of the Water Companies, Funded
Debt also means and includes the aggregate voluntary or involuntary liquidation
price (whichever is greater) of all preferred shares of the Water Companies
held by any Person other than the Borrower or a Restricted Subsidiary.
"Funded Debt Agreement" means any agreement or instrument evidencing
---------------------
or pursuant to which there has been issued or incurred any outstanding Funded
Debt (other than the Loans).
"GAAP" means generally accepted accounting principles in the United
----
States of America as in effect from time to time.
"Hazardous Materials" means materials listed in 49 C.F.R. (S) 172.101,
-------------------
materials defined as hazardous pursuant to Section 101(14) of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, and
any flammable, explosive or radioactive materials, hazardous or toxic wastes or
substances, petroleum or petroleum distillates or asbestos or material
containing asbestos or similar materials or any other materials or substances
which constitute hazardous or toxic material under applicable federal, state or
local Environmental Laws.
"Indemnified Party" has the meaning specified in Section 8.4(b).
-----------------
"Initial Lender" means each Lender party to this Agreement as of the
--------------
date of this Agreement.
"Insufficiency" means, with respect to any Plan, the amount, if any,
-------------
of its unfunded benefit liabilities within the meaning of Section 4001(a)(18) of
ERISA.
"Insurance Letters of Credit" means letters of credit issued in con-
---------------------------
nection with insurance programs in favor of insurers providing casualty or prop-
erty insurance for the Borrower or any Restricted Subsidiary, for which the Bor-
rower has established reserves in accordance with GAAP.
-13-
<PAGE>
"Integrated Debt and Lien Basket Amount" means, at any time of
--------------------------------------
determination thereof, the sum of (without duplication) (a) the amount of Funded
Debt of Restricted Subsidiaries (other than Excluded Debt) plus (b) the amount
----
of Debt outstanding pursuant to Section 5.2(a)(xi), plus (c) the amount of Debt
----
secured by Liens pursuant to Section 5.2(b)(vii), plus (d) the excess of (i) the
----
aggregate face amount of receivables at any time transferred in connection with
any Accounts Receivable Financing over (ii) the amount received for such
transfer (including any reserve for bad debt and retained interest in respect of
such accounts receivable, but excluding any amount accounted for as interest
expense or loss on sale), plus (e) the amount of retained loss exposure in any
----
Accounts Receivable Financing to the extent not included in clause (d), plus (f)
----
an amount calculated by reference to the specified percentage of the face amount
of each guarantee outstanding pursuant to Section 5.2(c)(ii), such amount to be
determined as set forth therein; the aggregate of the foregoing may not exceed
20% of Consolidated Total Capitalization at any time.
"Intercompany Debt" means any Debt of the Borrower or any of its
-----------------
Restricted Subsidiaries which is owing to the Borrower or any of its Wholly-
Owned Restricted Subsidiaries.
"Investment" in any Person means all investments by stock purchase,
----------
capital contribution, loan, advance, guarantee of any Debt or creation or
assumption of any other liability in respect of any Debt of such Person, or
otherwise.
"Issuing Bank" has the meaning specified in the preamble to this
------------
Agreement.
"Issuing Bank's Fee" has the meaning specified in Section 2.4(c).
------------------
"L/C Cash Collateral Account" means a special cash collateral account
---------------------------
maintained at an office of Fleet Bank (for so long as Fleet Bank shall be the
Agent, and thereafter at an office of the successor Agent) in the name of, and
under the sole dominion and control of, the Agent for the benefit of the Issuing
Bank and the Lenders.
"L/C Related Documents" has the meaning specified in Section
---------------------
2.3(c)(i).
"Lenders" has the meaning specified in the preamble to this Agreement.
-------
-14-
<PAGE>
"Lender's Available Commitment" means, as to each Lender on any date
-----------------------------
of determination thereof, such Lender's Commitment minus the sum of (i) the
-----
principal amount outstanding on such date of all Loans made by such Lender and
(ii) such Lender's Pro Rata Share of Facility Letter of Credit Obligations on
such date.
"Lending Office" means, with respect to each Lender, the office of
--------------
such Lender specified as its Lending Office in Schedule 8.2 or in the Assignment
and Acceptance or Additional Lender Agreement pursuant to which it became a
Lender, or such other office of such Lender as such Lender may from time to time
specify to the Borrower and the Agent.
"Letter of Credit Facility" has the meaning specified in Section
-------------------------
2.1(c)(i).
"Letter of Credit Fee" has the meaning specified in Section 2.3(d).
--------------------
"Lien" means any lien, security interest or other charge or encum-
----
brance of any kind, or any other type of preferential arrangement having the
same effect as a lien, security interest or other charge or encumbrance of any
kind, including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance on title
to real property.
"Loans" means (a) all outstanding Loans (including Swingline Loans)
-----
made by the Lenders under (and as defined in) the Original Credit Agreement and
(b) all loans and advances made by the Lenders pursuant to Article II hereof.
"Loan Documents" means, collectively, this Agreement, the Notes, and
--------------
each Pledge Agreement.
"Major Plan" means, at any time, a Plan (a) the value of whose assets,
----------
as of the most recent valuation thereof, exceeds $30,000,000 or (b) that has an
Insufficiency at such time in excess of $2,500,000.
"Margin Regulations" means Regulations G, T, U and X of the Board of
------------------
Governors of the Federal Reserve System and any successor regulations thereto,
as in effect from time to time.
"Margin Stock" means "margin stock" as defined in Regulation U of the
------------
Board of Governors of the Federal Reserve System and any successor regulations
thereto, as in effect from time to time.
-15-
<PAGE>
"Multiemployer Plan" means a multiemployer plan, as defined in Section
------------------
4001(a)(3) of ERISA and subject to Title IV thereof, to which the Borrower or
any ERISA Affiliate is making or accruing an obligation to make contributions,
or has within any of the preceding five plans years made or accrued an
obligation to make contributions, such plan being maintained pursuant to one or
more collective bargaining agreements.
"Multiple Employer Plan" means a single employer plan, as defined in
----------------------
Section 4001(a)(15) of ERISA and subject to Title IV thereof, that (a) is main-
tained by the Borrower or an ERISA Affiliate and at least one Person other than
the Borrower and its ERISA Affiliates or (b) was so maintained previously, but
is not currently maintained by the Borrower or its ERISA Affiliates, and in
respect of which the Borrower or an ERISA Affiliate would still have liability
under Section 4064 or 4069 of ERISA in the event such plan has been or were to
be terminated.
"Net Amount of Restricted Investments" as at any date of determin-
------------------------------------
ation shall mean the outstanding amount of Restricted Investments existing on
such date which have been made by the Company and its Restricted Subsidiaries
subsequent to June 30, 1992. In computing the Net Amount of Restricted
Investment in any Person, the outstanding amount thereof shall be the amount
originally actually invested, net of any return of capital, and disregarding any
increases or decreases in value, or write-ups, write-downs or write-offs of the
Restricted Investment concerned.
"Net Cash Proceeds" means Cash Proceeds less the sum of (a) all costs
----------------- ----
and expenses (including brokers', advisers' and underwriters' fees and
commissions) paid or payable in connection with the transaction from which such
Cash Proceeds are realized, (b) all sales and transfer taxes, if any, payable in
connection with such transaction and (c) in the case of any sale, transfer or
other disposition of assets, all Debts of the Borrower or the relevant
Subsidiary required to be discharged with such Cash Proceeds in order to
consummate such transaction.
"Note" and "Notes" have the meanings specified in Section 2.1(b).
---- -----
"Notice of Borrowing" has the meaning specified in Section 2.2(a)(ii).
-------------------
"Notice of Issuance" has the meaning specified in Section 2.3(a)(i).
------------------
-16-
<PAGE>
"Obligation" means, with respect to any Person, any obligation of such
----------
Person of any kind, including, without limitation, any obligation to make any
payment for any reason, whether or not such obligation is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed,
legal, equitable, secured or unsecured, and whether or not such obligation is
discharged, stayed or otherwise affected by any proceeding referred to in
Section 6.1(e). Without limiting the generality of the foregoing, the
Obligations of the Borrower under or in respect of the Loan Documents include
(a) all principal, interest, Letter of Credit Fees, charges, expenses, fees,
reasonable attorneys' fees and disbursements, indemnities and any other amounts
payable by the Borrower under any Loan Document and (b) any amount in respect
of any of the foregoing that the Agent or any Lender, in its sole discretion,
may elect to pay or advance on behalf of the Borrower after the occurrence and
during the continuance of an Event of Default. Upon any payment or advance by
the Agent or any Lender of any amount referred to in the preceding sentence,
such amount shall, until repaid by the Borrower, constitute an outstanding Loan
for all purposes under this Agreement.
"OECD" means the Organization for Economic Cooperation and
----
Development.
"Operating Cash Flow" means, for any period in respect of the Bor-
-------------------
rower and its Restricted Subsidiaries, EBIT for such period plus, to the extent
----
deducted in computing Consolidated Net Income for such period, the sum of (a)
all amortization, depreciation and other non-cash charges of the Borrower and
its Restricted Subsidiaries for such period (other than any such amortization,
depreciation and charges relating to discontinued operations) and (b) all lease
expenses (other than expenses in respect of Capitalized Leases and lease expense
relating to discontinued operations) of the Borrower and its Restricted
Subsidiaries accrued in such period.
"Original Credit Agreement" has the meaning specified in the first
-------------------------
Recital to this Agreement.
"Other Taxes" has the meaning specified in Section 2.11(b).
-----------
"Outstanding Credit" means, at any date of determination, the sum on
------------------
such date of (a) the aggregate amount of all Outstanding Loans, plus (b) the
Facility Letter of Credit Obligations.
"Outstanding Loans" means, at any date of determination thereof, the
-----------------
principal amount then outstanding of all Loans.
-17-
<PAGE>
"Parent" of any Person means any corporation, partnership, joint
------
venture, trust or estate as to which such Person is a Subsidiary.
"Participation Fee" has the meaning specified in Section 2.4(d).
-----------------
"PBGC" means the Pension Benefit Guaranty Corporation, or any
----
successor agency or entity performing substantially the same functions.
"Permitted Investments" means (a) securities with maturities of one
---------------------
year or less from the date of acquisition issued or fully guaranteed or insured
by the United States Government or any agency thereof, (b) certificates of
deposit and Eurodollar time deposits with maturities of one year or less from
the date of acquisition and overnight bank deposits of any Lender or of any
commercial bank having capital and surplus in excess of $500,000,000 (or the
foreign currency equivalent thereof) and the long-term debt of which is rated A
or better by Standard & Poor's Corporation or Moody's Investors Service, Inc.,
(c) repurchase obligations of any Lender or of any commercial bank satisfying
the requirements of clause (b) of this definition, having a term of not more
than 30 days with respect to securities issued or fully guaranteed or insured by
the United States Government, (d) commercial paper or demand notes having a
maturity of 270 days or less of an issuer rated at least A-1 by Standard &
Poor's Corporation or P-1 by Moody's Investors Service, Inc., (e) securities
with maturities of one year or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States or by
any political subdivision or taxing authority of any such state, commonwealth or
territory or by any foreign government, the securities of which state,
commonwealth, territory, political subdivision, taxing authority or foreign
government (as the case may be) are rated at least A or better by Standard &
Poor's Corporation or A by Moody's Investors Service, (f) securities with
maturities of one year or less from the date of acquisition backed by standby
letters of credit issued by any Lender or any commercial bank satisfying the
requirements of clause (b) of this definition or (g) shares of any money market
mutual or similar fund that is listed in Schedule 1.1-E hereto (unless and until
the Agent notifies the Borrower that any such fund no longer constitutes a
Permitted Investment) or that otherwise is acceptable to the Agent.
"Permitted Liens" means (a) Liens for taxes, assessments and
---------------
governmental charges or levies to the extent not required to be paid under Sec-
tion 5.1(b) hereof; (b) Liens imposed by law, such as materialmen's, mechanics',
carriers', workmen's and repairmen's Liens and other similar Liens arising in
the ordinary course of business securing obligations that are not overdue for a
period of more than 30 days or which are being contested in good faith and by
proper proceedings and as to which appropriate reserves are being maintained;
-18-
<PAGE>
(c) pledges or deposits to secure obligations under workers' compensation laws
or similar legislation or to secure public or statutory obligations (other than
under ERISA); (d) easements, rights of way and other encumbrances on title to
real property that do not render title to the property encumbered thereby
unmarketable or materially adversely affect the use of such property for its
present purposes; (e) deposits to secure the performance of bids, trade
contracts (other than for Debt), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of like nature incurred in
the ordinary course of business, the loss of which deposits would not be
reasonably likely to have a material adverse effect on the business, condition
(financial or otherwise), operations, performance or properties of the Borrower
and its Restricted Shareholders, taken as a whole, or the Borrower; (f) Liens in
favor of the United States of America for amounts paid to the Borrower or any of
its Restricted Subsidiaries as progress payments under government contracts
entered into by it; (g) attachment, judgment or other similar liens arising in
connection with court or arbitration proceedings securing not more than
$50,000,000 in aggregate amount, provided that the same have been discharged,
--------
or that execution or enforcement thereof has been stayed pending appeal; (h)
other Liens incidental to the conduct of the business of the Borrower and its
Restricted Subsidiaries or the ownership of any of their respective assets and
not incurred to secure Debt, which Liens do not in any case materially detract
from the value of the property subject thereto or interfere with the ordinary
conduct of the business of the Borrower or any of its Restricted Subsidiaries.
"Person" means an individual, partnership, corporation, joint stock
------
company, trust (including a business trust), unincorporated association, joint
venture or other entity, or a government or any political subdivision or agency
thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
----
"Pledge Agreement" has the meaning specified in Section 3.1(c).
----------------
"Pledgor" means each record owner of the stock of each Designated
-------
Subsidiary.
"Principal Subsidiary" means any Restricted Subsidiary (other than a
--------------------
Foreign Restricted Subsidiary or a Restricted Subsidiary that is a holding com-
pany for the holding stock of one other Restricted Subsidiary and having other
assets of less than $100,000) as to which either (i) the total tangible assets
thereof comprised 5% or more of Consolidated Total Tangible Assets or (ii) EBIT
attributable thereto comprised 5% or more of EBIT for the Borrower and all
-19-
<PAGE>
Restricted Subsidiaries on a consolidated basis; in each case on the last day of
the fiscal quarter ended June 30, 1992 as set forth in the financial statements
delivered pursuant to Section 3.1(b)(viii) or on the last day of any fiscal
quarter thereafter.
"Project Subsidiary" means any Subsidiary of the Borrower created for
------------------
the sole purpose of financing all or any part of the purchase price of the
acquisition or cost of construction or improvement of property, projects or
facilities acquired, constructed or improved by such Subsidiary and operating
the same.
"Pro Rata Share" means, as to any Lender, such Lender's Commitment,
--------------
expressed as a percentage of the Facility, each as in effect from time to time.
"Reduction Date" shall mean (a) January 5, 1993, April 15, 1993 and
--------------
June 30, 1993 and (b) each other date on which there occurs a mandatory
reduction of the Facility.
"Reference Rate" means the rate of interest publicly announced from
--------------
time to time by Fleet Bank as its "prime rate." The "prime rate" is a rate set
by Fleet Bank upon various factors, including Fleet Bank's costs and desired
return, general economic conditions and other factors, and is used as a
reference point for pricing some loans. Fleet Bank may price loans at, above or
below its "prime rate." Any change in the Reference Rate shall take effect on
the date specified in the public announcement by Fleet Bank of a change in its
"prime rate." If Fleet Bank ceases to be the Agent, "Reference Rate" shall mean
the rate of interest publicly announced from time to time by the successor Agent
as its reference rate, prime rate or peg rate for commercial lending.
"Register" has the meaning specified in Section 8.7(c).
--------
"Reimbursement Obligation" has the meaning specified in Section
------------------------
2.3(b)(i).
"Required Amount" has the meaning specified in Section 5.2(e)(ii).
---------------
"Required Lenders" means at any time Lenders (other than Affiliates of
----------------
the Borrower) having at least 51% of the total Commitments.
-20-
<PAGE>
"Restatement Date" means the date on which a counterpart of this
----------------
Agreement is executed by the Borrower and the Agent and the Agent shall have
received counterparts of this Agreement executed by each Lender.
"Restatement Effective Date" means the date on which the Agent
--------------------------
delivers to the Borrower a Notice of Effectiveness stating that the "Restatement
Effective Date" has occurred, which date shall in no event be prior to the
Restatement Date.
"Restricted Investment" means any Investment, including, without
---------------------
limitation, any Investment in an Unrestricted Subsidiary, other than (a) any
Investment in a Permitted Investment; (b) any Investment in a Restricted
Subsidiary or a Person that, upon the making of such Investment, becomes a
Restricted Subsidiary, provided, however, that any Investment by the Company or
-------- -------
a Restricted Subsidiary in a Restricted Subsidiary which subsequently becomes an
Unrestricted Subsidiary shall be deemed to be a Restricted Investment as of the
date such Restricted Subsidiary becomes an Unrestricted Subsidiary; and (c) any
Investment by the Borrower or any of its Subsidiaries as a co-venturer in a
joint venture or pooling of efforts for a limited or fixed duration for the
construction of any specific project or series of related specific projects in
the ordinary course of business of the Borrower and consistent with current
arrangements or prior practices as of the date of this Agreement of the
Borrower or such Subsidiary; provided that it is intended upon completion of
--------
the construction of such specific project or series of related specific
projects, that such joint venture or pooling of efforts shall be disbanded.
"Restricted Payment" means (i) the purchase, redemption, retirement,
------------------
defeasement or other acquisition for value, of any of the capital stock or any
warrants, rights or options to acquire such capital stock, now or hereafter
outstanding, of the Borrower or any Restricted Subsidiary, or (ii) the return of
any capital to the stockholders of the Borrower or any Restricted Subsidiary
(other than to the Borrower or any Wholly-Owned Restricted Subsidiary), as such,
or any dividend or other distribution of assets, capital stock, warrants,
rights, options, obligations or securities to the stockholders of the Borrower
or any Restricted Subsidiary (other than to the Borrower or any Wholly-Owned
Restricted Subsidiary), as such, or (iii) payment by the Borrower or any
Restricted Subsidiary of any management or administrative or other fee to any
Affiliate of the Borrower (other than any Wholly-Owned Restricted Subsidiary)
that is, directly or indirectly, a stockholder of the Borrower (other than usual
and customary payments to directors and officers of the Borrower or any of its
Subsidiaries consistent with the practice of the Borrower prior to the date of
this Agreement).
-21-
<PAGE>
"Restricted Subsidiary" means any Subsidiary of the Borrower other
---------------------
than an Unrestricted Subsidiary.
"Sale and Leaseback Transaction" has the meaning specified in Section
------------------------------
5.2(g).
"Short-Term Debt" of any Person means any Debt of such Person other
---------------
than Funded Debt.
"Single Employer Plan" means a single employer plan, as defined in
--------------------
Section 4001(a)(15) of ERISA and subject to Title IV thereof, that (a) is main-
tained by the Borrower or an ERISA Affiliate and no Person other than the Bor-
rower and its ERISA Affiliates or (b) was so maintained previously, but is not
currently maintained by the Borrower or its ERISA Affiliates, and in respect of
which the Borrower or an ERISA Affiliate would still have liability under
Section 4069 of ERISA in the event such plan has been or were to be terminated.
"Standby Letter of Credit" means any Facility Letter of Credit, other
------------------------
than a Trade Letter of Credit.
"Subsidiary" of any Person means any corporation, partnership, joint
----------
venture, trust or estate of which (or in which ) more than 50% of:
(a) the outstanding capital stock having Voting Power to elect a
majority of the Board of Directors of such corporation (irrespective of
whether at the time capital stock of any other class or classes of such
corporation shall or might have Voting Power upon the occurrence of any
contingency);
(b) the interest in the capital or profits of such partnership or
joint venture; or
(c) the beneficial interest of such trust or estate;
is at the time directly or indirectly owned by such Person, by such Person and
one or more of its Subsidiaries or by one or more of such Person's Subsidiaries.
"Taxes" has the meaning specified in Section 2.12(a).
-----
"Termination Date" means September 17, 1993 (or, if such date is not a
----------------
Business Day, the next preceding Business Day) or the earlier date of term-
-22-
<PAGE>
ination in whole of the Commitments of all the Lenders pursuant to Section 2.5
or 6.1.
"Third Party Letter of Credit" means any letter of credit issued for
----------------------------
the account of the Borrower or any of its Restricted Subsidiaries other than any
Facility Letter of Credit.
"Third Party Letter of Credit Obligations" means, at any time, the sum
----------------------------------------
of (x) the maximum aggregate amount then available to be drawn under all Third
Party Letters of Credit outstanding at such time (assuming the occurrence of,
and compliance with, all conditions for drawing) plus (y) the aggregate amount
----
of unpaid reimbursement obligations resulting from drawings under Third Party
Letters of Credit.
"Trade Letter of Credit" means any Facility Letter of Credit in sup-
----------------------
port of obligations incurred in the ordinary course of business for the purchase
of goods or services.
"Trade Letter of Credit Agreement" has the meaning specified in
--------------------------------
Section 2.3(a)(i).
"Unrestricted Subsidiary" means:
-----------------------
(a) each Project Subsidiary of the Borrower which is so designated in
Schedule 1.1-F;
(b) each Project Subsidiary which is created or acquired by the
Borrower subsequent to the date of this Agreement and which shall be
designated by resolution of the Board of Directors of the Borrower and by
notice to the Agent at the time of such creation or acquisition as an
Unrestricted Subsidiary; and
(c) any other Subsidiary of the Borrower which shall be irrevocably
redesignated by resolution of the Board of Directors of the Borrower and
notice to the Agent as an Unrestricted Subsidiary, provided that the
--------
Required Lenders shall have consented in writing to such redesignation.
Any Unrestricted Subsidiary described in clause (a) or (b) above may
be irrevocably redesignated by resolution of the Board of Directors of the Bor-
rower and notice to the Agent as a Restricted Subsidiary, provided that, the
--------
Borrower shall not so redesignate any such Subsidiary unless on the date on
which the Borrower proposes to make any such redesignation, and after giving
-23-
<PAGE>
effect thereto, no Default shall have occurred and be continuing. All Liens,
Debt and Investments and other obligations of an Unrestricted Subsidiary which
is redesignated a Restricted Subsidiary shall be deemed to be incurred or made
at the time of such redesignation.
An Unrestricted Subsidiary may not itself have Subsidiaries, unless
such Subsidiaries qualify as, and are designated as, Unrestricted Subsidiaries
pursuant to clause (a), (b) or (c) above.
"Voting Power" means, with respect to securities issued by any Person,
------------
the combined voting power of all securities of such Person which are issued and
outstanding at the time of determination and which are entitled to vote in the
election of directors of such Person, other than securities having such power
only by reason of the happening of a contingency.
"Water Companies" means Jamaica Water Securities Corp., Jamaica Water
---------------
Supply Company and Sea Cliff Water Company, collectively, but only so long as
they are Subsidiaries of the Borrower.
"Water Company Investments" shall mean Investments made by the Company
-------------------------
and its Restricted Subsidiaries in the Water Companies subsequent to December
31, 1991.
"Welfare Plan" means a welfare plan, as defined in Section 3(1) of
------------
ERISA.
"Wholly-Owned" means, with respect to any Subsidiary, that all of the
------------
shares of stock entitled, under ordinary circumstances, to vote for the elec-
tion of directors of such Subsidiary (other than directors' qualifying shares)
are owned by a single Person.
"Withdrawal Liability" has the meaning given such term under Part 1 of
--------------------
Subtitle E of Part IV of ERISA.
SECTION 1.2. Computation of Time Periods. In this Agreement in the
---------------------------
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding".
-24-
<PAGE>
SECTION 1.3. Accounting Terms and Computation of Financial
---------------------------------------------
Information.
- - - - - - - - - -----------
(a) GAAP. All accounting terms not specifically defined herein shall
----
be construed in accordance with GAAP.
(b) GAAP for Financial Covenants. All computations determining
----------------------------
compliance with financial covenants or terms, including definitions used
therein, shall be made in accordance with generally accepted accounting
principles in effect at the time of preparation of, and in conformity with those
used to prepare, the historical financial statements delivered to the Agent
pursuant to Section 5.1(o). If at any time the computations for determining
compliance with financial covenants or provisions relating thereto utilize
generally accepted accounting principles different than those being utilized on
the date of this Agreement, the parties hereto agree to enter into good faith
negotiations promptly in order to modify such financial covenants or provisions
so that they shall have substantially the same economic meaning as such
financial covenants or provisions have on the date of this Agreement.
(c) Certain Accounting Principles. All references herein to "the
-----------------------------
Borrower and its Restricted Subsidiaries" for the purposes of computing the con-
solidated financial position, results of operations or other balance sheet or
financial statement items shall be deemed to include only the Borrower and its
Restricted Subsidiaries as separate legal entities (and all such computations
shall be adjusted for minority interests, as appropriate) and, unless otherwise
provided herein, shall not include the position, operations or other such items
of any other Person, whether by way of the equity method of accounting or
otherwise (whether or not, in any particular instance, such accounting
treatment would be in accordance with GAAP). For purposes of determining
operating results, net worth or assets of the Borrower or any Subsidiary, no
such results, net worth or assets shall be included in any computation hereunder
to the extent the assets involved are located in countries which impose
currency controls or other restrictions on the repatriation of funds to the
United States, except those which in practice do not materially impede the
remission of such funds to the United States.
SECTION 1.4. Construction. References herein to the plural form
------------
include the singular, and the singular include the plural; the word "including"
is not limiting; and the word "or" is not exclusive. The words "hereof,"
"herein," "hereby" and "hereunder" refer to this Agreement as a whole (but not
to the Original Credit Agreement) and not to any particular provision of this
Agreement. Article, section, exhibit and schedule references are to articles
and sections of,
-25-
<PAGE>
and exhibits and schedules to, this Agreement, unless otherwise expressly
indicated.
ARTICLE II
AMOUNTS AND TERMS OF THE LOANS
AND THE FACILITY LETTERS OF CREDIT
SECTION 2.1. The Facility.
------------
(a) Loans. Each Lender severally agrees, upon the terms and subject
-----
to the conditions hereinafter set forth, to make loans to the Borrower from time
to time on any Business Day during the period from the Restatement Effective
Date until the Termination Date, in an amount which does not exceed the lesser
of (I) such Lender's Available Commitment or (II) such Lender's Pro Rata Share
of the Facility in effect at such time. No Lender shall be obligated to make
any Loan to the Borrower in excess of the amount described in this Section
2.1(a). The aggregate amount of (i) the Outstanding Loans and (ii) all Facility
Letter of Credit Obligations shall in no event, at any time, exceed the amount
of the then-effective Facility. Each Borrowing (i) shall be in an aggregate
amount not less than $5,000,000 and in integral multiples of $500,000 in excess
thereof, and (ii) shall consist of Loans made on the same day by the Lenders
ratably according to their respective Commitments. Within the limits of the
Facility and each Lender's Commitment, and subject to the limits referred to
above, the Borrower may borrow under this Section 2.1(a), prepay pursuant to
Section 2.8(a) and reborrow under this Section 2.1(a). No Lender shall be
required to make any further Loans under the Original Credit Agreement. All
Loans shall be denominated in Dollars.
(b) Notes. Each Lender's Loan shall be evidenced by promissory
-----
notes, substantially in the form of Exhibit A hereto (each a "Note" and
----
collectively the "Notes"), executed and delivered by the Borrower, each such
-----
Note delivered to a Lender to be payable to the order of such Lender and to be
dated the date hereof (or (i) in the case of any Note issued to an Additional
Lender, the date of the Additional Lender Agreement of such Additional Lender
and (ii) in the case of a Note or Notes issued pursuant to Section 8.7(c), the
date of issuance thereof) and to be in the amount of such Lender's Commitment on
the Restatement Effective Date (or in the case of an Additional Lender, such
Additional Lender's Commitment specified in its Additional Lender Agreement);
provided, however, that until a Lender receives such Note from the Borrower,
- - - - - - - - - -------- -------
such Lender's Loan shall be evidenced by the promissory note (the "Original
--------
Note") delivered to such Lender
-26-
<PAGE>
by the Borrower pursuant to the Original Credit Agreement. The Borrower hereby
authorizes each Lender to record the date and amount of each Loan made by such
Lender to the Borrower (including the amounts of such Loans outstanding on the
Restatement Effective Date), and the date and amount of each payment or
prepayment of the principal thereof, on the schedule attached to the Note issued
to such Lender (or a continuation of such schedule) and hereby agrees that each
such notation shall constitute prima facie evidence of the accuracy thereof;
----- -----
provided, however, that failure by a Lender to make such notation shall not
- - - - - - - - - -------- -------
affect the obligation of the Borrower to repay all Loans made by such Lender to
the Borrower, together with all interest thereon; or any other obligation of the
Borrower to such Lender hereunder or under the Note issued to such Lender.
(c) Facility Letters of Credit.
--------------------------
(i) The Borrower may request the Issuing Bank, on the terms and
conditions hereinafter set forth, and in the manner provided in Section
2.3(a), to issue, and the Issuing Bank shall, if so requested, issue
letters of credit in Dollars for the account of the Borrower from time to
time on any Business Day from the Restatement Effective Date until 60 days
before the Termination Date (or, if the Termination Date occurs as a result
of termination in whole of the Commitments pursuant to Section 2.5, until
notice thereof is given by the Borrower pursuant to Section 2.5). Facility
Letter of Credit Obligations shall not at any time exceed in the aggregate
the lesser of (I) $50,000,000 (the "Letter of Credit Facility") and (II)
-------------------------
together with all Third Party Letter of Credit Obligations (other than
trade letters of credit, except to the extent of unpaid reimbursement
obligations with respect thereto), $100,000,000; provided, however, that
-------- -------
Third Party Letter of Credit Obligations other than in connection with
Insurance Letters of Credit may not at any time exceed $15,000,000. No
Facility Letter of Credit shall be issued if the maximum amount available
for drawing under such proposed Facility Letter of Credit, when added to
the other Facility Letter of Credit Obligations then outstanding, would
exceed the lesser of (A) the Letter of Credit Facility or (B) the Available
Facility Amount then in effect, or if the issuance thereof would result in
a violation of the immediately preceding sentence of this clause (i). Each
Facility Letter of Credit shall be deemed to utilize the Facility in an
aggregate amount equal to the sum of (x) the amount available from time to
time for drawing thereunder (assuming compliance with all conditions to
drawing) and (y) all unpaid Reimbursement Obligations relating thereto.
(ii) No Facility Letter of Credit shall have an expiration date
(including all rights of renewal) later than the earlier of (x) 364 days
(or,
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<PAGE>
in the case of Trade Letters of Credit, 180 days) from the issuance thereof
or (y) 10 days before the Termination Date.
(iii) Immediately upon the issuance of each Facility Letter of
credit (including letters of credit issued pursuant to Article III of the
Original Credit Agreement), the Issuing Bank (or the LOC Bank in the
Original Credit Agreement) shall be deemed to have sold and transferred to
each Lender, and each Lender shall be deemed to have purchased and received
from the Issuing Bank, in each case, except as expressly provided herein,
irrevocably and without any further action by any party, an undivided
interest and participation in any such Facility Letter of Credit, each
drawing thereunder and the obligations of the Borrower under this Agree-
ment in respect thereof in an amount equal to the Lender's Pro Rata Share
of (A) the maximum amount available to be drawn under such Facility Letter
of Credit (assuming compliance with all conditions to drawing) plus (B) all
interest accrued and unpaid on the Reimbursement Obligations with respect
to such Facility Letter of Credit; provided, however, that no Lender shall
-------- -------
be obligated to purchase or be deemed to have purchased any participating
interest in any such Facility Letter of Credit if such Lender notifies the
Issuing Bank and the Agent in writing, prior to the issuance of such
Facility Letter of Credit, of the existence of any circumstance described
in Section 2.1(c)(iv) with respect to such Lender.
(iv) In addition to satisfaction of the conditions precedent set
forth in Sections 3.1 and 3.2 hereof, the Issuing Bank shall not be obli-
gated to issue any Facility Letter of Credit hereunder if, as of the
proposed date of issuance of such Facility Letter of Credit, any order,
judgment or decree of any governmental authority, central bank or
comparable agency shall purport by its terms to enjoin or restrain the
Issuing Bank from issuing the Facility Letter of Credit or any Lender from
participating in such Facility Letter of Credit or any law, rule or
regulation applicable to the Issuing Bank or any Lender or change therein
or any change in the interpretation thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof or any request or directive (whether or not having
the force of law) from any governmental authority, central bank or
comparable agency with jurisdiction over the Issuing Bank or any Lender,
shall prohibit or otherwise prevent the Issuing Bank from issuing letters
of credit generally or such Facility Letter of Credit, or prohibit or
otherwise prevent such Lender from participating in letters of credit
generally or such Facility Letter of Credit, or shall impose upon the
Issuing Bank or such Lender with respect to that Facility Letter of Credit
any restriction or unreimbursed reserve requirement not in effect
-28-
<PAGE>
on the Restatement Date or any unreimbursed cost or expense which was not
applicable, in effect or known to the Issuing Bank or such Lender on or as
of the Restatement Date and which the Issuing Bank or such Lender in good
faith deems materially adverse to it in respect of circumstances known to
it as of the Restatement Date.
(v) Within the limits of the Letter of Credit Facility, and
subject to the limits referred to above, the Borrower may request the
issuance of Facility Letters of Credit under this Section 2.1(c), repay any
Reimbursement Obligations and any Loans resulting from drawings thereunder
pursuant to Section 2.3(b) and request the issuance of additional Facility
Letters of Credit under this Section 2.1(c).
SECTION 2.2. Making of the Loans.
-------------------
(a) Notice of Borrowing.
-------------------
(i) Each Borrowing shall be made on notice, given not later than
12:00 noon (New York City time) on the Business Day prior to the date of
the proposed Borrowing by the Borrower to the Agent, which shall give to
each Lender prompt notice thereof by telex, telecopier or cable.
(ii) Each notice of a Borrowing shall be made by telephone and
promptly confirmed in writing by telex, telecopier or cable, in
substantially the form of Exhibit B hereto (a "Notice of Borrowing"),
-------------------
specifying therein the requested (A) date of such Borrowing and (B)
aggregate amount of such Borrowing. Each Notice of Borrowing shall be
irrevocable and binding on the Borrower. The Borrower shall indemnify each
Lender against any loss, cost or expense incurred by such Lender as a
result of any failure to fulfill, on or before the date specified in such
Notice of Borrowing, the applicable conditions set forth in Section 3.2
including, without limitation, any loss (including loss of anticipated
profits), cost or expense incurred by reason of the liquidation or
redemption of deposits or other funds acquired by such Lender to fund its
ratable portion of such Borrowing when such Borrowing, as a result of such
failure, is not made on such date.
(b) Authorized Persons. The Borrower shall notify the Agent in
------------------
writing of the names of its officers and employees authorized to request Loans
on behalf of the Borrower and shall provide the Agent with a specimen signature
of each such officer or employee. The Agent shall be entitled to rely
conclusively on such officer's or employee's authority to request Loans on
behalf of the Borrower until the Agent receives written notice to the contrary.
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<PAGE>
(c) Funding. Each Lender shall, before 12:00 noon (New York City
-------
time) on the date of such Borrowing, make available to the Agent at the Agent's
Account, in same day funds, such Lender's ratable portion of such Borrowing.
After the Agent's receipt of such funds and the Agent's good faith determination
that the conditions set forth in Article III have been fulfilled, the Agent will
make such funds available to the Borrower by crediting the Borrower's Account.
Unless the Agent shall have received notice from a Lender prior to the date of
any Borrowing that such Lender will not make available to the Agent such
Lender's ratable portion of such Borrowing, the Agent may assume that such
Lender has made such portion available to the Agent on the date of such Borrow-
ing in accordance with this Section 2.2(c), and the Agent may, in reliance upon
such assumption, make available to the Borrower on such date a corresponding
amount. If and to the extent that such Lender shall not have so made such rat-
able portion available to the Agent, such Lender and the Borrower severally
agree to pay or repay to the Agent, forthwith on demand, such corresponding
amount together with interest thereon, for each day from the date such amount is
made available to the Borrower until the date such amount is paid or repaid to
the Agent, at (i) in the case of the Borrower, the interest rate applicable at
the time to Loans comprising such Borrowing and (ii) in the case of such Lender,
an interest rate per annum equal to the Agent's cost of funds advanced to the
Borrower, as certified to such Lender by the Agent. If such Lender shall pay to
the Agent such corresponding amount, such amount so paid shall constitute such
Lender's Loan as part of such Borrowing for purposes of this Agreement.
(d) Several Obligations. The failure of any Lender to make the Loan
-------------------
to be made by it as part of any Borrowing shall not relieve any other Lender of
its obligation, if any, hereunder to make its Loan on the date of such Borrow-
ing, but no Lender shall be responsible for the failure of any other Lender to
make the Loan to be made by such other Lender on the date of any Borrowing.
(e) Termination of Swingline Commitments. On the Restatement Date,
------------------------------------
the "Swingline Commitments" (as defined in the Original Credit Agreement) shall
terminate permanently.
SECTION 2.3. Issuance of and Other Provisions in Regard to Facility
------------------------------------------------------
Letters of Credit.
- - - - - - - - - -----------------
(a) Request for Issuance.
--------------------
(i) Each Standby Letter of Credit shall be issued or amended
upon notice, given not later than 11:00 a.m. (New York City time) on the
third Business Day prior to the date of the proposed issuance or amend-
-30-
<PAGE>
ment of such Standby Letter of Credit, by the Borrower to the Issuing Bank
and the Agent and the Agent shall provide each Lender with prompt notice
thereof by telex, telecopier or cable. Each Trade Letter of Credit shall
be issued or amended upon notice given in accordance with the terms of any
separate agreement between the Borrower and the Issuing Bank (and the
Borrower shall provide prompt notice thereof to the Agent, which shall
promptly provide notice thereof to the Lenders) providing for the issuance
or amendment of such Trade Letter of Credit pursuant to this Agreement and
containing terms and conditions not inconsistent with this Agreement (a
"Trade Letter of Credit Agreement"), provided that if any such terms and
--------------------------------- --------
conditions are inconsistent with this Agreement, this Agreement shall
control. Each such notice of issuance of a Facility Letter of Credit (a
"Notice of Issuance") shall be by telex, telecopier or cable, specifying
-------------------
therein, in the case of a Standby Letter of Credit, the requested (A) date
of such issuance (which shall be a Business Day), (B) whether such Facility
Letter of Credit is an Insurance Letter of Credit, (C) maximum amount of
such Facility Letter of Credit, the aggregate amount of all Third Party
Letter of Credit Obligations on such date and the aggregate amount of Third
Party Letter of Credit Obligations other than in connection with Insurance
Letters of Credit on such date, (D) expiration date of such Facility
Letter of Credit, (E) name and address of the beneficiary of such Facility
Letter of Credit and (F) form of such Facility Letter of Credit and, in the
case of a Trade Letter of Credit, such other information as shall be re-
quired pursuant to the relevant Trade Letter of Credit Agreement. Subject
to the terms of this Section 2.3 and Section 2.1(c), if the requested terms
of such Facility Letter of Credit are reasonably acceptable to the Issuing
Bank, the Issuing Bank will, upon fulfillment of the applicable conditions
set forth in Article III, make such Facility Letter of Credit available to
the Borrower at its office referred to in Section 8.2 or as otherwise
agreed with the Borrower in connection with such issuance.
(ii) The Issuing Bank shall furnish (A) to the Agent on the
first Business Day of each week a written report summarizing issuance and
expiration dates of Facility Letters of Credit issued during the previous
week and drawings during such week under all Facility Letters of Credit and
(B) to each Lender on the first Business Day of each month a written report
summarizing issuance and expiration dates of Facility Letters of Credit
issued during the preceding month and drawings during such month under all
Facility Letters of Credit and setting forth such Lender's participation
therein.
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<PAGE>
(b) Drawing and Reimbursement.
-------------------------
(i) The Borrower shall reimburse the Issuing Bank for each
amount that the Issuing Bank pays in respect of any draft drawn under any
Facility Letter of Credit not later than 11:00 A.M. on the second Business
Day after payment of such amount by the Issuing Bank under such Facility
Letter of Credit (each such obligation of the Borrower to reimburse the
Issuing Bank in respect of a drawing under a Facility Letter of Credit, a
"Reimbursement Obligation"). Each Reimbursement Obligation owing with
-------------------------
respect to any drawing under any Facility Letter of Credit shall bear
interest, for the account of the Issuing Bank, from the date of payment of
such drawing by the Issuing Bank under such Facility Letter of Credit at
the interest rate for Loans calculated in accordance with Section 2.7(a)
until the date which occurs two (2) Business Days after the date of such
payment by the Issuing Bank, and thereafter, until the date on which such
Reimbursement Obligation is paid in full (whether by the Borrower or by the
Lenders pursuant to Section 2.3(b)(ii)), at the interest rate for past due
Loans calculated in accordance with Section 2.7(b). Accrued interest on
any unpaid Reimbursement Obligation shall be due and payable on the date
that such Reimbursement Obligation is due and payable and thereafter on
demand. All payments of Reimbursement Obligations shall be accompanied by
interest accrued thereon.
(ii) In the event that a Reimbursement Obligation is not paid by
the Borrower by 11:00 a.m. (New York City time) on the date on which it is
due and payable by the Borrower pursuant to Section 2.3(b)(i), the Issuing
Bank shall promptly notify the Agent and the Agent shall promptly notify
each Lender. Each Lender shall, on the first Business Day following such
notification, make a Loan which shall be used to repay the applicable
portion of the Reimbursement Obligation with respect to such Facility
Letter of Credit and all accrued interest thereon (or, if an Event of
Default described in Section 6.1(e) has occurred, each Lender shall pay the
purchase price for its participating interest), in an amount equal to the
amount of its participation in the Reimbursement Obligation relating to
such drawing, and all interest accrued on such Reimbursement Obligation,
for application to reimburse the Issuing Bank (but without any requirement
for compliance with the applicable conditions set forth in Section 2.1(a),
Section 2.2 or Article III) and shall make available to the Agent for the
account of the Issuing Bank, by deposit to the Agent's Account by 12:00
noon (New York City time), in same day funds, the amount of such Loan or
amount of the purchase price of such participating interest.
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<PAGE>
(iii) Promptly after the Issuing Bank receives a payment from the
Borrower on account of a Reimbursement Obligation with respect to a
drawing under a Facility Letter of Credit as to which the Issuing Bank has
received the proceeds of any Loans (or purchases of participating
interests) made by the Lenders pursuant to this Section 2.3(b), it shall
promptly pay to the Agent, and the Agent shall promptly pay to each Lender
that made a Loan (or paid the purchase price for its participating
interest) to fund its participating interest in such Facility Letter of
Credit, an amount equal to such Lender's Pro Rata Share of the amount of
such payment received by the Issuing Bank from the Borrower.
(iv) In determining whether to pay any draft drawn under any
Facility Letter of Credit, the Issuing Bank shall have no obligation to the
Lenders other than to confirm that any documents required to be delivered
under such Facility Letter of Credit appear to have been delivered and that
they appear to comply on their face with the requirements of such Facility
Letter of Credit. No action taken or omitted to be taken by the Issuing
Bank under or in connection with any Facility Letter of Credit, if taken or
omitted to be taken in the absence of willful misconduct or gross negli-
gence, shall result in any liability of the Issuing Bank to any Lender.
(v) The obligations of each Lender to make a Loan to fund its
participating interest (or to pay the purchase price for its participating
interest) in a Facility Letter of Credit under this Section 2.3(b) shall be
irrevocable and not subject to any qualification or exception whatsoever
and shall be made in accordance with the terms and conditions of this
Agreement under all circumstances, including, without limitation, any of
the following circumstances:
(A) failure of the Borrower to satisfy any otherwise applicable
condition to such Lender's obligation to make a Loan set forth in Article
III;
(B) any lack of validity or enforceability of the Original Credit
Agreement, this Agreement or any of the other Loan Documents;
(C) the existence of any claim, set-off, defense or other right
which the Borrower may have at any time against a beneficiary named in a
Facility Letter of Credit or any transferee of any Facility Letter of
Credit (or any Person for whom any such transferee may be acting), the
Agent, the Issuing Bank, any Lender or any other Person, whether in
connection
-33-
<PAGE>
with the Original Credit Agreement, this Agreement, any Facility Letter of
Credit, the transactions contemplated herein or any unrelated transactions;
(D) any draft, certificate or any other document presented under
the Facility Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(E) the surrender or impairment of any security for the per-
formance or observance of any of the terms of any of the Loan Documents;
or
(F) (i) any set-off, counterclaim, recoupment, defense or other
right which such Lender may have against the Issuing Bank, the Borrower or
any other Person for any reason whatsoever; (ii) the occurrence or
continuance of a Default; (iii) any adverse change in the condition
(financial or otherwise) of the Borrower; (iv) any breach of this Agreement
by the Borrower or any other Lender; or (v) any other circumstance, hap-
pening or event whatsoever, whether or not similar to any of the fore-
going.
(vi) If any payment received on account of any Reimbursement
Obligation with respect to a Facility Letter of Credit and distributed to a
Lender as a participant therein under this Section 2.3(b) is thereafter set
aside, avoided or recovered from the Issuing Bank in connection with any
receivership, liquidation, reorganization or bankruptcy proceeding relating
to the Borrower, each Lender that received such distribution shall, upon
demand by the Issuing Bank through the Agent, pay to the Issuing Bank such
Lender's Pro Rata Share of the amount so set aside, avoided or recovered.
(c) Obligations Absolute. The obligations of the Borrower under this
--------------------
Agreement, any Trade Letter of Credit Agreement and any other agreement or
instrument relating to any Facility Letter of Credit shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this
Agreement, such Trade Letter of Credit Agreement and such other agreement or
instrument under all circumstances. As between the Borrower and the Issuing
Bank, the Borrower assumes all risks of the acts and omissions of, or misuse of
such Facility Letters of Credit by, the respective beneficiaries of the Facility
Letters of Credit. In furtherance and not in limitation of the foregoing,
neither the Issuing Bank, any Lender nor any of their officers or directors
shall be responsible:
-34-
<PAGE>
(i) for any lack of validity or enforceability of the Original
Credit Agreement, this Agreement, any Trade Letter of Credit Agreement, any
Facility Letter of Credit or any other agreement or instrument relating
thereto (collectively, the "L/C Related Documents");
---------------------
(ii) for any change in the time, manner or place of payment of,
or in any other term of, all or any of the Obligations of the Borrower in
respect of the Facility Letters of Credit or any other amendment or waiver
of or any consent to departure from all or any of the L/C Related Docu-
ments;
(iii) for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign a Facility
Letter of Credit or the rights or benefits thereunder or proceeds thereof,
in whole or in part, which may prove to be invalid or ineffective for any
reason;
(iv) for the existence of any claim, set-off, defense or other
right that the Borrower may have at any time against any beneficiary or any
transferee of a Facility Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), the Issuing Bank, any
Lender or any other Person, whether in connection with this Agreement, the
transactions contemplated hereby or by the L/C Related Documents or any
unrelated transaction;
(v) for the use that may be made of any Facility Letter of Credit
or acts or omissions of any beneficiary or transferee in connection
therewith, including, without limitation, the misapplication by the
beneficiary of a Facility Letter of Credit of the proceeds of any drawing
under such Facility Letter of Credit;
(vi) for any certificate or any other document presented under a
Facility Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(vii) for payment by the Issuing Bank under a Facility Letter of
Credit against presentation of documents that do not comply with the terms
of the Facility Letter of Credit, including, without limitation, failure of
such documents to bear any reference or adequate reference to the Facility
Letter of Credit; or
-35-
<PAGE>
(viii) for any other circumstances whatsoever in making or fail-
ing to make payment under any Facility Letter of Credit.
In furtherance and not in limitation of the foregoing, the Issuing
Bank may accept documents that appear on their face to be in order, without re-
sponsibility for further investigation, regardless of any notice or information
to the contrary. None of the above shall affect, impair, or prevent the vesting
of any of the Issuing Bank's rights or powers hereunder, but the Issuing Bank
shall not be relieved of any liability it may otherwise have as a result of its
gross negligence or willful misconduct to the extent of any direct, but not any
consequential, damages.
(d) Compensation.
------------
(i) The Borrower shall pay to the Agent for the ratable accounts
of the Lenders a fee (a "Letter of Credit Fee") on the maximum amount
--------------------
available for drawing under all outstanding Facility Letters of Credit, (A)
prior to the Restatement Date, at the rate specified in Section 3.4 of the
Original Credit Agreement and (B) on and after the Restatement Date at a
rate equal to two percent (2%) per annum, payable monthly in arrears on the
first Business Day of each month, commencing October 1, 1992, and on the
Termination Date.
(ii) The Borrower shall pay to the Issuing Bank, for its own
account, such issuance, opening, transfer fees and other fees and charges
in connection with the issuance and administration of each Facility Letter
of Credit as the Borrower and the Issuing Bank shall agree.
SECTION 2.4. Fees.
----
(a) Commitment Fee. The Borrower shall pay to the Agent for the
--------------
ratable accounts of the Lenders a commitment fee (the "Commitment Fee") on the
--------------
average daily unused portion of each Lender's Commitment (provided that for
purposes only of this Section 2.4(a) the undrawn portion of outstanding Facil-
ity Letters of Credit shall constitute a utilization of the Facility, (i) prior
to the Restatement Date, at the rate and otherwise in accordance with the terms
of Sections 2.3 and 2A.3 of the Original Credit Agreement and (ii) from the
Restatement Date, in the case of each Lender that is a signatory hereto, and
from the effective date specified in the Assignment and Acceptance or Additional
Lender Agreement pursuant to which it became a Lender, in the case of each other
Lender, until the Termination Date at the rate of 0.375% per annum, payable
monthly in arrears
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<PAGE>
on the first Business Day of each month, commencing October 1, 1992, and on the
Termination Date.
(b) Agent's Fee. The Borrower shall pay to the Agent, for its own
-----------
account, on the Restatement Date, a fee (the "Agent's Fee") in the amount
provided in a separate letter agreement between the Borrower and the Agent.
(c) Co-Lead Managers' Fee. The Borrower shall pay to each Co-Lead
---------------------
Manager, for its own respective account, on the Restatement Date, a fee (the
"Co-Lead Managers' Fee") in such amount as provided in a separate letter
- - - - - - - - - ----------------------
agreement among the Borrower, the Agent and the Co-Lead Managers.
(d) Participation Fees. The Borrower shall pay to the Agent for the
------------------
account of each Lender (including the Agent and the Co-Lead Managers in their
capacity as Lenders), a fee (the "Participation Fee") on or prior to the
-----------------
Restatement Date in the amount of one percent (1%) of the Commitment of such
Lender under this Agreement.
(e) Payment; Fees Fully Earned. Commitment Fees, Participation Fees,
--------------------------
Co-Lead Managers' Fees and the Agent's Fee shall be payable to the Agent, for
its own account or the account of the Co-Lead Managers or Lenders, as the case
may be, at the Agent's Account, in immediately available funds. All Fees shall
be fully earned on the date such Fees become payable pursuant hereto and, when
paid, shall be non-refundable.
SECTION 2.5. Reduction of Commitments.
------------------------
(a) Mandatory Reductions. (i) The Facility shall automatically be
--------------------
reduced to $160,000,000 on January 5, 1993, $135,000,000 on April 15, 1993 and
$100,000,000 on June 30, 1993. If the amount of the Facility on any Reduction
Date is less than the amount specified for such Reduction Date above, the
Facility shall remain at such lower amount. Each Reduction of the Facility
shall be applied ratably to reduce the Commitment of each Lender.
(ii) Upon any issuance by the Borrower or any of its Restricted
Subsidiaries of any equity or debt securities (other than securities issued by
the Borrower or its Wholly-Owned Restricted Subsidiaries to the Borrower or its
Wholly-Owned Subsidiaries) or upon the incurrence by the Borrower or any of its
Restricted Subsidiaries of any Funded Debt (other than Funded Debt incurred by
the Borrower or its Wholly-Owned Restricted Subsidiaries owing to the Borrower
or its Restricted Subsidiaries), the Facility shall be reduced by an amount
equal to (i) 100% of the amount of the Net Cash Proceeds received from the
issuance
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<PAGE>
of any such debt securities or Funded Debt and (ii) 50% of the Net Cash Proceeds
received from the issuance of such equity securities (including the convertible
preferred stock to be issued by the Borrower to Wheelabrator Technologies Inc.
("WTI") in connection with the sale by the Borrower to WTI of certain
---
Subsidiaries of the Borrower), such reduction to be applied ratably to reduce
the Commitment of each Lender.
(iii) Upon any sale, lease, transfer or other disposition by the
Borrower or its Subsidiaries of any of their assets (other than any such
disposition permitted by clauses (A) through (E) of Section 5.2(e)(i), the
Facility shall be permanently reduced by an amount equal to the Net Cash
Proceeds realized from such sale, transfer or other disposition; provided,
--------
however, that if such Net Cash Proceeds are required by any Funded Debt
- - - - - - - - - -------
Agreement in effect on the date hereof to be applied ratably to the Funded Debt
of the Borrower or its Subsidiaries (including its Debt hereunder), the
reduction in the Facility shall be equal to the portion of such Net Cash
Proceeds available for application to the Loans pursuant to such ratable
application to Funded Debt; provided further, that no such reduction of the
----------------
Facility under this Section 2.5(a)(iii) shall be required with respect to any
sale, transfer or other disposition of assets occurring after the Facility has
been reduced to $100,000,000 or less. Notwithstanding the foregoing, upon any
sale, lease, transfer or other disposition of the assets or shares of the Water
Companies, the Facility shall be reduced (so long as it exceeds $100,000,000) by
the Net Cash Proceeds of such disposition available for application to the Loans
after the application of such Net Cash Proceeds to (A) payments in respect of
any Debt or preferred stock of the Water Companies, now or hereafter
outstanding, required to be made by the instruments or agreements governing such
Debt or preferred stock and (B) the pro rata application of the balance of such
--- ----
Net Cash Proceeds to Funded Debt of the Borrower and its Subsidiaries (other
than the Water Companies) to the extent required by any applicable Funded Debt
Agreement existing on the date hereof.
(b) Optional Reduction. The Borrower shall have the right, upon at
------------------
least three Business Days' notice to the Agent (which shall provide prompt
notice thereof to each Lender), to terminate in whole or reduce ratably in part
the unused portions of the Commitments of the Lenders; provided that each
--------
partial reduction shall be in the aggregate amount of $1,000,000 or an integral
multiple thereof; provided further, that, for purposes only of determining the
----------------
Borrower's right to terminate or reduce the Commitments, a Facility Letter of
Credit that is Fully Secured shall not be deemed to utilize the Facility.
-38-
<PAGE>
(c) Reduction of Letter of Credit Facility. Reductions in the
--------------------------------------
Commitments shall simultaneously effect pro rata reductions in the Letter of
--- ----
Credit Facility.
(d) Reduction of Outstanding Credit. If on any Reduction Date the
-------------------------------
Outstanding Credit exceeds the amount of the Facility, the Borrower shall reduce
the Outstanding Credit by first repaying Outstanding Loans and next depositing
funds in the L/C Cash Collateral Account to the extent of such excess.
SECTION 2.6. Repayment of Loans.
------------------
The Borrower shall repay the outstanding principal amount of the
Loans, together with accrued interest thereon, on the Termination Date.
SECTION 2.7. Interest.
--------
(a) Pre-Default Interest. The Borrower shall pay interest on the
--------------------
unpaid principal amount of each Loan owing to each Lender from the date of such
Loan until such principal amount shall be paid in full, (i) prior to the
Restatement Date, at the rate and on the terms specified in the Original Credit
Agreement and (ii) on and after the Restatement Date, at a rate per annum equal
to the Base Rate in effect from time to time, payable monthly in arrears on the
first Business Day of each month and on the date the Commitments are terminated
in connection therewith.
(b) Default Interest. Notwithstanding Section 2.7(a), upon the
----------------
occurrence and during the continuance of an Event of Default, interest on the
unpaid principal amount of each Loan and any unpaid Reimbursement Obligation or
any other amount due and owing hereunder shall accrue at a rate per annum equal
to the Base Rate as in effect from time to time plus 2% per annum payable on
----
demand.
SECTION 2.8. Prepayments; Deposits in L/C Cash Collateral Account.
----------------------------------------------------
(a) Optional Prepayment. The Borrower may, upon at least one
-------------------
Business Day's notice to the Agent stating the proposed date and aggregate
principal amount of the prepayment and if such notice is given the Borrower
shall on such proposed date, prepay the outstanding principal amount of all of
the Loans outstanding, in whole or in part in the aggregate amount stated in
such notice, without penalty or premium, together with interest accrued to the
date of such prepayment on the principal amount prepaid; provided, however, that
-------- -------
each
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<PAGE>
partial prepayment shall be in an aggregate principal amount not less than
$1,000,000 or in integral multiples thereof.
(b) Mandatory Prepayment.
--------------------
(i) The Borrower shall, on the date of receipt of Net Cash
Proceeds from the sale, lease, transfer or other disposition of any assets
of the Borrower or any of its Subsidiaries (other than dispositions of
assets expressly permitted by clauses (A) through (E) of Section
5.2(e)(i)), prepay an aggregate principal amount of the Loans equal to 100%
of the amount of such Net Cash Proceeds; provided that, if so required by
--------
the terms of any Funded Debt Agreement in effect on the date hereof, the
Borrower may apply such Net Cash Proceeds to the ratable repayment of the
Loans and other Funded Debt of the Borrower; provided further, that in the
-------- -------
case of any such disposition of the shares or assets of the Water
Companies, the Borrower may apply the Net Cash Proceeds of such disposition
first to pay the Debt and/or redeem preferred stock of the Water Companies,
now or hereafter outstanding, to the extent required by any instrument or
agreement governing such Debt or preferred stock and shall apply the
balance of such Net Cash Proceeds to the repayment of the Loans as provided
in the foregoing provisions of this Section 2.8(b)(i).
(ii) The Borrower shall, on the date of receipt of Net Cash
Proceeds from the incurrence of any Debt of the Borrower or any of its
Restricted Subsidiaries (other than Funded Debt permitted by Section
5.2(a)) or the issuance of any debt or equity securities by the Borrower or
any of its Restricted Subsidiaries, prepay an aggregate principal amount of
the Loans equal to 100% of such Net Cash Proceeds.
(iii) The Borrower shall, on the date of receipt of Net Cash
Proceeds from the transfer of accounts receivable of the Borrower or any of
its Subsidiaries pursuant to an Accounts Receivable Financing (other than
with respect to any accounts receivable subject to a Lien permitted by this
Agreement immediately prior to such transfer), prepay an aggregate
principal amount of the Loans equal to 100% of the amount of such Net Cash
Proceeds.
-40-
<PAGE>
(c) Deposits in L/C Cash Collateral Account. If the amount available
---------------------------------------
for any mandatory repayment of the Loans required by this Section 2.8 exceeds
the aggregate outstanding principal amount of the Loans and all accrued interest
thereon, such excess shall be deposited in this L/C Cash Collateral Account to
the extent of the Facility Letter of Credit Obligations.
SECTION 2.9. Increased Costs, Etc.
---------------------
(a) Increased Cost. Except as to taxes, levies, imposts, deduc-
--------------
tions, charges or withholdings, if either (i) any change in or in the
interpretation of any law or regulation or (ii) the compliance by any Lender or
its Lending Office or by the Issuing Bank with any guideline or request from any
central bank or other governmental authority, in any case introduced, changed,
interpreted or requested after the date hereof (whether or not having the force
of law), shall either (i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets held by, or letters of credit or
guarantees issued by, or deposits in or for the account of, any Lender or the
Issuing Bank or (ii) impose on any Lender or the Issuing Bank any other
condition relating to this Agreement or such Lender or the Loans made by it or
the Issuing Bank or any Facility Letter of Credit issued by it or any Lender's
participating interest therein, and the result of any event referred to in
clause (i) or (ii) shall be to increase the cost to any Lender of agreeing to
make or making, funding or maintaining Loans, or to the Issuing Bank of issuing
or maintaining any Facility Letter of Credit or to any Lender of purchasing any
participation therein, then the Borrower shall from time to time, upon demand by
such Lender or the Issuing Bank (with a copy of such demand to the Agent), pay
to the Agent for the account of such Lender or the Issuing Bank, as the case may
be, additional amounts sufficient to compensate such Lender or the Issuing Bank
for such increased cost. A certificate as to the amount of such increased cost,
submitted to the Borrower by such Lender, shall be conclusive and binding for
all purposes, absent manifest error.
(b) Capital. If any Lender or the Issuing Bank determines that the
-------
adoption or effectiveness of any treaty, law, rule or regulation in regard to
capital adequacy, or any change therein or in the application thereof, or any
change in the interpretation or administration thereof by any central bank or
other governmental or monetary authority charged with the interpretation or
administration thereof, or compliance by such Lender or either of its Applicable
Lending Offices or the Issuing Bank, or any corporation controlling such Lender
or the Issuing Bank, with any interpretation, directive, request, order or
decree in regard to capital adequacy (whether or not having the force of law)
by any such central bank or other governmental or monetary authority, including,
without limitation, any guideline contemplated by the report dated July, 1988
entitled "International
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<PAGE>
Convergence of Capital Management and Capital Standards" issued by the Bank
Committee on Banking Regulations and Supervisory Practices, has or would have
the effect of reducing the rate of return on the capital of or maintained by
such Lender, the Issuing Bank or any corporation controlling the Lender or the
Issuing Bank as a consequence of such Lender's Loans or Commitment hereunder
(including, without limitation, its obligation to make Loans to fund its
participating interest in Facility Letters of Credit) or the issuance of
Facility Letters of Credit by the Issuing Bank, and other commitments of this
type, by increasing the amount of capital required or expected to be maintained
by such Lender, the Issuing Bank or any corporation controlling such Lender or
the Issuing Bank or otherwise, to a level below that which such Lender, the
Issuing Bank or any corporation controlling such Lender or the Issuing Bank
could have achieved but for such adoption, effectiveness, change or compliance
(taking into account such Lender's, the Issuing Bank's or such corporation's
policies with respect to capital adequacy), then the Borrower shall, from time
to time, pay to such Lender or the Issuing Bank, upon demand by such Lender or
the Issuing Bank (with a copy of such demand to the Agent) such additional
amounts as may be specified by such Lender or the Issuing Bank as being
sufficient to compensate such Lender or the Issuing Bank for such reduction in
return, to the extent that such Lender or the Issuing Bank determines such
reduction to be attributable to the existence, issuance or maintenance of such
obligations or Loans or Facility Letters of Credit. A certificate as to such
amounts submitted to the Borrower by such Lender or the Issuing Bank shall be
conclusive and binding for all purposes, absent manifest error.
SECTION 2.10. Payments.
--------
(a) Time for Payment.
----------------
(i) The Borrower shall make each payment hereunder not later than
1:00 p.m. (New York City time) on the day when due, in Dollars, to the
Agent at the Agent's Account in same day funds for the account of the
Lenders. The Agent will promptly thereafter cause to be distributed like
funds relating to the payment of principal or interest or Commitment Fees
or Letter of Credit Fees ratably (other than amounts payable pursuant to
Section 2.9(a), 2.9(b) or 2.11 and amounts payable to the Issuing Bank in
respect of Facility Letters of Credit) to the Lenders for the account of
their Lending Offices (or any other account specified in writing by any
Lender from time to time) and like funds relating to the payment of any
other amount payable to any Lender to such Lender for the account of its
Lending Office (or any other office specified in writing by any Lender from
time to time), in each case to be applied in accordance with the terms of
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this Agreement. Upon its acceptance of an Assignment and Acceptance and
recording of the information contained therein in the Register pursuant to
Section 8.7(d), from and after the effective date of such Assignment and
Acceptance, the Agent shall make all payments hereunder in respect of the
interest assigned thereby to the Lender assignee thereunder, and the
parties to such Assignment and Acceptance shall make all appropriate
adjustments in such payments for periods prior to such effective date
directly between themselves.
(ii) Whenever any payment hereunder shall be stated to be due on
a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and any such extension of time shall in such case
be included in the computation of payment of interest.
(b) Set-Off. The Borrower hereby authorizes each Lender, if and to
-------
the extent payment owed to such Lender is not made to the Agent when due
hereunder, from time to time to charge to, or set-off against, any or all of the
Borrower's accounts with such Lender any amount so due.
(c) Computation. All computations of interest, Fees and Letter of
-----------
Credit Fees shall be made by the Agent on the basis of a year of 360 days, in
each case for the actual number of days (including the first day but excluding
the last day) occurring in the period for which such interest, fees or Letter of
Credit Fees are payable. Each determination by the Agent of an interest rate,
Fee or commission hereunder shall be conclusive and binding for all purposes,
absent demonstrable error.
(d) Distribution of Payments. Unless the Agent shall have received
------------------------
notice from the Borrower prior to the date on which any payment is due to any
Lender hereunder that the Borrower will not make such payment in full, the Agent
may assume that the Borrower has made such payment in full to the Agent on such
date and the Agent may, in reliance upon such assumption, cause to be
distributed to each such Lender on such due date an amount equal to the amount
then due such Lender. If and to the extent the Borrower shall not have so made
such payment in full to the Agent, each such Lender shall repay to the Agent
forthwith on demand such amount distributed to such Lender together with
interest thereon, for each day from the date such amount is distributed to such
Lender until the date such Lender repays such amount to the Agent, at the inter-
est rate per annum certified by the Agent to such Lender to be the Agent's cost
of funds with respect to such payment made to such Lender.
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<PAGE>
(e) Interest on Overdue Payment. Interest on any past due payment
---------------------------
shall be payable on demand.
SECTION 2.11. Taxes.
-----
(a) No Withholding. Any and all payments by the Borrower hereunder
--------------
shall be made, in accordance with Section 2.10, free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding,
---------
(i) in the case of each Lender and the Agent, taxes imposed on its net income,
and franchise taxes imposed on it, by the jurisdiction under the laws of which
such Lender or the Agent (as the case may be) is organized or any political
subdivision or taxing authority thereof or therein, (ii) in the case of each
Lender, taxes imposed on its net income, and franchise taxes imposed on it, by
the jurisdiction of such Lender's principal office or Lending Office or any
political subdivision or taxing authority thereof or therein and (iii) in the
case of each Lender, United States withholding tax payable with respect to
payments hereunder under laws (including, without limitation, any statute,
treaty, ruling, determination or regulation) in effect on the Initial Date, but
---
not excluding any withholding tax imposed by the United States or any taxing
- - - - - - - - - -------------
authority thereof or therein payable as a result of any change in such laws
occurring after the Initial Date (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred to
as "Taxes"). For purposes of this Section 2.11, the term "Initial Date" shall
----- ------------
mean, in the case of each Lender signatory hereto June 30, 1990 and, in the case
of each Lender other than a Lender signatory hereto, the date of the Assignment
and Acceptance or the Additional Lender Agreement, as the case may be, pursuant
to which it becomes a Lender. If the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder to any Lender
or the Agent, (x) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.11) such Lender or the Agent (as
the case may be) receives an amount equal to the sum it would have received had
no such deductions been made, (y) the Borrower shall make such deductions and
(z) the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law; provided,
--------
however, that any such Lender shall use reasonable efforts to designate a
- - - - - - - - - -------
different Lending Office if, in the sole judgment of the Lender, such
designation would avoid the need for, or reduce the amount of, any Taxes
required to be deducted from or in respect of any sum payable hereunder to any
Lender or the Agent and would not, in the sole judgment of such Lender, impose
additional costs or legal or regulatory burdens deemed by such Lender to be
material or
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otherwise be deemed by such Lender to be disadvantageous to such Lender.
Notwithstanding the foregoing, the Borrower shall have no obligation to pay any
amount to or for the account of any Lender or the Agent on account of any Taxes
pursuant to this Section 2.11 to the extent such amount results from the failure
of any Lender or the Agent to deliver to the Borrower and the Agent (upon re-
quest therefor pursuant to clause (ii) below), on or before the date payment is
due by the Borrower to such Lender or the Agent, two (2) duly completed copies
of United States Internal Revenue Service Form 1001 or 4224, or any successor
applicable form, as the case may be, certifying that the Lender or the Agent is
entitled to receive such payments without deduction or withholding of United
States Federal income taxes, if either such form or successor form would be
applicable (except for any failure or inability to make such delivery and certi-
fication by reason of a change in law after the Initial Date). Such form,
certificate or document will be provided by each such Lender (without
consequence for non-delivery except as set forth above) (i) as is required by
law due to a change in the factual circumstances of any such Lender (but not due
to a change in applicable law) and (ii) from time to time after the Initial Date
as reasonably requested by either the Borrower or the Agent.
(b) Other Taxes. In addition to making all payments to be made
-----------
hereunder free and clear of Taxes, the Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies that arise from any payment made hereunder or under any Loan
Document or from the execution, delivery or registration filing, or recording
of, or otherwise with respect to, this Agreement or any other Loan Document
(hereinafter referred to as "Other Taxes").
-----------
(c) Indemnity. The Borrower will indemnify each Lender and the Agent
---------
for the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 2.11) paid by such Lender or the Agent (as the case may be) and any
liability (including penalties, additions to tax, interest and expenses) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted; provided that, in the event such Lender or the
--------
Agent, as the case may be, successfully contests the assessment of such Taxes or
Other Taxes or any liability arising therefrom or with respect thereto, such
Lender or Agent shall refund, to the extent of any refund thereof made to such
Lender or Agent, any amounts paid by the Borrower under this Section 2.11(c) in
respect of such Taxes, Other Taxes or liabilities arising therefrom or with
respect thereto. Each Lender and the Agent agrees that it will contest such
Taxes, Other Taxes or liabilities (at the expense of the Borrower) if (i) the
Borrower furnishes to it an opinion of reputable tax counsel acceptable to such
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Lender or the Agent to the effect that such Taxes or Other Taxes were wrong-
fully or illegally imposed and (ii) such Lender or the Agent determines, in its
sole discretion, that it would not be disadvantaged or prejudiced in any manner
whatsoever as a result of such contest. This indemnification shall be made
within 30 days from the date such Lender or the Agent (as the case may be) makes
written demand therefor.
(d) Evidence of Payment. Within 30 days after the date of any
-------------------
payment of Taxes, the Borrower will furnish to the Agent, at its address
referred to in Section 8.2, the original or a certified copy of a receipt
evidencing payment thereof. If no Taxes are payable in respect of any payment
hereunder, the Borrower will furnish to the Agent, at such address, a
certificate from each appropriate taxing authority, or an opinion of counsel
acceptable to the Agent, in either case stating that such payment is exempt from
or not subject to Taxes; provided, however, that such certificate or opinion
-------- -------
need only be given if: (i) the Borrower makes any payment from any account
located outside the United States, or (ii) the payment is made by a payor that
is not a United States Person. For purposes of this Section 2.11 the terms
"United States" and "United States Person" shall have the meanings set forth in
Section 7701 of the Code.
(e) Change in Lending Office. If a Lender shall change its Lending
------------------------
Office, such Lender shall not be entitled to receive any greater payment under
this Section 2.11 than such Lender would have been entitled to receive if it had
not changed its Lending Office, unless such change was made at the request of
the Borrower or at a time when the circumstances giving rise to such greater
payment did not exist.
(f) Survival of Covenant. Without prejudice to the survival of any
--------------------
other agreement of the Borrower hereunder, the agreements and obligations of the
Borrower contained in this Section 2.11 shall survive the payment in full of
principal and interest hereunder.
SECTION 2.12. Sharing of Payments, Etc. If any Lender shall after
-------------------------
the date hereof obtain any payment (whether voluntary, involuntary, through the
exercise of any right of set-off, or otherwise) on account of the Loans owing
to it (other than pursuant to Section 2.9(a), 2.9(b), 2.11 or 2.13, and
payments to the Issuing Bank in respect of Facility Letters of Credit) in excess
of its ratable share of payments on account of the Loans obtained by all the
Lenders, such Lender shall forthwith purchase from the other Lenders such
participations in the Loans owing to them as shall be necessary to cause such
purchasing Lender to share the excess payment ratably with each of them;
provided, however, that if all or any portion of such excess payment is
- - - - - - - - - -------- -------
thereafter recovered from such
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<PAGE>
purchasing Lender, such purchase from each Lender shall be rescinded and such
Lender shall repay to the purchasing Lender the purchase price to the extent of
such recovery together with an amount equal to such Lender's ratable share
(according to the proportion of (i) the amount of such Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect
of the total amount so recovered. The Borrower agrees that any Lender so pur-
chasing a participation from another Lender pursuant to this Section 2.12 may,
to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Lender were the direct creditor of the Borrower in the amount of such
participation.
SECTION 2.13. Use of Proceeds. The proceeds of the Loans shall be
---------------
used for general corporate purposes and to provide working capital for the
Borrower and its Subsidiaries and to pay Reimbursement Obligations and, to the
extent that on the Restatement Effective Date the Loans of any Lender, including
the "Swingline Loans" of the "Swingline Banks" (as such terms are defined in the
Original Credit Agreement) exceed their Pro Rata Share of all Loans then out-
standing, to repay such excess. No part of the proceeds of any Loan or Facility
Letter of Credit shall be used directly or indirectly for the purpose, whether
immediate, incidental or ultimate, of purchasing or carrying any Margin Stock or
maintaining or extending credit to others for such purpose or for any other pur-
pose which otherwise violates the Margin Regulations.
SECTION 2.14. Pro Rata Treatment. Except to the extent otherwise
------------------
provided herein, (i) each Borrowing shall be requested from the Lenders, pro
---
rata according to their respective Pro Rata Shares of the Facility, (ii) each
- - - - - - - - - ----
termination or reduction of the Facility shall be applied to the respective
Commitments of the Lenders pro rata according to their respective Pro Rata
--- ----
Shares and (iii) each payment or prepayment by the Borrower of principal or
interest of any Loans shall be made for the account of the Lenders pro rata
--- ----
according to their respective Pro Rata Shares.
SECTION 2.15. Evidence of Debt; Loan Accounts.
-------------------------------
(a) Evidence of Debt. Prior to the Restatement Effective Date, all
----------------
Loans of each Lender shall be evidenced by the promissory note issued to such
Lender pursuant to this Original Credit Agreement. From and after the Restate-
ment Effective Date, all Loans of each Lender shall be evidenced by the Note
issued to such Lender pursuant to Section 2.1(b) hereof.
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<PAGE>
(b) Maintenance of Loan Accounts. Each Lender shall maintain in
----------------------------
accordance with its usual practice an account or accounts evidencing the
indebtedness of the Borrower to such Lender resulting from each Loan owing to
such Lender from time to time, including the amounts of principal and interest
payable and paid to such Lender from time to time hereunder.
(c) Agent's Register. The Register maintained by the Agent pursuant
----------------
to Section 8.7(c) shall include a control account, in which account shall be
recorded (i) the date and amount of each Borrowing made and Facility Letter of
Credit issued hereunder, (ii) each Assignment and Acceptance and Additional
Lender Agreement delivered to and accepted by it, (iii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iv) the amount of any sum received by the
Agent from the Borrower hereunder.
(d) Entries Conclusive and Binding. The entries made in the Register
------------------------------
shall be conclusive and binding for all purposes, absent demonstrable error.
SECTION 2.16. Increase in the Commitments. Notwithstanding anything
---------------------------
to the contrary contained in this Agreement, the Facility may be increased by
not more than $10,000,000 in the aggregate prior to the Termination Date. Such
increase in the Commitments shall be effected solely as follows: one or more
banks may become lenders under this Agreement provided that (a) each such bank
--------
is an Eligible Assignee, (b) such bank is approved by the Borrower, the Issuing
Bank and the Agent (each such approval not to be unreasonably withheld), (c)
the Commitment of such bank hereunder (as set forth in such bank's Additional
Lender Agreement referred to below) shall not be less than $5,000,000 and (d)
such bank enters into an agreement in writing with the Borrower, the Issuing
Bank and the Agent, substantially in the form of Exhibit F hereto (an
"Additional Lender Agreement") which shall specify its Commitment hereunder.
- - - - - - - - - ----------------------------
Upon the execution by the Borrower, the Issuing Bank, the Agent and such bank of
such Additional Lender Agreement, such bank shall become and be deemed a party
hereunder and a "Lender" hereunder for all purposes hereof and its Commitment
hereunder shall be the amount specified in its Additional Lender Agreement.
Each bank which executes and delivers an Additional Lender Agreement and
becomes a party hereto and a "Lender" hereunder pursuant to such Additional
Lender Agreement shall be referred to herein as an "Additional Lender."
-----------------
Concurrently with the execution by an Additional Lender of its Additional Lender
Agreement, such Additional Lender shall make a Loan hereunder to the Borrower in
such amount as shall be necessary to cause the outstanding amount of such
Additional Lender's share of the total Loans of all the Lenders to be
proportional
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to such Additional Lender's share of the Commitments. The proceeds of such Loan
shall be applied by the Borrower to the partial repayment of the other Lenders'
Loans to the extent necessary to effect such proration (and the pro-rata and
sharing provisions of Sections 2.12 and 2.14 shall not be applicable to such
payment). No bank may become an Additional Lender unless the Borrower, the
Issuing Bank and the Agent consent thereto by executing the Additional Lender
Agreement signed by such bank (or counterparts thereof), but no consent of any
other Lender shall be required therefor. In no event may the Commitment of any
Lender be increased by reason of any bank or financial institution becoming an
Additional Lender, or otherwise, but the aggregate amount of the Commitments
shall be increased by the amount of each Additional Lender's Commitment. Upon
any Additional Lender becoming a party hereto, the Agent shall notify each other
Lender thereof and shall deliver to each Lender a copy of the Additional Lender
Agreement executed by such Additional Lender.
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.1. Conditions Precedent to Restatement Effective Date. The
--------------------------------------------------
amendment and restatement of the Original Credit Agreement made hereby (other
than the provisions of Article VII and VIII hereof which shall in all events
become effective on the Restatement Date) shall not become effective and the
Loans, all interest accrued thereon and all other amounts payable hereunder and
under the Original Credit Agreement shall be due and payable on September 30,
1992, unless on or before September 30, 1992 (i) the Restatement Date shall have
occurred and (ii) the Agent notifies the Borrower and each Lender, pursuant to a
notice substantially in the form of Exhibit C hereto (a "Notice of Effective-
-------------------
ness"), that the Restatement Effective Date has occurred pursuant to notice by
- - - - - - - - - ----
the Agent to the Borrower and the Lenders. The Agent shall deliver such notice
only upon its determination that all of the following conditions (other than
those which are waived in writing by the Lenders in accordance with the terms
hereof) have been satisfied (such determination to be conclusive with respect to
each Lender except for any such Lender which notifies the Agent and the Borrower
in writing prior to the delivery of the Notice of Effectiveness that a
particular condition precedent has not been satisfied, and provided that the
delivery of a Notice of Effectiveness shall not constitute a waiver of any
misrepresentation, breach or Default by the Borrower hereunder):
(a) Diligence Examination. The Lenders shall have completed a due
---------------------
diligence investigation of the Borrower and its Subsidiaries in scope, and with
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results, satisfactory to the Lenders, and no Lender shall have notified the
Agent that anything came to the attention of such Lender during the course of
such due diligence investigation to lead it to believe (i) that any information
provided by or on behalf of the Borrower to any Lender was or has become
misleading, incorrect or incomplete in any material respect; or (ii) that the
Borrower and its Subsidiaries do not have good title to all material assets (and
marketable title to all real property) of the Borrower and its Subsidiaries
reflected as owned in any information provided by or on behalf of the Borrower
to any Lender; in furtherance (but not in limitation) of their due diligence
investigation, the Lenders shall have been given such access to the management,
records, books of account, contracts and properties of the Borrower and its
Subsidiaries as they shall have requested.
(b) Delivery of Certain Documents. The Agent shall have received
-----------------------------
the following, each dated the date hereof (unless otherwise specified), in form
and substance satisfactory to the Agent (unless otherwise specified):
(i) a copy of the certificate of incorporation of the Borrower,
each Pledgor and each Principal Subsidiary specified by the Agent and each
amendment thereto, certified as of a recent date prior to the date hereof
by the Secretary of State of the state of incorporation of the Borrower,
such Pledgor and each such Principal Subsidiary as being a true and correct
copy thereof;
(ii) a copy of a certificate of the Secretary of State of the
state of incorporation of the Borrower, each Pledgor and each Principal
Subsidiary specified by the Agent, dated as of a recent date prior to the
date hereof, listing the charter and all amendments thereto of the
Borrower, such Pledgor or such Principal Subsidiary, as the case may be, on
file in his or her office and certifying that (A) such amendments are the
only amendments to the Borrower's, such Pledgor's or such Principal
Subsidiary's, as the case may be, charter on file in his or her office,
(B) to the extent reasonably available in such jurisdiction, the Borrower,
such Pledgor or such Principal Subsidiary, as the case may be, has paid all
franchise taxes to the date of such certificate and (C) the Borrower, such
Pledgor or such Principal Subsidiary, as the case may be, is duly
incorporated and in good standing under the laws of such state;
(iii) to the extent requested by Agent or any Lender, a telegram
from the Secretary of State of the state of incorporation of the Borrower,
each Pledgor and each Principal Subsidiary specified by the Agent certify-
ing that the Borrower, such Pledgor or such Principal Subsidiary, as the
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case may be, is a corporation legally existing and in good standing in such
state on or about the date hereof;
(iv) certificates of the Borrower, each Pledgor and each Princi-
pal Subsidiary specified by the Agent, signed on behalf of the Borrower,
such Pledgor or such Principal Subsidiary, as the case may be, by its
President or Chief Executive Officer or any Vice President and its
Secretary or any Assistant Secretary, dated the date hereof, certifying as
to (A) the absence of any amendments to the charter of the Borrower, such
Pledgor or such Principal Subsidiary, as the case may be, since the date of
the Secretary of State's certificate referred to in Section 3.1(b)(ii), (B)
a true and correct copy of the bylaws of the Borrower, such Pledgor or such
Principal Subsidiary, as the case may be, as in effect on the date hereof,
(C) the due incorporation and good standing of the Borrower, such Pledgor
or such Principal Subsidiary, as the case may be, as a corporation
organized under the laws of its state of incorporation, and the absence of
any proceeding for the dissolution or liquidation of the Borrower, such
Pledgor or such Principal Subsidiary, as the case may be, (D) in the case
of the Borrower and each Pledgor, the truth in all material respects of
the representations and warranties contained in this Agreement or any
other Loan Document as though made on and as of the date hereof, (E) in
the case of the Borrower, the absence of any event occurring and continuing
that constitutes a Default, and (F) the filing by the Borrower and each
Principal Subsidiary of all Federal, state and local tax returns required
by law to be filed by the Borrower or such Principal Subsidiary on or prior
to the date hereof and the timely payment by the Borrower or such Principal
Subsidiary of all taxes shown thereon to be due, except to the extent that
failure to file such tax returns and pay such taxes would not have a
material adverse effect on the business, condition (financial or
otherwise), operations, performance or properties of the Borrower and its
Restricted Subsidiaries, taken as a whole, or on the ability of the
Borrower to perform its Obligations under this Agreement or any other Loan
Document;
(v) a certificate of the Secretary or any Assistant Secretary of
the Borrower and each Pledgor dated the date hereof certifying (i) as to
the adoption of resolutions by the Board of Directors of the Borrower and
such Pledgor in the form attached thereto authorizing and approving this
Agreement and each other Loan Document to which it is party, and that such
resolutions have not been rescinded, modified or amended and remain in full
force and effect, and (ii) the names and true signatures of the officers of
the Borrower and such Pledgor authorized to sign this Agreement and
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<PAGE>
each other Loan Document to which it is or is to be a party and the other
documents to be delivered hereunder and thereunder;
(vi) duly executed copies of this Agreement;
(vii) duly executed Notes to be issued to the Lenders in
substitution for the promissory notes delivered to the Banks under the
Original Credit Agreement;
(viii) such financial, business and other information regarding
the Borrower and its Subsidiaries as any Lender shall have reasonably re-
quested, including, without limitation, (A) information as to possible
contingent liabilities, tax information, environmental information, obliga-
tions under ERISA, collective bargaining agreements and other arrangements
with employees, (B) audited consolidated financial statements for the
period ended December 31, 1991 for the Borrower and its Restricted
Subsidiaries, (C) interim consolidated financial statements for the
Borrower and its Restricted Subsidiaries dated the end of the fiscal
quarter ended June 30, 1992, a schedule of the outstanding amount of
Restricted Investments existing on such date and reasonably detailed
calculations of the Integrated Debt and Lien Basket Amount as of such date
(prepared in accordance with the terms of this Agreement as if this
Agreement was in full force and effect on such date) and (D) financial
projections prepared by management of the Borrower, in form and substance
satisfactory to the Lenders, including balance sheets, income statements
and cash flow statements for calendar years 1992 and 1993, including
selected financial data (consisting of earnings before interest and taxes,
capital expenditures, depreciation and working capital items) on an annual
basis for the two fiscal years commencing with fiscal year 1992;
(ix) with respect to each Plan of the Borrower, and any of its
respective ERISA Affiliates, the most recent actuarial valuation report for
such Plan, if any;
(x) with respect to each Multiemployer Plan to which the Bor-
rower or any of its ERISA Affiliates is (or, within the past five years has
been) obligated to contribute, copies of the most recent estimates of
potential Withdrawal Liability received by the Borrower or any of its ERISA
Affiliates from the sponsor of such Multiemployer Plan, if any;
(xi) a favorable opinion of Sheldon Cammaker, Esq., Executive
Vice President and General Counsel to the Borrower, in substantially the
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form of Exhibit D, and as to such other matters as any Lender may rea-
sonably request; and
(xii) a favorable opinion of White & Case, special counsel to
the Agent, in substantially the form of Exhibit E.
(c) Pledge Agreement. Each Pledgor shall have executed and delivered
----------------
to the Agent a pledge agreement, satisfactory in form and substance to the
Agent (a "Pledge Agreement"), pledging to the Agent, and granting to the Agent,
----------------
for the benefit of the Agent and the Lenders, a lien upon and a security
interest in the stock of each Designated Subsidiary owned by such Pledgor.
(d) Pledged Stock Certificates. Each Pledgor shall have delivered to
--------------------------
the Agent certificates representing all shares of stock of the Designated
Subsidiaries owned by such Pledgor, together with duly executed stock powers
with respect thereto.
(e) Truth of Representations and Warranties. The representations
---------------------------------------
and warranties contained in each Loan Document are correct in all material
respects on and as of the date hereof.
(f) No Default. No Event of Default has occurred and is continuing
----------
on the date hereof.
(g) No Material Adverse Change. There shall have occurred no
--------------------------
material adverse change in the business, condition (financial or otherwise),
operations, performance or properties of the Borrower and its Restricted
Subsidiaries, taken as a whole, or that would affect the ability of the Borrower
to perform its Obligations under this Agreement or any other Loan Document,
since June 30, 1992, except as disclosed in the Borrower's quarterly report on
Form 10-Q for the fiscal quarter ended June 30, 1992.
(h) Other Items. The Agent shall have received such other
-----------
approvals, opinions or documents as any Lender or the Agent may reasonably
request.
(i) Payment of Fees and Expenses. The Borrower shall have paid all
----------------------------
fees that are due and expenses (as provided in Section 8.4 and 2.4 and as
otherwise agreed between the Borrower and the Agent or the Co-Lead Managers or
any Lender) of the Agent, the Co-Lead Managers and the Lenders (including the
fees and disbursements of counsel to the Agent), to the extent such fees and
expenses have been presented for payment.
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<PAGE>
(j) No Action Against Lenders. There shall be no action, pro-
-------------------------
ceeding, governmental investigation or arbitration pending or threatened against
any Lender in which an unfavorable decree, order or other determination would,
in the opinion of such Lender, enjoin or make unlawful the consummation of the
transactions contemplated hereby.
SECTION 3.2. Conditions Precedent to Each Borrowing and Issuance.
---------------------------------------------------
The obligation of each Lender to make a Loan or the Issuing Bank to issue a
Facility Letter of Credit after the Restatement Date, and the right of the
Borrower to request a Loan or the issuance of a Facility Letter of Credit here-
under, shall be subject to the further conditions precedent, and the acceptance
by the Borrower of the proceeds of such Loans made or its request for the issu-
ance of a Facility Letter of Credit shall constitute a representation and
warranty by the Borrower, that all of such conditions (other than any such
conditions that are waived in accordance with the terms hereof) were satisfied
on the date of such Borrowing or issuance:
(a) Restatement Effective Date. The Restatement Effective Date shall
--------------------------
have occurred.
(b) Accuracy of Certain Facts. The following statements shall be
-------------------------
true (and each of the giving of the applicable Notice of Borrowing or Notice of
Issuance and the acceptance by the Borrower of the proceeds of such Borrowing
and the request for issuance shall constitute a representation and warranty by
the Borrower that on the date of such Borrowing or issuance such statements are
true):
(i) the representations and warranties contained in each Loan
Document are correct in all material respects on and as of the date of such
Borrowing or issuance (other than any representation and warranty made
pursuant to the first sentence of Section 4.1(b)), before and after giving
effect to such Borrowing or issuance and to the application of the pro-
ceeds therefrom, as though made on and as of such date (unless stated to
relate to a specific earlier date, in which case, such representations and
warranties shall be correct in all material respects as of such earlier
date);
(ii) no event has occurred and is continuing, or would result
from such Borrowing or issuance or from the application of the proceeds
therefrom, that constitutes a Default;
(iii) there has occurred no material adverse change in the busi-
ness, condition (financial or otherwise), operations, performance or prop-
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erties or prospects of the Borrower and its Restricted Subsidiaries, taken
as a whole, or that would affect the ability of the Borrower to perform its
Obligations under this Agreement or any other Loan Document since June 30,
1992, except as disclosed in the Borrower's quarterly report on Form 10-Q
for the fiscal quarter ended June 30, 1992; and
(iv) for each Loan or issuance of any Facility Letter of
Credit, to the best of the Borrower's knowledge, the Available Facility
Amount equals or exceeds the amount of any such Loan or Facility Letter of
Credit requested to be made or issued after giving effect to (x) the making
of any other Loan or issuance of a Facility Letter of Credit requested to
be made or issued on such date and (y) the application of the proceeds
thereof.
(c) Receipt of Notices and Other Items. The Agent shall have
----------------------------------
received a duly completed Notice of Borrowing or Notice of Issuance, as the case
may be, and such other approvals, opinions or documents as the Required Lenders
or the Agent may reasonably request; provided, however, that the obligation of
-------- -------
each Lender to make a Loan (or to pay the purchase price for its participating
interest) pursuant to Section 2.3(b)(ii) shall be absolute and unconditional and
such Loan shall be made by such Lender notwithstanding the failure of the
Borrower to satisfy any condition set forth in this Section 3.2.
SECTION 3.3. Determinations Under Section 3.1. For purposes of
--------------------------------
determining compliance with the conditions specified in Section 3.1, each Lender
shall be deemed to have consented to, approved or accepted or to be satisfied
with each document or other matter required thereunder to be consented to or
approved by or acceptable or satisfactory to the Lenders unless an officer of
the Agent responsible for the transactions contemplated by the Loan Documents
and holding the position of Vice President or a more senior position shall have
received notice from such Lender prior to the Restatement Effective Date
specifying its objection thereto and such objection shall not have been
withdrawn by notice to the Agent to that effect.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Representations and Warranties of the Borrower. The
----------------------------------------------
Borrower hereby represents and warrants as follows:
(a) Corporate Existence. The Borrower (i) is a corporation duly
-------------------
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (ii) is duly qualified or licensed as a
foreign corporation and is in good standing in each jurisdiction in which it
owns or leases property or in which the conduct of its business requires it to
so qualify or be licensed (except, in each case in this clause (ii), for
jurisdictions in which the failure to so qualify or be in good standing would
not be reasonably likely to have a material adverse effect on the business,
condition (financial or otherwise), operations, performance or properties of the
Borrower or on the ability of the Borrower to perform its obligations under this
Agreement or any other Loan Document and (iii) has all requisite corporate power
and authority to own or lease and operate its properties and to carry on its
business as now conducted and as proposed to be conducted. All of the
outstanding capital stock of the Borrower has been validly issued and is fully
paid and non-assessable.
(b) Subsidiaries; Designated Subsidiaries. Set forth on Schedule
-------------------------------------
1.1-D hereto is a complete and accurate list of all of the Subsidiaries of the
Borrower, showing as of the date hereof (as to each such Subsidiary) the
jurisdiction of its incorporation, identifying each such Subsidiary which is a
Project Subsidiary and showing the record owner of each Subsidiary (including
each Designated Subsidiary). All of the outstanding capital stock of all of
such Subsidiaries has been validly issued, is fully paid and non-assessable and
(other than directors' qualifying shares) is owned by the Borrower or one or
more of its Subsidiaries (except as disclosed on Schedule 1.1-D) free and clear
of all Liens. Each such Subsidiary (other than those indicated on Schedule 1.1-
D as "inactive," each such Subsidiary having assets in an amount not exceeding
$50,000, and all such Subsidiaries having assets in an aggregate amount not
exceeding $250,000) (i) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, (ii) is
duly qualified or licensed as a foreign corporation and is in good standing in
each jurisdiction in which it owns or leases property or in which the conduct of
its business requires it to so qualify or be licensed (except, in each case in
this clause (ii), for jurisdictions in which the failure to so qualify or be in
good standing would not be reasonably likely to have a material adverse effect
on the business, condition (financial or otherwise), operations, performance or
properties of the Borrower and its Restricted Subsidiaries,
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<PAGE>
taken as a whole, or on the ability of the Borrower to perform its Obligations
under this Agreement or any other Loan Document) and (iii) has all requisite
corporate power and authority to own or lease and operate its properties and to
carry on its business as now conducted and as proposed to be conducted. No
Designated Subsidiary is a "Restricted Subsidiary" for purposes of (and as
defined in) any Funded Debt Agreement of the Borrower or any of its
Subsidiaries.
(c) Corporate Power; Authorization. The execution, delivery and
------------------------------
performance by the Borrower of this Agreement and each other Loan Document to
which it is or is to be a party, and the consummation of the other transactions
contemplated hereby and thereby, are within the Borrower's corporate powers,
have been duly authorized by all necessary corporate action and all necessary
shareholder action, if any, and do not (i) contravene the Borrower's, any Pled-
gor's, any Restricted Subsidiary's or any Designated Subsidiary's charter or by-
laws, (ii) violate any law, rule, regulation (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System), order,
writ, judgment, injunction, decree, determination or award, (iii) conflict with
or result in the breach of, or constitute a default under, any loan agreement,
indenture, mortgage, deed of trust or lease, or any other contract or
instrument binding on or affecting the Borrower, any of its Restricted
Subsidiaries or any of their properties, the contravention, violation,
conflict, breach, or default with, of or under which would be reasonably likely
considered singly and in the aggregate to have a material adverse effect on the
business, condition (financial or otherwise), operations, performance or
properties of the Borrower and its Restricted Subsidiaries, taken as a whole,
or on the ability of the Borrower to perform its Obligations under this
Agreement or any other Loan Document or (iv) result in or require the creation
or imposition of any Lien upon or with respect to any of the properties of the
Borrower or any of its Restricted Subsidiaries. Neither the Borrower nor any of
its Restricted Subsidiaries is in contravention of its charter or By-Laws or in
violation of any such law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award or in breach of any such contract, loan agree-
ment, indenture, mortgage, deed of trust, lease or other instrument, the
violation or breach of which would be reasonably likely to have a material
adverse effect on the business, condition (financial or otherwise), operations,
performance or properties of the Borrower and its Restricted Subsidiaries, taken
as a whole, or on the ability of the Borrower to perform its Obligations under
this Agreement or any other Loan Document.
(d) Approvals and Notices. No authorization or approval or other
---------------------
action by, and no notice to or filing with, any governmental authority or
regulatory body or any other third party is required for the due execution,
delivery and performance by the Borrower of this Agreement or any other Loan
Document to
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<PAGE>
which it is or is to be a party, or for the consummation of the transactions
contemplated hereby or thereby, except for authorizations, approvals, actions,
notices and filings which have been duly obtained, taken, given or made and are
in full force and effect. This Agreement has been, and each other Loan Docu-
ment when delivered hereunder will have been, duly executed and delivered by the
Borrower.
(e) Enforceable Obligations. This Agreement is, and each other Loan
-----------------------
Document when delivered hereunder will be, the legal, valid and binding
obligation of the Borrower, enforceable against the Borrower in accordance with
its terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium, reorganization or other similar laws affecting
creditors' rights generally and by general principles of equity.
(f) Financial Conditions.
--------------------
(i) The consolidated and consolidating (presented on a business
group basis) balance sheets of the Borrower and its Restricted Sub-
sidiaries as at December 31, 1991, and the related consolidated statements
of income and retained earnings of the Borrower and its Restricted
Subsidiaries for the fiscal period then ended, certified, in the case of
the consolidated financial statements, by Ernst & Young, independent public
accountants, fairly present the consolidated financial condition of the
Borrower and its Restricted Subsidiaries as at such date and the consol-
idated results of the operations of the Borrower and its Restricted
Subsidiaries for the period ended on such date, all in accordance with GAAP
applied on a consistent basis except, to the extent not on a consistent
basis, as disclosed in the notes thereto; the consolidated and
consolidating (presented on a business group basis) interim balance sheets
of the Borrower and its Restricted Subsidiaries as at June 30, 1992, and
the related consolidated statements of income and retained earnings of the
Borrower and its Restricted Subsidiaries for the fiscal period then ended,
certified by the chief financial officer of the Borrower, fairly present
the consolidated financial condition of the Borrower and its Restricted
Subsidiaries as at such date and the consolidated results of the
operations of the Borrower and its Restricted Subsidiaries for the period
ended on such date, all in accordance with GAAP applied on a consistent
basis except, to the extent not on a consistent basis, as disclosed in the
notes thereto and subject to normal year-end adjustments, and since June
30, 1992, except as disclosed in the Borrower's quarterly report on Form
10-Q for the fiscal quarter ended June 30, 1992, there has been no material
adverse change in the business, condition (financial or otherwise),
operations,
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performance, properties or prospects of the Borrower and its Restricted
Subsidiaries, taken as a whole, or in the ability of the Borrower to
perform its Obligations under this Agreement or any other Loan Document.
(ii) Schedule 4.1(f) lists all reports required to be filed by
the Borrower with the Securities and Exchange Commission since December 31,
1989 and prior to the date of this Agreement. As of their respective
dates, none of such reports contained any untrue statement of a material
fact or omitted to state any material fact necessary to make the state-
ments therein not misleading. The Borrower will make available to any
Lender upon request copies of all documents listed in Schedule 4.1(f). The
reports listed in Schedule 4.1(f), taken together, contain (as of their
respective dates) a true and correct description of the business,
operations and principal properties of the Borrower and its Subsidiaries,
taken as a whole as of the date of this Agreement. The reports listed in
Schedule 4.1(f), taken together, include financial statements of the
Borrower and its Subsidiaries for the last three complete fiscal years and
any later quarter-year ended over 60 days prior to the date of this
Agreement. All such financial statements fairly present the results of
operations and changes in financial position for each of such periods and
the financial position at the end of such period of the Borrower and its
Subsidiaries. All such financial statements have been prepared in
accordance with GAAP consistently applied throughout the periods involved,
except as set forth in the notes thereto.
(g) Future Financial Performance. The financial projections deliv-
----------------------------
ered to the Agent pursuant to Section 3.1(b)(viii)(D) were prepared in good
faith in a manner consistent with Borrower's past practices and on the basis of
the assumptions stated therein, which assumptions were reasonable in the light
of conditions existing at the time of delivery of such projections, and
represented, at the time of delivery, the Borrower's best estimate of its
future financial performance.
(h) Accuracy and Completeness of Information. No information,
----------------------------------------
exhibit or report furnished by the Borrower to the Agent or any Lender in con-
nection with the negotiation of the Loan Documents or pursuant to the terms of
the Loan Documents, as such information, exhibit or report has been amended,
supplemented or superseded by any other information, exhibit or report later
delivered to the same parties receiving such information, exhibit or report,
contained any material misstatement of fact or omitted to state a material fact
or any fact necessary to make the statements contained therein, in light of
circumstances in which made, not misleading.
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<PAGE>
(i) No Material Litigation. Except as disclosed in the Borrower's
----------------------
quarterly report on Form 10-Q for the fiscal quarter ended June 30, 1992, there
is no action, suit, investigation, litigation or proceeding affecting the
Borrower or any of its Subsidiaries pending or, to the best knowledge of the
Borrower, threatened before any court, governmental agency or arbitrator (i)
that would be reasonably likely to have a material adverse effect on the
business, condition (financial or otherwise), operations, performance or
properties of the Borrower and its Restricted Subsidiaries, taken as a whole, or
that would affect the ability of the Borrower to perform its Obligations under
this Agreement or any other Loan Document, or (ii) that purports to affect the
legality, validity or enforceability of this Agreement or any other Loan
Document or the consummation of the transactions contemplated hereby or thereby.
(j) No Margin Stock. No proceeds of any Loan made on or after the
---------------
date hereof will be used to acquire any equity security of a class that is
registered pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended. The Borrower is not engaged in the business of extending credit for
the purpose of purchasing or carrying Margin Stock, and no proceeds of any Loan
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.
(k) No ERISA Events. No ERISA Event has occurred which resulted in a
---------------
material liability that has not been satisfied or is reasonably expected to
occur with respect to any Plan with an Insufficiency in excess of $2,000,000.
(l) ERISA Plans. The most recent Schedule B (Actuarial Information)
-----------
to the annual report (Form 5500 Series) for each Plan, if any, copies of which
have been filed with the Internal Revenue Service and furnished to the Lenders,
to the best of the Borrower's knowledge, has been prepared by an enrolled
actuary in accordance with the standards applicable thereto and fairly presents
the funding status of such Plan as of the date set forth therein.
(m) No Withdrawal Liability. Neither the Borrower nor any ERISA
-----------------------
Affiliate has incurred any unpaid Withdrawal Liability, or is reasonably
expected to incur any Withdrawal Liability, to any Multiemployer Plan in excess
of $2,000,000 in the aggregate for all Multiemployer Plans.
(n) Multiemployer Plans. Neither the Borrower nor any ERISA
-------------------
Affiliate has been notified by the sponsor of a Multiemployer Plan that such
Multiemployer Plan is in reorganization or has been terminated, within the
meaning of Title IV of ERISA, and to the best knowledge of the Borrower, no
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Multiemployer Plan is reasonably expected to be in reorganization or to be
terminated, within the meaning of Title IV of ERISA.
(o) Other Events. Neither the business nor the properties of the
------------
Borrower or any of its Subsidiaries are affected by any fire, explosion,
accident, strike, lockout or other labor dispute, or other casualty (whether or
not covered by insurance) that would be reasonably likely to have a material
adverse effect on the business, condition (financial or otherwise), operations,
performance or properties of the Borrower and its Restricted Subsidiaries, taken
as a whole, or that would affect the ability of the Borrower to perform its
Obligations under this Agreement or any other Loan Document.
(p) Environmental Matters.
---------------------
(i) The Borrower and its Subsidiaries have been issued and will
maintain all material federal, state, and local permits, licenses,
certificates, and approvals required in connection with (a) air emissions,
(b) discharges to surface water or groundwater, (c) noise emissions, (d)
solid or liquid waste disposal, (e) the use, generation, storage,
transportation, or disposal of Hazardous Materials, or (f) other
environmental, health, or safety matters.
(ii) Neither the Borrower nor any of its Subsidiaries has re-
ceived notice of, or knows of or suspects, facts which might constitute any
violations of any Environmental Law with respect to its business,
operations, assets, equipment, property, leaseholds, or other facilities
which, singly or taken together, could reasonably be expected to have a
material adverse effect on the business, condition (financial or
otherwise), operations, performance or properties of the Borrower and its
Restricted Subsidiaries, taken as a whole, or that would affect the ability
of the Borrower to perform its Obligations under this Agreement or any
other Loan Document.
(iii) There has been no emission, spill, release, or discharge
into or upon (a) the air, (b) soils or any improvements located thereon,
(c) surface water or groundwater, or (d) the sewer, septic system or waste
treatment, storage or disposal system servicing the premises, of any
Hazardous Materials at or from the premises owned or operated by the
Borrower or any Subsidiary that could reasonably be expected to have a
material adverse effect on the business, condition (financial or
otherwise), operations, performance or properties of the Borrower and its
Restricted Subsidiaries, taken as a whole, or that would affect the ability
of the
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Borrower to perform its Obligations under this Agreement or any other Loan
Document.
(iv) There has been no material complaint, order, directive,
claim, citation, or notice by any governmental authority or any other
Person with respect to (a) air emissions, (b) spills, releases, or
discharges to soils or improvements located thereon, surface water,
groundwater or the sewer, septic system or waste treatment, storage or
disposal systems servicing the premises, (c) noise emissions, (d) solid or
liquid waste disposal, (e) the use, generation, storage, transportation, or
disposal of Hazardous Materials, or (f) other environmental, health, or
safety matters affecting the Borrower or any Subsidiary or their respective
business, operations, assets, equipment, property, leaseholds, or other
facilities.
(v) The Borrower has complied, and the operations and prop-
erties of the Borrower and each of its Subsidiaries comply in all material
respects with all applicable Environmental Laws, all Hazardous Materials
located on the properties of the Borrower and each of its Subsidiaries or
utilized in their operations are utilized and stored in compliance in all
material respects with all applicable laws, and neither the Borrower nor
any of its Subsidiaries has any liability, contingent or otherwise, under
any Environmental Law which could reasonably be expected to have a material
adverse effect on the business, condition (financial or otherwise), opera-
tions, performance or properties of the Borrower and its Restricted
Subsidiaries, taken as a whole, or that would affect the ability of the
Borrower to perform its Obligations under this Agreement or any other Loan
Document.
(q) Material Contracts. Neither the Borrower nor any of its Sub-
------------------
sidiaries is a party to any contract, indenture, loan or credit agreement or
lease or subject to any charter or corporate restriction the performance of its
obligations thereunder which would be reasonably likely to have a material
adverse effect on the business, condition (financial or otherwise), operations,
performance or properties of the Borrower and its Restricted Subsidiaries, taken
as a whole, or on the ability of the Borrower to perform its Obligations under
this Agreement or any other Loan Document.
(r) Payment of Taxes. The Borrower and each of its Subsidiaries has
----------------
filed, or there has been filed on its behalf, or has timely requested an exten-
sion to file, or has received an approved extension to file, all tax returns
(Federal, State, local and foreign) and reports required to be filed prior to
the date of the making of this representation and warranty (and all such returns
and reports are true and accurate in all material respects) and has paid all
taxes shown to be due
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and payable thereon or on any assessments made against it or any of its prop-
erty, and has paid all other taxes, fees or other charges (including, without
limitation, interest, additions to taxes and penalties) (in all cases other
than (i) those the amount or validity of which currently is being contested in
good faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided in its books and (ii) those which would
not have a material adverse effect on the business, condition (financial or
otherwise), operations, performance or properties of the Borrower and its
Restricted Subsidiaries, taken as a whole, or on the ability of the Borrower to
perform its Obligations under this Agreement or any other Loan Document) and, to
the knowledge of the Borrower and each of its Subsidiaries, no claims are being
asserted with respect to any such taxes, fees or other charges (other than (i)
those the amount or validity of which currently is being contested in good
faith by appropriate proceedings and with respect to which reserves in
accordance with GAAP have been provided on its books and (ii) those which would
not have a material adverse effect on the business, condition (financial or
otherwise), operations, performance or properties of the Borrower and its
Restricted Subsidiaries, taken as a whole, or on the ability of the Borrower to
perform its Obligations under this Agreement or any other Loan Document).
(s) Investment Company Act; Public Utility Holding Company Act.
----------------------------------------------------------
Neither the Borrower nor any of its Subsidiaries is an "investment company," or
an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended. Neither the making of any Loans, nor the issuance of any
Facility Letters of Credit, nor the application of the proceeds or repayment
thereof by the Borrower, nor the consummation of the other transactions contem-
plated hereby, will violate any provision of such Act or any rule, regulation or
order of the Securities and Exchange Commission thereunder. Neither the Bor-
rower nor any of its Subsidiaries is subject to regulation under the Federal
Power Act or is a "holding company" or an "affiliate" of a "holding company," or
of a "subsidiary company" of a "holding company," as such terms are defined in
the Public Utility Holding Company Act of 1935, as amended.
(t) Funded Debt Agreements; Existing Debt. Set forth on Schedule
-------------------------------------
1.1-C is a complete and accurate list of (i) all Funded Debt Agreements of the
Borrower and its Subsidiaries in effect on the date hereof and (ii) all Existing
Debt outstanding under each such Funded Debt Agreement and all other Existing
Debt of the Borrower and its Restricted Subsidiaries as of the date hereof, in
each case showing the principal amount outstanding thereunder.
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(u) Tax Consolidation. The Borrower and each of the Borrower's
-----------------
Restricted Subsidiaries (other than Foreign Subsidiaries) are all members of the
"affiliated group" (within the meaning of (S) 1504(a)(1) of the Code) of which
the Borrower is the common Parent, and each has consented to the "making of a
consolidated return" (as defined in (S) 1501 of the Code).
(v) Ownership of Property; Liens. The Borrower and each of its
----------------------------
Restricted Subsidiaries has good and valid title to all its material assets, in
each case free and clear of all Liens, other than Liens permitted by this
Agreement.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.1. Affirmative Covenants. On and after the date hereof, so
---------------------
long as any Loan or Reimbursement Obligation shall remain unpaid, any Facility
Letter of Credit shall be outstanding (unless such Facility Letter of Credit is
Fully Secured) or any Lender shall have any Commitment hereunder, the Borrower
will, unless the Required Lenders shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply, and cause each of its
--------------------------
Subsidiaries to comply, in all respects, with all applicable laws, rules,
regulations and orders, such compliance to include, without limitation,
compliance with ERISA and all applicable Environmental Laws, except to the
extent that failure to so comply would not have a material adverse effect on the
business, condition (financial or otherwise), operations, performance or
properties of the Borrower and its Restricted Subsidiaries, taken as a whole, or
on the ability of the Borrower to perform its Obligations under this Agreement
or any other Loan Document.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its
----------------------
Subsidiaries to pay and discharge, before the same shall become delinquent, (i)
all taxes, assessments and governmental charges or levies imposed upon it or
upon its property and (ii) all lawful claims that, if unpaid, might by law
become a Lien upon its property (in each case, other than those which the
failure to so pay or discharge would not have a material adverse effect on the
business, condition (financial or otherwise), operations, performance or
properties of the Borrower and its Restricted Subsidiaries, taken as a whole,
or on the ability of the Borrower to perform its Obligations under this
Agreement or any other Loan Document; provided, however, that neither the
-------- -------
Borrower nor any of its Subsidiaries shall be required to pay or discharge any
such tax, assessment, charge or
-64-
<PAGE>
claim that is being contested in good faith and by proper proceedings and as to
which appropriate reserves are being maintained.
(c) Maintenance of Insurance. Maintain, and cause each of its
------------------------
Restricted Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations in such amounts and covering such risks as
is usually carried by companies engaged in similar businesses of similar size
and owning similar properties in the same general areas in which the Borrower or
such Subsidiary operates.
(d) Preservation of Corporate Existence, Etc. Preserve and main-
-----------------------------------------
tain, and cause each of its Restricted Subsidiaries to preserve and maintain,
its corporate existence, rights (charter and statutory) and franchises;
provided, however, that neither the Borrower nor any Restricted Subsidiary
- - - - - - - - - -------- -------
shall be required to preserve any right or franchise if the Board of Directors
of the Borrower or such Restricted Subsidiary shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Borrower or such Restricted Subsidiary, as the case may be, and the loss
thereof is not disadvantageous in any material respect to the Borrower, such
Restricted Subsidiary or the Lenders.
(e) Visitation Rights. At any reasonable time and from time to time,
-----------------
upon reasonable prior notice permit the Agent or any of the Lenders or any
agents or representatives thereof, to the extent reasonably requested, to
examine and make copies of and abstracts from the records and books of account
of, and visit the properties of, the Borrower and any of its Subsidiaries, and
to discuss the affairs, finances and accounts of the Borrower and any of its
Subsidiaries with any of their officers or directors and with their independent
certified public accountants.
(f) Keeping of Books. Keep, and cause each of its Subsidiaries to
----------------
keep, proper books of record and account, in which appropriate entries shall be
made of all financial transactions and the assets and business of the Borrower
and each such Subsidiary to the extent necessary to permit the preparation of
the financial statements required to be delivered hereunder.
(g) Maintenance of Properties, Etc. Maintain and preserve, and cause
-------------------------------
each of its Restricted Subsidiaries to maintain and preserve, substantially all
of its properties that are used in the conduct of its business in good working
order and condition, ordinary wear and tear excepted.
-65-
<PAGE>
(h) Maintenance of Current Ratio. Maintain at all times a ratio of
----------------------------
Consolidated Current Assets to Consolidated Current Liabilities of not less than
1.25 to 1.0.
(i) Maintenance of Adjusted Current Ratio. Maintain at all times a
-------------------------------------
ratio of (x) Consolidated Current Assets (minus 50% of the book value of inven-
-----
tory of the Borrower and its Restricted Subsidiaries on a consolidated basis) to
(y) Consolidated Current Liabilities, of not less than 1.0 to 1.0.
(j) Maintenance of Consolidated Working Capital. Maintain
-------------------------------------------
Consolidated Working Capital of not less than $250,000,000 on September 30,
October 31 and November 30, 1992 and not less than $300,000,000 on the last day
of each month thereafter.
(k) Maintenance of Consolidated Tangible Net Worth. Maintain at all
----------------------------------------------
times Consolidated Tangible Net Worth of not less than an amount equal to the
sum of (i) $150,000,000 plus (ii) 75% of the cumulative amount of positive
----
Consolidated Net Income (determined quarterly and not adjusted for the exclu-
sions set forth in the definition of "Consolidated Net Worth") for the period
commencing with the fiscal quarter beginning July 1, 1992 plus (iii) the excess
----
of (A) 100% of any increase in Consolidated Net Worth which results from the
issuance of any equity securities or capital stock over (B) the amount of
Restricted Investments permitted by Section 5.2(f) made by the Borrower or its
Restricted Subsidiaries on or after July 1, 1992.
(l) Maintenance of Fixed Charges Coverage Ratio. Maintain a Fixed
-------------------------------------------
Charges Coverage Ratio, determined as of the last day of each fiscal quarter of
the Borrower, commencing with the quarter ending September 30, 1992 for the
period of four (4) fiscal quarters (or such smaller number of quarters as have
elapsed after June 30, 1992) ending on the last day of such fiscal quarter of
not less than the ratio set forth below for such ending date:
<TABLE>
<CAPTION>
Ratio Period Ending
----- -------------
<S> <C>
0.9 to 1 9/30/92
1.07 to 1 12/31/92
1.12 to 1 3/31/93
1.15 to 1 6/30/93 and
thereafter
</TABLE>
-66-
<PAGE>
(m) Consolidated Funded Debt. Maintain at all times a ratio of (x)
------------------------
Consolidated Funded Debt (excluding the Loans) to (y) Consolidated Net Worth
of not more than 1.75 to 1.0.
(n) EBIT. Maintain EBIT, determined as of the last day of each EBIT
----
Period (as defined below) of the Borrower, in an amount not less than the amount
set forth below for such EBIT Period:
<TABLE>
<CAPTION>
EBIT Period
For Fiscal
EBIT Quarter Ending
---- --------------
<S> <C>
$13,000,000 9/30/92
39,000,000 12/31/92
45,000,000 3/31/93
37,000,000 6/30/93 and thereafter
</TABLE>
As used herein, the term "EBIT Period" shall mean, (i) for the fiscal quarter of
---- ------
the Borrower ending September 30, 1992, such fiscal quarter and (ii) for each
fiscal quarter ending thereafter, such fiscal quarter and the immediately
preceding fiscal quarter.
(o) Reporting Requirements. Furnish to the Lenders and the Agent:
----------------------
(i) as soon as possible and in any event within three days after
the Borrower knows or has reason to know of the occurrence of any Default
continuing on the date of such statement, a statement of the treasurer of
the Borrower setting forth details of such Default and the action that the
Borrower proposes to take with respect thereto;
(ii) as soon as available and in any event within 60 days after
the end of each month hereafter (and, upon the reasonable request of any
Lender, at any other time), (A) a schedule of outstanding Debt, showing the
total amount of Debt and Liens outstanding and the respective amounts of
Debt and Liens outstanding permitted by Section 5.2(a), (B) a valuation of
inventory securing Floor Plan Financing at the lower of cost or market
value as of the end of such month or for the period commencing at the end
of the previous month and ending with the end of such month, as the case
may be, (C) a schedule of Third Party Letter of Credit Obligations and the
computations used by the Borrower in determining, as of the end of such
month, compliance with the covenant contained in Section
-67-
<PAGE>
5.2(a)(ix), and (D) a schedule of guarantees permitted by Section
5.2(c)(ii) and the computations used by the Borrower in determining, as of
the end of such month, compliance with the covenant contained in such
Section; all duly certified by the treasurer of the Borrower;
(iii) as soon as available and in any event within 45 days after
the end of each month hereafter, unaudited consolidated and consolidating
balance sheets of the Borrower and its Restricted Subsidiaries (subject to
the following proviso, presented on a business group basis) as of the end
of such month and unaudited consolidated and consolidating statements of
income, retained earnings and cash flows of the Borrower and its Re-
stricted Subsidiaries (subject to the following proviso, presented on a
business group basis) for such month and for the period commencing at the
end of the previous fiscal year and ending with the end of such month, all
in reasonable detail and duly certified (subject to normal year-end audit
adjustments and the absence of footnotes) by the treasurer of the Borrower
as having been prepared in accordance with GAAP (except that the
consolidating cash flow statements may be prepared on a receipts and dis-
bursements basis), together with (A) a certificate of said officer stating
that no Default has occurred and is continuing or, if a Default has
occurred and is continuing, a statement as to the nature thereof and the
action that the Borrower proposes to take with respect thereto, and (B) a
schedule, certified by such officer, in reasonable detail, of the
computations used by the Borrower in determining, as of the end of such
month, compliance with the covenants contained in Sections 5.1(h), (i),
(j), (k) and (m) and 5.2(m), provided that upon the request of Required
--------
Lenders, the Borrower will thereafter deliver (contemporaneously with the
delivery of other financial statements pursuant to this clause (iii)),
consolidated and consolidating financial statements of the type presented
on a non-business group (i.e., standard) basis;
----
(iv) as soon as available and in any event within 60 days after
the end of each of the first three quarters of each fiscal year of the
Borrower, commencing with the quarter ending September 30, 1992, unaudited
consolidated and consolidating balance sheets of the Borrower and its
Restricted Subsidiaries (subject to the following proviso, presented on a
business group basis) as of the end of such quarter and unaudited con-
solidated and consolidating statements of income, retained earnings and
cash flows of the Borrower and its Restricted Subsidiaries (subject to the
following proviso, presented on a business group basis) for the period
commencing at the end of the previous fiscal year and ending with the end
of such quarter, setting forth in each case in comparative form the corre-
-68-
<PAGE>
sponding figures for the corresponding period of the preceding fiscal year
(to the extent that comparative figures were prepared for such previous
period), all in reasonable detail and duly certified (subject to normal
year-end audit adjustments and the absence of footnotes) by the treasurer
of the Borrower as having been prepared in accordance with GAAP (except
that the consolidating cash flow statements may be prepared on a receipts
and disbursements basis), together with (A) a certificate of said officer
stating that no Default has occurred and is continuing or, if a Default has
occurred and is continuing, a statement as to the nature thereof and the
action that the Borrower proposes to take with respect thereto, and (B) a
schedule, certified by such officer, in reasonable detail, of the computa-
tions used by the Borrower in determining, as of the end of such fiscal
quarter, compliance with the covenants contained in Sections 5.1(h), (i),
(j), (k), (l), (m), and (n) and Section 5.2(m), provided that upon the
--------
request of Required Lenders, the Borrower will thereafter deliver
(contemporaneously with the delivery of other financial statements
pursuant to this clause (iv)), consolidated and consolidating financial
statements of the type presented on a non-business group (i.e., standard)
----
basis;
(v) as soon as available and in any event within 120 days after
the end of the fiscal year ending December 31, 1992 and the end of each
fiscal year thereafter of the Borrower, a copy of the consolidated and con-
solidating balance sheets of the Borrower and its Restricted Subsidiaries
(subject to the following proviso, presented on a business group basis) as
of the end of such fiscal year and consolidated and consolidating state-
ments of income, retained earnings and cash flows of the Borrower and its
Restricted Subsidiaries (subject to the following proviso, presented on a
business group basis) for such period or fiscal year, in each case pre-
pared in accordance with GAAP (except that the consolidating cash flow
statements may be prepared on a receipts and disbursements basis) and, in
the case of such consolidated statements, certified without qualification
or in a manner reasonably acceptable to the Agent by independent public
accountants of recognized standing reasonably acceptable to the Agent,
together with (A) a certificate of such accounting firm stating that in the
course of the regular audit of the financial statements of the Borrower and
its Restricted Subsidiaries, which audit was conducted by such accounting
firm in accordance with generally accepted auditing standards, such
accounting firm has obtained no knowledge that a Default has occurred and
is continuing, or if, in the opinion of such accounting firm, a Default has
occurred and is continuing, a statement as to the nature thereof, (B) a
schedule, certified by the treasurer of the Borrower, in form and sub-
stance reasonably satisfactory to the Agent of the computations used by
-69-
<PAGE>
the Borrower in determining, as of the end of such fiscal period or year,
compliance with the covenants contained in Sections 5.1(h), (i), (j), (k),
(l), (m) and (n) and copies of any accountant's letters received by manage-
ment in connection with such accountant's findings during its audit of the
financial records of the Borrower during, or in respect of, such fiscal
year, provided that upon the request of Required Lenders, the Borrower will
--------
thereafter deliver (contemporaneously with the delivery of other financial
statements pursuant to this clause (v)), consolidated and consolidating
financial statements of the type presented on a non-business group (i.e.,
----
standard) basis;
(vi) in the event of any change in GAAP from the date of the
financial statements referred to in Section 4.1(f)(i), and until financial
covenants or provisions of this Agreement have been modified accordingly
pursuant to Section 1.3(b), upon delivery of any financial statement
required to be furnished under clauses (iii) and (iv) of this Section
5.1(o), a statement of reconciliation conforming any information contained
in such financial statement required to be furnished under clauses (iii)
and (iv) of this Section 5.1(o) with GAAP as in effect on the date of the
financial statements referred to in Section 4.1(f)(i);
(vii) promptly and in any event within 30 Business Days after
the Borrower or any ERISA Affiliate knows or has reason to know that any
ERISA Event has occurred with respect to a Major Plan, a statement of the
chief financial officer of the Borrower describing such ERISA Event and the
action, if any, that the Borrower or such ERISA Affiliate proposes to take
with respect thereto;
(viii) promptly and in any event within 30 Business Days after
receipt thereof by the Borrower or any ERISA Affiliate, copies of each
notice from the PBGC stating its intention to terminate any Plan or to have
a trustee appointed to administer any Plan with an Insufficiency in excess
of $2,000,000;
(ix) promptly and in any event within 30 Business Days after the
filing thereof with the Internal Revenue Service, copies of each Schedule B
(Actuarial Information) to the annual report (Form 5500 Series), if any,
with respect to each Major Plan;
(x) promptly and in any event within 30 Business Days after
receipt thereof by the Borrower or any ERISA Affiliate from the sponsor of
a Multiemployer Plan, a copy of each notice received by the Borrower or
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<PAGE>
any ERISA Affiliate concerning (A) the imposition of Withdrawal Liability
by any Multiemployer Plan which liability is in excess of $2,000,000, (B)
the reorganization or termination, within the meaning of Title IV of ERISA,
of any Multiemployer Plan or (C) the amount of liability incurred, or that
may be incurred, by the Borrower or any ERISA Affiliate in connection with
any event described in clause (A) or (B) which liability is in excess of
$2,000,000;
(xi) prompt notice of all actions, suits and proceedings before
any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting the Borrower or any of its
Subsidiaries of the type described in Section 4.1(i);
(xii) promptly after the sending or filing thereof, copies of
all financial statements and reports that the Borrower or any of its
Subsidiaries sends to its public stockholders and other public holders of
its securities, if any, and copies of all regular, periodic and special
reports, and all registration statements, that the Borrower or any of its
Subsidiaries files with the Securities and Exchange Commission (other than
those prepared on Form S-8 or Form S-3 solely for the account of selling
shareholders) or any governmental authority that may be substituted
therefor, or with any national securities exchange;
(xiii) upon receipt of the proceeds of any sale or other
disposition of assets (other than any such sale or disposition permitted
by clauses (A) through (E) of Section 5.2(e)(i)) or the issuance of any
securities or the incurrence of Funded Debt resulting in any such case in
Cash Proceeds of at least $1,000,000, a statement of the treasurer of the
Borrower describing such issuance, incurrence or sale or other
disposition, together with a statement of the calculations used in
determining the Net Cash Proceeds and Cash Proceeds thereof, in each case
in form and detail reasonably satisfactory to the Agent; and
(xiv) such other information respecting the business, condition
(financial or otherwise), operations, performance or properties of the
Borrower or any of its Subsidiaries as the Agent or any Lender may from
time to time reasonably request.
(p) Transactions with Affiliates. Conduct or engage in, and cause
----------------------------
each of its Restricted Subsidiaries to conduct, all transactions otherwise
permitted under the Loan Documents with any of their Affiliates (other than the
Borrower or any of its Restricted Subsidiaries) on terms that are fair and rea-
-71-
<PAGE>
sonable and no less favorable to the Borrower or such Restricted Subsidiary than
it would obtain in a comparable arm's-length transaction with a Person not an
Affiliate. The Borrower will not conduct or engage in, and will not permit any
of its Restricted Subsidiaries to conduct or engage in, any transaction with any
of its Affiliates (other than the Borrower or any of its Restricted
Subsidiaries) involving an amount, or assets or property having a fair value, in
excess of $5,000,000, in any transaction or series of related transactions,
without having given the Agent at least ten (10) Business Days' prior written
notice thereof, which notice shall include a reasonably detailed description of
such transaction; provided, however, that such notice will not be required with
--------
respect to reasonable non-cash compensation of officers or directors of the
Borrower.
(q) Further Assurances. At any time and from time to time execute
------------------
and deliver such further documents and do such other acts as the Agent or any
Lender may reasonably request in order to further effect the purpose of this
Agreement or any other Loan Document.
SECTION 5.2. Negative Covenants. On and after the date hereof, so
------------------
long as any Loan or Reimbursement Obligation shall remain unpaid, any Facility
Letter of Credit shall be outstanding (unless such Facility Letter of Credit is
Fully Secured) or any Lender shall have any Commitment hereunder, the Borrower
will not, without the prior written consent of the Required Lenders:
(a) Debt. Create, incur, assume or suffer to exist, or permit any of
----
its Restricted Subsidiaries to create, incur, assume or suffer to exist any
Debt, except:
------
(i) Debt under the Loan Documents;
(ii) Existing Debt, not including any extension, renewal or
replacement thereof except (A) as otherwise may be permitted by another
------
clause of this Section 5.2(a), or (B) Existing Debt with respect to which
an Existing Lien could be extended, renewed or replaced pursuant to Section
5.2(b)(ii);
(iii) Intercompany Debt in the ordinary course of business,
provided that separate books and records shall be kept by the Borrower with
--------
respect to any amounts of such Debt attributable to proceeds of Borrowings
hereunder;
(iv) (A) unsecured Short-Term Debt in an aggregate principal
amount not exceeding $90,000,000 outstanding at any time, (B) secured
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<PAGE>
Short-Term Debt in an aggregate principal amount not exceeding $35,000,000
outstanding at any time and (C) secured Short-Term Debt pursuant to an
existing arrangement with IBM Credit Corporation in an aggregate principal
amount not exceeding $25,000,000 outstanding at any time; provided that the
--------
aggregate principal amount of Short-Term Debt permitted by Section
5.2(a)(iv)B) and Section 5.2(a)(iv)(C) shall not exceed $35,000,000
outstanding at any time; and, provided further that the aggregate
----------------
principal amount of Short-Term Debt permitted by this Section 5.2(a)(iv)
shall not exceed $90,000,000 outstanding at any time;
(v) Funded Debt with respect to industrial revenue, pollution
control or similar bonds issued for the benefit of the Borrower or any
Restricted Subsidiary (in addition to Existing Debt permitted to be out-
standing with respect to such type bonds) in an aggregate principal amount
not exceeding $10,000,000 outstanding at any time;
(vi) Funded Debt secured by Liens permitted pursuant to Section
5.2(b)(vii), provided that after giving effect thereto, the Borrower shall
--------
be in compliance with Sections 5.1(h), (i), (j), (k), (l), (m) and (n);
(vii) unsecured Funded Debt of the Borrower or any Restricted
Subsidiary, provided that after giving effect thereto the Borrower shall be
--------
in compliance with Sections 5.1(h), (i), (j), (k), (l), (m) and (n) and the
Integrated Debt and Lien Basket Amount shall not exceed 20% of Consoli-
dated Total Capitalization at any time;
(viii) guarantees by the Borrower or by any Restricted
Subsidiary of Debt of any Person that would constitute Debt hereunder to
the extent that such Debt could have been directly incurred by the Borrower
or such Restricted Subsidiary hereunder;
(ix) Third Party Letter of Credit Obligations not to exceed
$100,000,000 minus the aggregate amount of Facility Letter of Credit
-----
Obligations, provided that Third Party Letter of Credit Obligations other
--------
than in connection with Insurance Letters of Credit may not at any time
exceed $15,000,000;
(x) Funded Debt of the Water Companies issued under indentures
existing on the date of this Agreement and listed in Schedule 1.1-B (or
indentures having substantially similar terms and conditions) and the
preferred shares of the Water Companies issued and outstanding on the date
of this Agreement, provided that, to the extent that the principal
--------
-73-
<PAGE>
amount of Funded Debt of the Water Companies exceeds the amount thereof
outstanding on the date of this Agreement, after giving effect to such
excess amount, the Integrated Debt and Lien Basket Amount shall not exceed
20% of Consolidated Total Capitalization at any time;
(xi) purchase money mortgages and Excess Floor Plan Financing
Amounts, provided that after giving effect to Debt incurred under this
--------
Section 5.2(a)(xi), the Integrated Debt and Lien Basket Amount shall not
exceed 20% of Consolidated Total Capitalization at any time; and
(xii) Debt in respect of Floor Plan Financing, other than Excess
Floor Plan Financing Amounts.
(b) Liens. Create, incur, assume or suffer to exist, or permit any
-----
of its Restricted Subsidiaries to create, incur, assume or suffer to exist, any
Lien, or enter into any agreement with any other Person to create any Lien, on
or with respect to any of its properties of any character (including, without
limitation, accounts) whether now owned or hereafter acquired, or sign or file,
or permit any of its Restricted Subsidiaries to sign or file, under the Uniform
Commercial Code of any jurisdiction, a financing statement that names the
Borrower or any of its Restricted Subsidiaries as debtor, or sign, or permit any
of its Restricted Subsidiaries to sign, any security agreement authorizing any
secured party thereunder to file such financing statement, or assign, or permit
any of its Restricted Subsidiaries to assign, any accounts, except:
------
(i) Permitted Liens;
(ii) Liens existing on the Restatement Date and listed in
Schedule 5.2(b), not including any extension, renewal or replacement
thereof except (A) as otherwise may be permitted under this Section 5.2(b),
------
or (B) as Liens securing Existing Debt permitted to be extended, renewed or
replaced and encumbering the same property, plant or other capital assets
listed in Schedule 5.2(b), provided that the principal amount of Debt
--------
secured thereby shall not exceed the principal amount of Debt so secured at
the time of such extension, renewal or replacement and that such extension,
renewal or replacement shall be limited to all or part of the property,
plant or other capital asset which secured the Lien so extended, renewed or
replaced (including improvements on such property);
(iii) Liens on assets of the Water Companies securing Funded
Debt permitted by Section 5.2(a)(x);
-74-
<PAGE>
(iv) Liens to secure Funded Debt permitted by Section 5.2(a)(v)
with respect to industrial revenue, pollution control or similar bonds
issued for the benefit of the Borrower or a Restricted Subsidiary,
provided, however, that any such Lien shall not encumber any property of
-------- -------
the Borrower or such Restricted Subsidiary other than the property
financed by the proceeds of the sale of such bonds and, provided further,
----------------
that any such Lien shall not secure an amount in excess of the unpaid
principal of and interest on such bonds together with attorneys' or
trustees' fees and expenses and other like charges;
(v) Liens on inventory to secure Floor Plan Financing, provided
--------
that if any such Liens secure Excess Floor Plan Financing Amounts such
Excess Floor Plan Financing Amount would be permitted under Section
5.2(a)(xi);
(vi) Liens existing on property prior to (x) acquisition of such
property by the Borrower or any Restricted Subsidiary or (y) acquisition of
the corporation owning such property by the Borrower or any Restricted
Subsidiary or (z) designation of the corporation owning such property as a
Restricted Subsidiary, provided that (a) such Lien was not created in
--------
contemplation of such acquisition or designation, (b) the amount of Funded
Debt secured by such Lien is permitted to be incurred and outstanding
hereunder and (c) the amount of Funded Debt secured by such Lien does not
exceed 25% of the lesser of the market value of the secured property or the
cost to the Borrower or such Restricted Subsidiary of the secured property
(any amount of Funded Debt secured by such Lien that would exceed the
permitted 25% of the lesser of the market value of the secured property or
the cost to the Borrower or such Restricted Subsidiary of the secured
property shall be referred to as the "Excess Secured Amount"); and
(vii) Liens securing Funded Debt (including any Excess Secured
Amount) and Short-Term Debt of the Borrower or any Restricted Subsidiary
permitted hereunder to be outstanding and secured, provided that after
--------
giving effect to the aggregate amount of Debt of the Borrower or any Re-
stricted Subsidiary secured by Liens permitted by this Section 5.2(b)(vii),
the Integrated Debt and Lien Basket Amount shall not exceed 20% of Con-
solidated Total Capitalization at any time.
(c) Guarantees. Guarantee, endorse or otherwise be or become
----------
contingently liable, or permit any of its Restricted Subsidiaries to guarantee,
-75-
<PAGE>
endorse or otherwise be or become contingently liable, directly or indirectly,
in connection with the obligations, stock or dividends of any Person, except:
------
(i) guarantees by the Borrower or any Restricted Subsidiary of
performance bonds or contractual obligations of any of its Subsidiaries in
respect of which it is usual and customary for performance bonds to
otherwise be provided (other than obligations for the payment of Debt or
arrangements that would have substantially the same effect as obligations
for the payment of Debt) in an aggregate amount at any time outstanding not
exceeding 700% of Consolidated Net Worth;
(ii) guarantees by the Borrower or any Restricted Subsidiary of
contractual obligations of any of its Subsidiaries created for the sole
purpose of financing all or any part of the purchase price of the
acquisition or cost or construction or improvement of property, projects or
facilities acquired, constructed or improved by such Subsidiary (other than
obligations for the payment of Debt) provided that (x) until such time as
--------
the Borrower shall be required to perform any obligations under such
guarantee and such obligations shall remain unfulfilled for a period of
thirty (30) days, an amount equal to 20% of the lesser of (A) the aggregate
outstanding amount of Debt of such Subsidiary incurred in connection with
such property, project or facility and such guarantee and (B) any amount
specifically stated in such guarantee to be the maximum amount required to
be paid by the guarantor shall be included in the Integrated Debt and Lien
Basket Amount; and (y) at such time that the Borrower shall be required to
perform any obligations under any such guarantee and such obligations
shall remain unfulfilled for a period of thirty (30) days, an amount equal
to 100% of the lesser of (A) the aggregate outstanding amount of Debt of
such Subsidiary incurred in connection with such property, project or
facility and such guarantee and (B) any amount specifically stated in such
guarantee to be the maximum amount required to be paid by the guarantor,
shall be included in the Integrated Debt and Lien Basket Amount; provided
--------
further that the thirty day period shall be measured from the date upon
-------
which the Borrower receives notice of any such requirement to perform
under any such guarantee, and the Borrower shall provide prompt notice
thereof to the Agent; and, provided further that after giving effect to the
----------------
amount of each such guarantee in the manner specified in this Section
5.2(c)(ii), the Integrated Debt and Lien Basket Amount shall not exceed 20%
of Consolidated Total Capitalization at any time;
(iii) guarantees by the Borrower of the price of its capital
stock issued in payment of the acquisition of a corporation or the
acquisition of
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assets in an aggregate amount at any time outstanding not exceeding 20% of
Consolidated Tangible Net Worth; and
(iv) guarantees by the Borrower or by any Restricted Subsidiary
of Debt of any Person to the extent that such Debt could have been directly
incurred by the Borrower or such Restricted Subsidiary hereunder and is
thereupon treated as Debt hereunder.
(d) Mergers. Except as expressly permitted by Section 5.2(e), merge
-------
with or into or consolidate with or into, or convey, transfer, lease or
otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets, whether now owned or
hereafter acquired) or permit any Restricted Subsidiary to do so, except that
any Restricted Subsidiary may merge or consolidate with or into, or convey,
transfer, lease or otherwise dispose of all or substantially all of its assets
to, the Borrower (provided that the Borrower shall be the surviving Person) or
--------
any of its Wholly-Owned Restricted Subsidiaries, provided that at the time
--------
thereof and after giving effect thereto no Default exists.
(e) Dispositions of Assets.
----------------------
(i) Sell, lease, transfer or otherwise dispose of, or permit any
of its Restricted Subsidiaries to sell, lease, transfer or otherwise
dispose of, any of its assets (subject to clause (ii) below, other than the
shares of capital stock of the Water Companies or the assets of the Water
Companies), including, without limitation, any manufacturing plant or
substantially all assets constituting the business of a division, branch or
other unit of operation, except (A) inventory in the ordinary course of its
business, (B) sales of obsolete or excess equipment not exceeding in the
aggregate for all such equipment $2,000,000 in gross proceeds during the
term of this Agreement, (C) in connection with a transaction authorized by
Section 5.2(d), (D) sales or other transfers of assets to the Borrower or
any of its Wholly-Owned Restricted Subsidiaries, (E) sales or other
dispositions of receivables pursuant to any Accounts Receivable Financing
program existing on the date hereof in an aggregate amount not exceeding
$60,000,000 at any time, and (F) other dispositions for cash of assets at
their fair market value (as determined in good faith by the Board of
Directors of the Borrower), provided that the Net Cash Proceeds thereof are
--------
applied to the prepayment or repayment of the Loans (or are deposited in
the L/C Cash Collateral Account) to the extent required by Sections 2.8(b)
and 2.8(c).
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(ii) Notwithstanding the foregoing, the Borrower shall not (a)
make any disposition by way of a sale or other transfer of any of the
shares of the capital stock of any of the Water Companies or (b) permit any
of the Water Companies to make any dispositions of any or all of their
assets (other than dispositions of assets in the ordinary course of busi-
ness, consistent with practice prior to the date of this Agreement), other
than pursuant to a condemnation proceeding, unless upon any such dis-
position the Borrower shall receive an amount (the "Required Amount") equal
---------------
to the greater of (x) 95% of book value of such assets at the time of such
disposition and (y) the amount, if any, which would be required to prepay,
redeem or purchase all Debt of the Water Companies and all debt of the
Borrower and its Restricted Subsidiaries which the holders thereof could
require the Water Companies or the Borrower or any Restricted Subsidiary,
as the case may be, to prepay, redeem or purchase as a result of such
disposition), in the form of the following: (A) cash in the Required
Amount, and/or (B) irrevocable commitments from underwriters or institu-
tional investors to purchase for cash the non-cash proceeds of such dis-
position in the Required Amount. If no Default exists and is continuing,
notwithstanding the foregoing, the Borrower may make a single dividend or
distribution of all (but not part) of the shares of any Water Company,
provided that no obligation on the part of the Borrower or any other Sub-
--------
sidiary of the Borrower shall result therefrom (including, without
limitation, any obligation by the Borrower or any Restricted Subsidiary to
become or remain liable for the Debt of the Water Company the shares of
which are being so distributed or any obligation by the Borrower or any
Subsidiary to prepay, redeem or purchase Debt of the Borrower or any
Restricted Subsidiary as a result of such distribution).
(f) Restricted Payments and Restricted Investments.
----------------------------------------------
(i) Declare, make or pay, or set apart for payment, or permit
any Restricted Subsidiary to, declare, make or pay, or set apart for pay-
ment, any Restricted Payment or any Restricted Investment provided that the
--------
Borrower and its Restricted Subsidiaries may make Restricted Payments (but
only in respect of preferred stock of the Borrower and its Restricted
Subsidiaries outstanding on the date hereof) and Restricted Investments, if
upon, or immediately after giving effect to any such proposed Restricted
Payment or Restricted Investment, (a) no Default shall have occurred and be
continuing and (b) the excess of the sum of (A) the aggregate amount of
Restricted Payments in respect of shares of preferred stock of the Borrower
or its Restricted Subsidiaries made on and after the date hereof, plus (B)
----
the then Net Amount of Restricted Investments made
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on and after the date hereof over 50% of the aggregate Net Cash Proceeds
----
received by the Borrower (100% after the principal amount of the Facility
shall have been reduced to $100,000,000 or less) from the issue or sale
subsequent to the date hereof of any shares of capital stock of the
Borrower (which Net Cash Proceeds shall be deemed to include an amount
equal to the principal of any Debt issued subsequent to the date hereof
which is subsequently converted into capital stock of the Borrower), would
not exceed the sum of (x) $23,000,000, plus (y) 25% of Consolidated Net
----
Income (or, in the case of a deficit, minus 100% of net loss) during the
period from July 1, 1992 to the date of such proposed Restricted Payment or
Restricted Investment.
(ii) Notwithstanding the provisions of clause (i) of this
Section 5.2(f), if no Default shall have occurred and be continuing or
result therefrom:
(A) any Water Company may declare and pay, out of assets of such
Water Company which are by law available for such payment, mandatory
cumulative fixed dividends on shares of its preferred stock which are
outstanding on the date of this Agreement at the rate required to be paid
on the date of this Agreement as set forth in Schedule 5.2(f);
(B) any Water Company may purchase, redeem, retire or otherwise
acquire any of its shares of preferred stock which are outstanding on the
date of this Agreement pursuant to any sinking fund or other mandatory
retirement requirement in respect thereof in existence on the date of this
Agreement, provided that the aggregate amount of all such purchases,
--------
redemptions, retirements and other acquisitions shall be included in any
computation otherwise provided for in clause (i) of this Section 5.2(f);
(C) the Borrower may (a) (if it has not previously made a
distribution pursuant to the following subclause (b) during the 12-month
period following the date of the sale of all or substantially all of the
shares of capital stock or assets of any Water Company), pay a single
dividend with respect to the proceeds of any such sale made in compliance
with Section 5.2(e)(ii) or (b) (if it has not previously paid a dividend
pursuant to the preceding subclause (a)) make a single distribution (in
respect of its capital stock) consisting of shares of common and preferred
stock and/or assets of any Water Company in compliance with Section
5.2(e)(ii); provided that:
--------
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<PAGE>
(1) (a) the amount of such dividend with respect to such Water
Company shall not exceed the net after-tax proceeds derived from the sale
of such Water Company less the then amount of the Adjusted Water Company
Investments with respect to such Water Company, or
(b) the fair market value of the shares of common stock of such
Water Company so distributed shall not exceed (x)(i) the fair market value
of all of the shares of common stock of such Water Company, times (ii) a
fraction, the numerator of which is the number of shares of common stock of
such Water Company to be so distributed and the denominator of which is
the total number of shares of common stock of such Water Company, less (y)
the then amount of the Adjusted Water Company Investments with respect to
such Water Company, or
(c) the fair market value of the shares of preferred stock of
such Water Company so distributed shall not exceed (x)(i) the fair market
value of all of the shares of preferred stock of such Water Company, times
(ii) a fraction, the numerator of which is the number of shares of
preferred stock of such Water Company to be so distributed and the
denominator of which is the total number of shares of preferred stock of
such Water Company, less (y) the then amount of the Adjusted Water Company
Investments with respect to such Water Company, or
(d) the fair market value of the assets of such Water Company so
distributed shall not exceed (x)(i) the fair market value of all of the
assets of such Water Company, times (ii) a fraction, the numerator of which
-----
is the fair market value of the assets of such Water Company to be so
distributed and the denominator of which is the fair market value of all of
the assets of such Water Company less (y) the then amount of the Adjusted
----
Water Company Investments with respect to such Water Company, and
(2) the Company shall, at least two days prior to making such
distribution or paying such dividend, deliver to the Agent an officer's
certificate demonstrating that such distribution or payment is permitted by
this Section 5.2(f)(ii)(C),
(3) in any computation otherwise provided for in Section
5.2(f)(i), the Company shall be deemed to have made a Restricted Payment
in the amount of any Adjusted Water Company Investments deducted pursuant
to clause (C)(1)(a) or deducted pursuant to clause
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(C)(1)(b)(y) and/or (C)(1)(c)(y) and/or (C)(1)(d)(y) of this Section
5.2(f)(ii), and
(4) no such dividend or distribution shall be included in any
computation otherwise provided for in Section 5.2(f)(i).
All determinations of "fair market value" pursuant to this clause (C) and the
definition of Adjusted Water Company Investments shall be made by the Board of
Directors of the Borrower, in good faith and any sale of all or substantially
all of the shares of capital stock or assets of any Water Company within a 12-
month period shall be deemed to constitute such a sale irrespective of the fact
that such shares or assets may have been sold in more than one transaction
during such 12-month period.
(g) Sale and Leaseback. Enter into any arrangement or series of
------------------
arrangements, or permit any Restricted Subsidiary to do so, with any Person
(other than a Wholly-Owned Restricted Subsidiary, in the case of the Borrower,
and other than the Borrower or a Wholly-Owned Restricted Subsidiary, in the case
of any Restricted Subsidiary) providing for the leasing by the Borrower or any
Restricted Subsidiary for a period (including any renewal periods) of more than
three years of real or personal property (x) which has been or is to be sold or
transferred by the Borrower or any Restricted Subsidiary or with respect to
which funds have been or are to be advanced by another Person on the security of
such property or rental obligations of the Borrower or any Restricted
Subsidiary, or (y) which has been or is to be acquired from another Person by
such Person, or on which one or more buildings have been or are to be
constructed by such Person, for the purpose of leasing such property to the
Borrower or any Restricted Subsidiary (in either case, a "Sale and Leaseback
Transaction"), except that the Borrower may enter into any such arrangement if:
------
(i) (a) such real or personal property is, for purposes of this
Section 5.2(g) and Section 5.2(b), deemed by the Borrower in an irrevoc-
able notice sent to the Agent, to be subject to a Lien securing Funded Debt
in an amount equal to the net proceeds of the sale or transfer of the
property leased pursuant to such Sale and Leaseback Transaction, and such
lien is permitted by Section 5.2(b)(vii), and (b) an amount equal to such
net proceeds is, for purposes of this Section 5.2(g) and Section 5.2(a),
deemed by the Borrower by notice to be, for all purposes, Funded Debt and
such Funded Debt is permitted by Section 5.2(a)(vi); or
(ii) promptly upon receipt (and in no event later than 2 days
after receipt) by the Borrower or any of its Restricted Subsidiaries of the
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proceeds of such Sale Leaseback Transaction, the Borrower applies or causes
to be applied an amount equal to such net proceeds to the prepayment of
the Loans and to a corresponding permanent reduction of the Facility.
(h) Maintenance of Ownership of Subsidiaries. Except for sales,
----------------------------------------
consolidations, conveyances, transfers or other dispositions permitted under
Section 5.2(e), sell or otherwise dispose of any shares of capital stock of any
of its Restricted Subsidiaries or any warrants, rights or options to acquire
such capital stock or permit any of its Restricted Subsidiaries to issue, sell
or otherwise dispose of any shares of its capital stock or the capital stock of
any other Restricted Subsidiary of the Borrower or any warrants, rights or
options to acquire such capital stock, except that the Borrower's Restricted
Subsidiaries may issue, sell or otherwise dispose of capital stock, warrants,
rights or options to acquire such capital stock to the Borrower or a Wholly-
Owned Restricted Subsidiary thereof. The Borrower will not permit any
Restricted Subsidiary (other than the Water Companies) to have outstanding any
preferred shares other than preferred shares owned by the Borrower or any
Restricted Subsidiary.
(i) Compliance with ERISA. (i) Terminate, or permit any ERISA
---------------------
Affiliate to terminate, any Plan so as to result in any material liability of
the Borrower or any ERISA Affiliate to the PBGC or (ii) permit to exist any
occurrence of any reportable event, within the meaning of Section 4043 of ERISA,
unless the 30-day notice requirement with respect thereto has been waived by the
PBGC, or any other event or condition, that presents a material risk of such a
termination by the PBGC of any Plan which would result in material liability of
the Borrower or any ERISA Affiliate to the PBGC.
(j) Plan Amendments. Amend, modify or change in any manner, or
---------------
permit any of its Subsidiaries to amend, modify or change in any manner, any
Plan, Multiemployer Plan or Welfare Plan sponsored, maintained or contributed to
by the Borrower or any of its Subsidiaries which amendment, modification or
change would have a material adverse effect on the Borrower and its Restricted
Subsidiaries, taken as a whole, or would affect the ability of the Borrower to
perform its Obligations under this Agreement or any other Loan Document; pro-
---
vided, however, that nothing in this paragraph (j) shall apply to prevent the
- - - - - - - - - ----- -------
Borrower from terminating any Single Employer Plan in a transaction (including
in a "spin-off/termination" or a "termination/reestablishment"), which
termination results in a reversion of surplus assets to the Borrower or would
not otherwise be prohibited under Section 5.2(i).
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<PAGE>
(k) Charter Amendments. Amend, or permit any of its Restricted
------------------
Subsidiaries to amend, its certificate of incorporation or bylaws in a manner
that has an adverse effect upon the Lenders or their rights under any of the
Loan Documents or upon the ability of the Borrower to perform its obligations
under any Loan Document.
(l) Accounting Changes. Make or permit, or permit any of its
------------------
Restricted Subsidiaries to make or permit, any change in accounting policies
affecting the presentation of financial statements or reporting practices,
except as required or permitted by GAAP.
(m) Acquisitions. Acquire, or permit any Restricted Subsidiary to
------------
acquire, any Person or all or substantially all of the assets of any Person or
any business division, group or line of business of any Person; provided,
--------
however, that following the reduction of the Facility to $160,000,000 or less,
- - - - - - - - - -------
the Borrower and its Restricted Subsidiaries may make such acquisitions but only
if the Borrower and its Restricted Subsidiaries do not expend, directly or
indirectly, an aggregate amount (taken for the Borrower and all Restricted
Subsidiaries together) exceeding, during the remaining term of this Agreement
after such reduction, (i) $5,000,000 (including any consideration consisting of
cash, debt issuances and assumptions of debt, net of cash acquired and
reflected on the balance sheet of such Person at the time of the acquisition)
for such acquisitions plus (ii) an additional aggregate amount not exceeding the
lesser of (x) $5,000,000 and (y) 50% of the excess of (A) the Net Cash Proceeds
received by the Borrower from the issuance of its equity securities after the
date hereof over (B) the aggregate amount of the Restricted Payments and
Restricted Investments made by the Borrower and its Restricted Subsidiaries
(other than the Water Companies) after the date hereof.
(n) Optional Prepayment of Funded Debt. Make, or permit any
----------------------------------
Restricted Subsidiary to make, during the term of this Agreement optional
prepayments aggregating more than $2,000,000 in principal amount on or in
respect of any Funded Debt (other than the Loans) of the Borrower or any of its
Restricted Subsidiaries.
(o) Amendment of Funded Debt Agreements. Amend, or permit any
-----------------------------------
Restricted Subsidiary to amend, any Funded Debt Agreement of the Borrower or
such Restricted Subsidiary in a manner adverse to the interests of the Borrower
or any Restricted Subsidiary or any Lender.
(p) Capital Expenditures. Make, or permit any Restricted Subsidiary
--------------------
to make, Capital Expenditures exceeding $1,000,000 in the aggregate during
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the term of this Agreement in respect of discontinued operations; provided,
--------
however, that, in addition to the exception set forth in this Section 5.1(p)
- - - - - - - - - -------
above, the Water Companies may make Capital Expenditures to the extent required
by law.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.1. Events of Default. If any of the following events
-----------------
("Events of Default") shall occur and be continuing:
- - - - - - - - - -------------------
(a) The Borrower shall fail to (i) pay in full any principal of, or
interest on, any Loan or any fees payable to the Agent or any Lender here-
under, when the same becomes due and payable, (ii) pay in full any Reim-
bursement Obligation within three Business Days after the drawing under a
Facility Letter of Credit giving rise to such Reimbursement Obligation or
(iii) make any other payment under any Loan Document within five Business
Days after the same becomes due and payable; or
(b) Any representation or warranty made by the Borrower (or any of
its officers) under or in connection with any Loan Document shall prove to
have been incorrect in any material respect when made; or
(c) (i) The Borrower shall fail to perform or observe any term,
covenant or agreement contained in Section 5.1(c), 5.1(d), 5.1(h), 5.1(i),
5.1(j), 5.1(k), 5.1(l), 5.1(m), 5.1(n), 5.1(o)(i) or 5.2 of this Agreement;
or
(ii) The Borrower shall fail to perform any other term, covenant
or agreement contained in any Loan Document on its part to be performed or
observed if such failure shall remain unremedied for 30 days after written
notice thereof shall have been given to the Borrower by the Agent (and the
Agent shall promptly provide a copy of any such notice to each Lender,
provided that failure by the Agent to provide such a copy to any Lender
--------
shall not affect the obligations of the Borrower hereunder); or
(d) The Borrower or any of its Subsidiaries (other than any Project
Subsidiary) shall fail to pay any principal of, premium or interest on or
any other amount payable in respect of any Debt that is outstanding in a
principal amount of at least $5,000,000 in the aggregate (but excluding
Debt outstanding hereunder) of the Borrower or such Subsidiary (as the
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<PAGE>
case may be), when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise); or any
other event shall occur or condition shall exist under any agreement or
instrument relating to any such Debt, if the effect of such event or
condition (without regard to any period of grace provided, or notice
required, in the agreement or instrument relating to such Debt) is to
accelerate, or to permit the acceleration of, the maturity of such Debt, or
any such Debt shall be declared to be due and payable or required to be
prepaid, redeemed, purchased or defeased (other than by a regularly
scheduled required prepayment, redemption, purchase or defeasance), or an
offer to prepay, redeem, purchase or defease such Debt shall be required to
be made, in each case prior to the stated maturity thereof, or the
principal of any such Debt is not repaid in full upon the maturity thereof
or in full or in part pursuant to any regularly scheduled required
prepayment, redemption, repurchase or defeasance; or
(e) (i) The Borrower or any of its Subsidiaries (other than any
Project Subsidiary) shall generally not pay its debts as such debts become
due, or shall admit in writing its inability to pay its debts generally, or
shall make a general assignment for the benefit of creditors; (ii) any
proceeding shall be instituted by the Borrower or any of its Subsidiaries
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief, or
composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of
an order for relief or the appointment of a receiver, trustee, custodian,
or other similar official for it or for any substantial part of its
property; (iii) there shall be commenced against the Borrower or any of
its Subsidiaries any proceeding referred to in clause (ii) which results
in the entry of an order for relief or any such adjudication or appointment
or remains undismissed, undischarged or unbonded for a period of 45 days,
provided that the Borrower, for itself and on behalf of each of its
--------
Subsidiaries, hereby expressly authorizes the Agent and each Lender to
appear in any court conducting any such proceeding during such 45-day
period to preserve, protect and defend their rights under the Loan
Documents; or (iv) the Borrower or any of its Subsidiaries shall take
corporate action to authorize any of the actions set forth above in this
Section 6.1(e); or
(f) Any judgment or order for the payment of money in excess of
$2,000,000 shall be rendered against the Borrower or any of its
Subsidiaries (other than any Project Subsidiary) and there shall be any
period of 10 consecutive days during which a stay of enforcement of such
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<PAGE>
judgment or order, by reason of a pending appeal or otherwise, shall not be
in effect unless such judgment or order shall have been vacated, satisfied
or dismissed or bonded pending appeal or, in the case of a judgment or
order the entire amount of which is covered by insurance, is the subject of
a binding agreement with the plaintiff and the insurer covering payment
therefor; or
(g) Any non-monetary judgment or order shall be rendered against the
Borrower or any of its Subsidiaries that is reasonably likely to have a
material adverse effect on (i) the business, condition (financial or
otherwise), operations, performance or properties of the Borrower and its
Subsidiaries, taken as a whole, or the Borrower, (ii) the ability of the
Borrower or any of its Subsidiaries to perform its obligations under any
Loan Document to which it is a party or (iii) the rights and remedies of
the Agent or the Lenders under any Loan Document, and there shall be any
period of 30 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be
in effect unless such judgment or order shall have been vacated, satisfied,
discharged or bonded pending appeal; or
(h) Any provision of any Loan Document after delivery thereof
pursuant to Section 3.1 shall for any reason cease to be valid and binding
on or enforceable against the Borrower or any Pledgor, as the case may be,
in all material respects, or the Borrower shall so state in writing; or
(i) Any ERISA Event shall have occurred or exist with respect to a
Plan and (x) unpaid liability arising from or relating to such ERISA Event
shall then exist and (y) the sum (determined as of the date of occurrence
of such ERISA Event) of such liability and all other unpaid liabilities
arising from or relating to ERISA Events which shall have occurred or exist
with respect to such Plan and each other Plan is equal to or greater than
$2,000,000 in the aggregate; or
(j) The Borrower or any of its ERISA Affiliates shall have been
notified by the sponsor of a Multiemployer Plan that it has incurred
Withdrawal Liability to such Multiemployer Plan in an amount that, when
aggregated with all other amounts required to be paid to Multiemployer
Plans by the Borrower and its Subsidiaries in connection with Withdrawal
Liabilities (determined as of the date of such notification), exceeds
$2,000,000; or
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<PAGE>
(k) The Borrower or any of its ERISA Affiliates shall have been
notified by the sponsor of a Multiemployer Plan that such Multiemployer
Plan is in reorganization or is being terminated, within the meaning of
Title IV of ERISA, if as a result of such reorganization or termination the
aggregate annual contributions of the Borrower and any of its Subsidiaries
to all Multiemployer Plans that are then in reorganization or being
terminated have been or will be increased over the amounts contributed to
such Multiemployer Plans for the plan year of each such Multiemployer Plan
immediately preceding the plan year in which such reorganization or
termination occurs by an amount exceeding $2,000,000; or
(l) Any Loan Document, or any material provision in any Loan
Document, shall, at any time or for any reason, cease to be in full force
and effect; or
(m) Any agreement to subordinate other Debt in right of payment to
the Loans and any other Obligations of the Borrower under this Agreement,
at any time and for any reason, incorporated in the agreement or instrument
governing or evidencing such subordinated Debt, ceases to be in full force
and effect or is declared to be null and void, or any holder of
subordinated Debt repudiates or disavows such subordination or denies that
it has any further liability or obligation under such subordination agree-
ment or gives notice to such effect; or
(n) For any reason the Borrower or any of its Subsidiaries (other
than those which are not "includible corporations" within the meaning of
Section 1504 of the Code during any taxable year or portion thereof) shall
cease to be a member of the "affiliated group" (within the meaning of Sec-
tion 1504(a)(1) of the Code) of which the Borrower is the common Parent or
shall have failed to file, or to join with the Borrower in the filing, of a
Federal consolidated tax return, or the Borrower shall fail to pay any fed-
eral income taxes shown on any such return to be due and payable at or
prior to the time such payment is due (after giving effect to any
extensions of time for filing or payment duly requested and obtained); or
(o) Any Person, whether directly or indirectly, and whether singly or
in concert with one or more Persons, shall acquire 35% or more, on a fully
diluted basis, of the issued and outstanding common stock of the Borrower;
THEN, and in any such event (other than such an event described in Section
6.1(e)(ii) or (iii)), the Agent (i) shall at the request, or may with the
consent, of
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<PAGE>
the Required Lenders, by notice to the Borrower, declare the obligation of each
Lender to make Loans and of the Issuing Bank to issue Facility Letters of
Credit to be terminated, whereupon the same shall forthwith terminate, and (ii)
shall at the request, or may with the consent, of the Required Lenders, (A) by
notice to the Borrower, declare the Loans, all interest thereon and all other
amounts payable under this Agreement and the other Loan Documents to be
forthwith due and payable, and thereupon the Loans, all such interest and all
such amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Borrower and, in addition, demand that the Borrower deposit with
the Agent, and the Borrower forthwith upon such demand shall deposit with the
Agent, with respect to each Facility Letter of Credit then outstanding, cash or
cash equivalents, to be held by the Agent, in the L/C Cash Collateral Account
for the benefit of the Issuing Bank and the Lenders as security for, and to
provide for the payment of, the Facility Letter of Credit Obligations, in an
amount equal to the amount of such Facility Letter of Credit Obligations, and
(B) by notice to each party required under the terms of any agreement in support
of which a Facility Letter of Credit is issued, request that all Obligations
related to such Facility Letter of Credit under such agreement be declared to be
due and payable. If an Event of Default occurs under Section 6.1(e)(ii) or
(iii), then the Commitments shall automatically and immediately terminate, and
the obligation of the Lenders to make any Loan hereunder, and of the Issuing
Bank to issue any Facility Letter of Credit hereunder, thereupon shall cease,
and the unpaid principal amount of and any accrued interest on all of the Loans
and Reimbursement Obligations automatically shall become due and payable,
without presentment, demand, protest, notice or other requirements of any kind,
all of which are hereby expressly waived by the Borrower and the Borrower shall
be obligated to immediately deposit with the Agent, with respect to each
Facility Letter of Credit then outstanding, cash or cash equivalents, to be
held by the Agent, in the L/C Cash Collateral Account for the benefit of the
Issuing Bank and the Lenders as security for, and to provide for, the Facility
Letter of Credit Obligations, in an amount equal to the amount of such Facility
Letter of Credit Obligations.
ARTICLE VII
THE AGENT
SECTION 7.1. Authorization and Action. Each Lender hereby appoints
------------------------
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers and discretion under this Agreement and the other Loan
Documents as are delegated to the Agent by the terms hereof and thereof, toge-
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ther with such powers as are reasonably incidental thereto. As to any matters
not expressly provided for by this Agreement or any other Loan Document (in-
cluding, without limitation, enforcement or collection of the Debt resulting
from the Loans), the Agent shall not be required to exercise any discretion or
take any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of Required Lenders, and such instructions shall be binding upon
all Lenders; provided, however, that the Agent shall not be required to take
-------- -------
any action that exposes the Agent to personal liability or that is contrary to
this Agreement or any other Loan Document or applicable law. The Agent agrees
(i) to give to each Lender and the Issuing Bank prompt notice of each notice
given to it by the Borrower or any Pledgor pursuant to the terms of this
Agreement or any other Loan Document, and (ii) to give to the Issuing Bank or
any Lender who so requests, a copy of any such notice given by the Borrower or
any Pledgors.
SECTION 7.2. Reliance, Etc. Neither the Agent nor any of its
--------------
respective directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken by it or them under or in connection with
this Agreement or any other Loan Document, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of the
foregoing: (i) the Agent may treat the Lender that made any Loan as the holder
of the Debt resulting therefrom until the Agent receives and accepts an
Assignment and Acceptance entered into by such Lender, as assignor, and an
Eligible Assignee, as assignee, as provided in Section 8.7; (ii) the Agent may
consult with legal counsel (including counsel for the Borrower), independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants or experts; (iii) neither the Agent nor
any Co-Lead Manager makes any warranty or representation to any Lender and shall
not be responsible to any Lender or the Issuing Bank for any statements,
warranties or representations made in or in connection with the Loan Documents;
(iv) the Agent shall have no duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of any
Loan Document on the part of the Borrower or any of its Subsidiaries (other
than the delivery of items required to be delivered to the Agent) or to inspect
the property (including the books and records of the Borrower); (v) the Agent
shall not be responsible to any Lender or the Issuing Bank for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of any Loan Document or any other instrument or document furnished pursuant
thereto; and (vi) the Agent shall incur no liability under or in respect of this
Agreement or any other Loan Document by acting upon any notice, consent,
certificate or other instrument or writing (which may be by
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telegram, telecopy, cable or telex) believed by it to be genuine and signed or
sent by the proper party or parties.
SECTION 7.3. Affiliates. With respect to its Commitment and the
----------
Loans made by it, Fleet Bank and each Co-Lead Manager shall have the same rights
and powers under the Loan Documents as any other Lender and may exercise the
same as though it were not the Agent, the Issuing Bank or a Co-Lead Manager; and
the term "Lender" or "Lenders" shall, unless otherwise expressly indicated,
include each of Fleet Bank, Credit Suisse, Bank of America National Trust and
Savings Association and Chemical Bank in its respective individual capacity.
Fleet Bank, Credit Suisse, Bank of America National Trust and Savings
Association and Chemical Bank and their respective Affiliates may accept
deposits from, lend money to, act as trustee under indentures of, accept invest-
ment banking engagements from and generally engage in any kind of business with
the Borrower, any of its Subsidiaries and any Person who may do business with or
own securities of the Borrower or any such Subsidiary without any duty to
account therefor to the Lenders.
SECTION 7.4. Lender Credit Decision. Each Lender acknowledges that
----------------------
it has, independently and without reliance upon the Agent, any Co-Lead Manager
or any other Lender and based on the financial statements referred to in
Section 4.1 and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and
without reliance upon the Agent, any Co-Lead Manager or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement or any other Loan Document.
SECTION 7.5. Indemnification. The Lenders agree to indemnify the
---------------
Agent (to the extent not promptly reimbursed by the Borrower), ratably according
to the respective principal amounts of the Loans then owing to each of them (or
if no Loans are at the time outstanding, ratably according to the respective
amounts of their Commitments), from and against any and all liabilities, obliga-
tions, losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever that may be imposed on, incurred
by, or asserted against the Agent in any way relating to arising out of the Loan
Documents or any action taken or omitted by the Agent under the Loan Documents;
provided, however, that no Lender shall be liable for any portion of such
- - - - - - - - - -------- -------
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Agent's gross negligence or
willful misconduct. Without limitation of the foregoing, each Lender agrees to
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reimburse the Agent promptly upon demand for its ratable share of any costs and
expenses payable by the Borrower under Section 8.4 (except costs and expenses of
routine administration), to the extent that the Agent is not promptly reimbursed
for such costs and expenses by the Borrower.
SECTION 7.6. Successor Agent and Issuing Bank. The Agent may resign
--------------------------------
at any time by giving written notice thereof to the Lenders, the Issuing Bank
and the Borrower and may be removed at any time with or without cause by the
Required Lenders. If the Agent also then serves in the capacity of Issuing
Bank, such resignation or removal of the Agent also shall constitute
resignation or removal of the Issuing Bank; provided that the Agent may resign
--------
as Issuing Bank without resignation or removal as Agent; provided further that
----------------
any Person other than the Agent that serves as an Issuing Bank may resign at any
time by giving notice thereof to the Agent and the Borrower. Upon any such
resignation or removal of the Agent, the Borrower shall have the right to
appoint a successor Agent which will be a financial institution approved by
Required Lenders. If no successor Agent shall have been so appointed and
approved, or if a proposed successor Agent shall have been appointed and
approved but shall not have accepted such appointment, within 30 days after the
retiring Agent's giving of notice of resignation or the Required Lenders'
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent, which shall be a commercial bank organized
under the laws of the United States of America or of any State thereof and
having a combined capital and surplus of at least $500,000,000 or a commercial
bank organized under the laws of any other country that is a member of OECD, or
a political subdivision of any such country, and having a total capital and
surplus in excess of $500,000,000 (or the foreign currency equivalent thereof)
provided that such bank is acting through a branch or agency located in the
- - - - - - - - - --------
United States. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, discretion, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations under the Loan Documents and, if the former Agent served as Issuing
Bank at the time of its resignation or removal, such successor Agent also shall
be the successor Issuing Bank. If the Agent also serves as Issuing Bank and
resigns in either such capacity without resigning as Agent, or if any Person
other than the Agent that serves as Issuing Bank resigns, Required Lenders shall
appoint a successor Issuing Bank, which, shall be a Lender (and upon its consent
thereto, such Lender shall be the successor Issuing Bank). After any retiring
Agent's resignation or removal hereunder as Agent or Issuing Bank, the
provisions of this Article VII and of Article II shall inure to its benefit as
to any actions taken or omitted to be taken by it while it was the Agent or
Issuing Bank under this Agreement.
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ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Amendments, Etc. No amendment or waiver of any
----------------
provision of this Agreement nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and such amendment, waiver or consent shall be consented to in one or more writ-
ings signed by or consented to by Required Lenders, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no amendment, waiver or con-
-------- -------
sent shall, unless in writing and signed by or consented to by all the Lenders,
do any of the following: (i) waive any of the conditions specified in Section
3.1 or, in the case of the initial Borrowing, 3.2, (ii) change the definition of
the term "Required Lenders", the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans, or the number of Lenders, that
shall be required for the Lenders or any of them to take any action hereunder,
(iii) amend this Section 8.1, Section 2.9 or clause (E) of Section 5.2(e)(i),
(iv) authorize or permit the Borrower or any of its Restricted Subsidiaries to
enter into any new Accounts Receivable Financing program after the date hereof
or increase the maximum amount of the Accounts Receivable Financing program of
the Borrower or its Restricted Subsidiaries in effect on the date hereof, (v)
increase the Commitments of the Lenders or subject the Lenders to any
additional obligations, (vi) reduce the principal of, or interest on, the Loans
or any fees or other amounts payable hereunder or (vii) postpone any date fixed
for any payment of principal of, or interest on, the Loans, Reimbursement
Obligations or any fees or other amounts payable hereunder; provided further
----------------
that no term or condition relating to the Letter of Credit Facility, any
Facility Letter of Credit or Reimbursement Obligation or the Lenders'
participations therein may be waived unless in writing and signed by the Issuing
Bank; provided further that no amendment, waiver or consent shall, unless in
----------------
writing and signed by the Agent in addition to the Lenders required above to
take such action, affect the rights or duties of the Agent under this Agreement.
Anything in this Agreement to the contrary notwithstanding, if any
Lender shall seek pursuant to 12 U.S.C. (S) 1821(a) or (n)(1)(B) to avoid its
obligations to fund its ratable portion of any Borrowing or its obligation to
participate in Facility Letters of Credit, such Lender shall (unless the
Borrower and each other Lender shall otherwise consent in writing) be deemed,
for all purposes relating to amendments, modifications, supplements, waivers or
consents under this Agreement or any other Loan Document (including the
determination of
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"Required Lenders" for said purposes), not to have any Loans or Commitment
hereunder and not to be a "Lender" under any provision requiring the consent or
approval of each Lender, provided that in no event shall any action taken by the
--------
other Lenders with respect to the matters referred to in clause (ii) above be
effective as against such Lender.
SECTION 8.2. Notices, Etc. Except as otherwise expressly provided
-------------
herein, all notices, demands and other communications provided for hereunder
shall be in writing (including telegraphic, telecopy, telex or cable com-
munication) and mailed, telegraphed, telecopied, telexed, cabled or delivered:
if to the Borrower: JWP INC.
Six International Drive
Rye Brook, New York 10573
Attention: Treasurer
Telecopy: (914) 935-4141
Telephone: (914) 935-4000
if to any Lender signatory
hereto: as specified on Schedule 8.2 hereto
if to any other Lender: as its Lending Office specified in the Assignment
and Acceptance or Additional Lender Agreement, as
the case may be, pursuant to which it became a
Lender (or such other office as may be designated in
such Assignment and Acceptance or Additional Lender
Agreement)
if to the Agent: Fleet Bank
56 E. 42nd Street
New York, New York 10017
Attention: Geoffrey D. Spillane
Telecopy: 212-907-5614
Telephone: 212-907-5219
if to the Issuing Bank: Fleet Bank
56 E. 42nd Street
New York, New York 10017
Attention: Geoffrey D. Spillane
Telecopy: 212-907-5614
Telephone: 212-907-5219
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or, as to each party, at such other address as shall be designated by such
party in a written notice to the other parties. All such notices and
communications shall be effective (i) when received, if mailed or delivered, or
(ii) when delivered to the telegraph company, transmitted by telecopier (with
receipt confirmed by telephone), confirmed by telex answerback or delivered to
the cable company, respectively, except that notices and communications to the
Agent pursuant to Article II, III or VII shall not be effective until received
by the Agent.
SECTION 8.3. No Waiver; Remedies. No failure on the part of any
-------------------
Lender, the Agent or the Issuing Bank to exercise, and no delay in exercising,
any right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 8.4. Costs and Expenses.
------------------
(a) The Borrower, whether or not the transactions contemplated herein
are consummated, agrees to pay on demand (i) all out-of-pocket costs and
expenses of the Agent in connection with the preparation, execution, delivery,
administration, modification and amendment of the Loan Documents (including,
without limitation, the reasonable fees and expenses of counsel for the Agent
with respect thereto (including allocated costs of in-house counsel), with
respect to advising the Agent as to its rights and responsibilities, or the
perfection, protection or preservation of rights or interests, under the Loan
Documents and with respect to negotiations with the Borrower regarding any
Default or any events or circumstances that may give rise to a Default) and (ii)
all costs and expenses of the Agent and the Lenders in connection with the
enforcement of the Loan Documents, whether in any action, suit or litigation,
any bankruptcy, insolvency or other similar proceeding affecting creditors',
rights generally or otherwise (including, without limitation, the reasonable
fees and expenses of counsel for the Agent and each Lender with respect thereto
(including allocated costs of in-house counsel)).
(b) The Borrower agrees to indemnify and hold harmless the Agent, the
Issuing Bank and each Lender and each of their Affiliates (other than any
Affiliate which is an Affiliate solely by reason of the ownership by the Agent,
the Issuing Bank, Co-Lead Managers and such Lender of less than 20% of the
securities having ordinary voting power for the election of directors) and their
respective officers, directors, employees, agents and advisors (each, an
"Indemnified Party") from and against any and all claims, damages, losses,
- - - - - - - - - ------------------
liabilities and expenses (including, without limitation, reasonable fees and
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expenses of counsel (including allocated costs of in-house counsel)) that may be
incurred by or asserted or awarded against any Indemnified Party, in each case
arising out of or in connection with this Agreement or any other Loan Document
or the transactions contemplated hereby or thereby, whether or not an
Indemnified Party is a party thereto and whether or not the transactions
contemplated hereby are consummated, except to the extent such claim, damage,
loss, liability or expense is found in a final, non-appealable judgment by a
court of competent jurisdiction to have resulted from such Indemnified Party's
gross negligence or willful misconduct. The Borrower hereby agrees not to
assert any claim against the Agent, the Issuing Bank, any Co-Lead Manager, any
Lender, any of their affiliates, or any of their respective directors, officers,
employees, attorneys and agents, on any theory of liability, for special,
indirect, consequential or punitive damages arising out of or otherwise relating
to any of the transactions contemplated herein or in any other Loan Document.
SECTION 8.5. Right of Set-off. Upon (a) the occurrence and during
----------------
the continuance of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 6.1 to authorize the Agent to
declare the Loans due and payable pursuant to the provisions of Section 6.1,
each Lender is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness or other property at any time owing by such Lender to or for
the credit or the account of the Borrower or its Subsidiaries against any and
all of the Obligations of the Borrower now or hereafter existing regardless of
whether such amounts are then due to Borrower or its Subsidiaries under this
Agreement, irrespective of whether such Lender shall have made any demand under
this Agreement or given any prior notice to Borrower. Each Lender agrees
promptly to notify the Borrower after any such set-off and application made by
such Lender; provided, however, that the failure to give such notice shall not
-------- -------
affect the validity of such set-off and application. The rights of each Lender
under this Section are in addition to other rights and remedies (including,
without limitation, other rights of set-off) that such Lender may have.
SECTION 8.6. Binding Effect. This Agreement shall be binding upon
--------------
and inure to the benefit of the Borrower, the Agent, the Issuing Bank and each
Lender and their respective successors and assigns, except that the Borrower
shall not have the right to assign its rights hereunder or any interest herein
without the prior written consent of all of the Lenders. Any Lender may at any
time assign all or any portion of the Loans owing to it, or the Note evidencing
such Loans, and its rights under this Agreement to a Federal Reserve Bank,
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provided that such assignment shall not release such Lender from its obligations
- - - - - - - - - --------
hereunder.
SECTION 8.7. Assignments and Participations.
------------------------------
(a) Each Lender may, subject to the approval of the Issuing Bank and
the Borrower (such approval not to be unreasonably withheld), assign to one or
more banks all or a portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Commitment and the Loans
owing to it); provided, however, that (i) each Initial Lender shall retain at
-------- -------
least 50% of its Commitment at the date of this Agreement (unless the Issuing
Bank and the Borrower shall agree otherwise in writing), (ii) except in the case
of an assignment to a Person that, immediately prior to such assignment, was a
Lender, the amount of the Commitment of the assigning Lender being assigned
pursuant to each such assignment (determined as of the date of the Assignment
and Acceptance with respect to such assignment) shall in no event be less than
the lesser of (A) the entire Commitment of such Lender at such time or (B)
$5,000,000 (provided, however, that if the amount of such assignment is less
-------- -------
than the entire amount of the Commitment of the assigning Lender, the amount
retained by the assigning Lender must be at least $2,000,000), (iii) each such
assignment shall be to an Eligible Assignee and (iv) the parties to each such
assignment shall execute and deliver to the Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance, together with a pro-
cessing and recordation fee of $2,500. Upon such execution, delivery, accept-
ance and recording, from and after the effective date specified in each Assign-
ment and Acceptance, which effective date shall be at least five Business Days
after the delivery thereof to the Agent or, if so specified in such Assignment
and Acceptance, the date of acceptance thereof by the Agent, (x) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and (y) the
Lender assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under this Agreement,
such Lender shall cease to be a party hereto, except that such Lender shall
continue to be an "Indemnified Party" under Section 8.4(b)).
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as
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provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any other Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
Loan Document or any other instrument or document furnished pursuant hereto;
(ii) such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or any of
its Subsidiaries or the performance or observance by the Borrower or any Pledgor
of any of its obligations under this Agreement or any other Loan Document or any
other instrument or document furnished pursuant hereto; (iii) such assignee con-
firms that it has received a copy of this Agreement and the Pledge Agreements,
together with copies of the financial statements referred to in Section 4.1 and
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into such Assignment and Acceptance;
(iv) such assignee will, independently and without reliance upon the Agent, the
Issuing Bank, any Co-Lead Manager, such assigning Lender or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement and the other Loan Documents; (v) such assignee confirms
that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the
Agent to take such action as agent on its behalf and to exercise such powers
under this Agreement and the other Loan Documents as are delegated to the Agent
by the terms hereof and thereof, together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all of the obligations that by the terms of this
Agreement are required to be performed by it as a Lender.
(c) The Agent shall maintain at its address referred to in Section
8.2 a copy of each Assignment and Acceptance delivered to and accepted by it and
a register for the recordation of the names and addresses of the Lenders and the
Commitment of, and principal amount of the Loans owing to, each Lender from time
to time (the "Register"). The entries in the Register shall be conclusive and
--------
binding for all purposes, absent demonstrable error, and the Borrower, the
Agent and the Lenders may treat each Person whose name is recorded in the
Register as a Lender hereunder for all purposes of this Agreement. The Register
shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice. In
addition, on the effective date of an Assignment and Acceptance, the Borrower
shall, if so requested by the assigning Lender, and upon surrender of the Note
issued to the assigning Lender, issue a new Note to the assignee in an amount
equal to the portion of the assigning Lender's Commitment assigned to such
assignee and, if
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less than the entire Commitment of the assigning Lender has been so assigned,
the Borrower shall issue to the assigning Lender a new Note in the amount of the
Commitment retained by the assigning Lender.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender representing that such assignment is being effected in
accordance with Section 8.7(a)(i) of this Agreement and an assignee representing
that it is an Eligible Assignee, the Agent shall, if such Assignment and Accept-
ance has been completed and is in substantially the form of Exhibit A hereto,
and has been consented to by the Agent, the Issuing Bank and the Borrower in
accordance with Section 8.7(a), (i) accept such Assignment and Acceptance, (ii)
record the information contained therein in the Register and (iii) give prompt
notice thereof to the Borrower.
(e) Each Lender may sell participations to one or more lenders in or
to all or a portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Commitment and the Loans
owing to it); provided, however, that (i) such Lender's obligations under this
-------- -------
Agreement (including, without limitation, its Commitment to the Borrower
hereunder) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) the Borrower, the Agent, the Issuing Bank and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement, and (iv) no participant
under such participation shall have any right to approve any amendment or waiver
of any provision of any Loan Document, or any consent to any departure by the
Borrower therefrom, except to the extent that such amendment, waiver or consent
would reduce the principal of or interest on the Loans or any fees or other
amounts payable hereunder, in each case to the extent subject to such
participation, or postpone any date fixed for any payment of principal of or
interest on the Loans or any fees or other amounts payable hereunder, in each
case to the extent subject to such participation.
(f) Any Lender may, in connection with any assignment or participa-
tion or proposed assignment or participation pursuant to this Section 8.7,
disclose to the assignee or participant or proposed assignee or participant any
information relating to the Borrower and its Subsidiaries furnished to such
Lender by or on behalf of the Borrower; provided, however, that, prior to any
-------- -------
such disclosure, the assignee or participant or proposed assignee or participant
shall agree to preserve the confidentiality of any confidential information
relating to the Borrower or any of its Subsidiaries received by it from such
Lender.
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SECTION 8.8. Governing Law; Submission to Jurisdiction; Waiver of
----------------------------------------------------
Jury Trial.
- - - - - - - - - ----------
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
(b) The Borrower hereby expressly and irrevocably agrees and con-
sents that any suit, action or proceeding arising out of or relating to this
Agreement, the Facility Letters of Credit, the Notes and the transactions
contemplated herein may be instituted by the Agent, the Issuing Bank or any
Lender in any State or Federal court sitting in the County of New York, State of
New York, United States of America and, by the execution and delivery of this
Agreement, the Borrower expressly waives any objection that it may have now or
hereafter to the laying of the venue or to the jurisdiction of any such suit,
action or proceeding, and irrevocably submits generally and unconditionally to
the jurisdiction of any such court in any such suit, action or proceeding.
(c) The Borrower agrees that service of process may be made on the
Borrower by personal service of a copy of the summons and complaint or other
legal process in any such suit, action or proceeding, or by registered or
certified mail (postage prepaid) to the address of the Borrower specified in or
pursuant to Section 8.2, or by any other method of service provided for under
the applicable laws in effect in the State of New York.
(d) Nothing contained in subsection (b) or (c) hereof shall preclude
the Agent, the Issuing Bank or any Lender from bringing any suit, action or
proceeding arising out of or relating to this Agreement or the other Loan
Documents or any Facility Letter of Credit in the courts of any place where the
Borrower or any of the Borrower's property or assets may be found or located or
any other place where jurisdiction may otherwise be obtained.
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER OR RELATED TO THIS AGREEMENT, ANY NOTE, ANY FACILITY LETTER OF
CREDIT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY
IN THE FUTURE BE DELIVERED IN CONNECTION WITH THE FOREGOING, EACH OF THE
BORROWER, THE AGENT, THE ISSUING BANK. AND THE LENDERS HEREBY AGREES, TO THE
EXTENT PERMITTED BY LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY, AND THE BORROWER HEREBY WAIVES, TO THE
EXTENT PERMITTED BY LAW, ANY OBJECTION THAT IT MAY HAVE THAT SUCH ACTION OR
PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
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SECTION 8.9. Execution in Counterparts. This Agreement may be
-------------------------
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 8.10. Borrower's Acknowledgment. The Borrower hereby
-------------------------
confirms and acknowledges to each Lender that it has no defenses, setoffs, or
counterclaims to its obligations hereunder, under the Original Credit Agreement
or the promissory notes issued hereunder or thereunder, including, without
limitation, its obligations to repay the Loans in full and, to the extent the
Borrower has any such defenses, setoffs, or counterclaims, it hereby irrevocably
and unconditionally releases the same.
SECTION 8.11. Release of Pledged Designated Subsidiaries Stock. Upon
------------------------------------------------
any sale of all the stock or all or substantially all the assets of a Designated
Subsidiary and concurrently with the application of the Net Cash Proceeds of
such sale to the repayment of the Loans, the Agent and the Lender shall release
any lien or security interest of the Agent and the Lenders in the stock of such
Designated Subsidiary and redeliver the certificates representing such stock
to, or in accordance with the instructions of, the relevant Pledgor. The Agent
is hereby authorized by each Lender to effect such release and redelivery on
behalf of the Lenders. The Agent shall have no liability to the Borrower, any
Pledgor or any Lender for any action taken or omitted to be taken by it with
respect to or in connection with such release and redelivery, except for the
Agent's gross negligence or willful misconduct.
-100-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
Borrower:
--------
JWP INC.
By_____________________________
Name:
Title:
Agent and Issuing Bank:
----------------------
FLEET BANK (FORMERLY NORSTAR BANK)
By______________________________
Name:
Title:
Commitment: Lenders:
- - - - - - - - - ---------- -------
$24,707,000 FLEET BANK (FORMERLY NORSTAR BANK)
By______________________________
Name:
Title:
$12,352,000 FLEET NATIONAL BANK
By_______________________________
Name:
Title:
-101-
<PAGE>
Commitment: Lenders:
- - - - - - - - - ---------- -------
$24,707,000 CREDIT SUISSE
By_____________________________
Name:
Title:
By_____________________________
Name:
Title:
$20,588,000 BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By_____________________________
Name:
Title:
$20,588,000 CHEMICAL BANK
By____________________________
Name:
Title:
$16,470,000 ISTITUTO BANCARIO SAN PAOLO
DI TORINO S.P.A.
By_____________________________
Name:
Title:
-102-
<PAGE>
Commitment: Lenders:
- - - - - - - - - ---------- -------
$16,470,000 APPLE BANK FOR SAVINGS
By_____________________________
Name:
Title:
$12,352,000 ROYAL BANK OF CANADA
By_____________________________
Name:
Title:
$12,352,000 BANCO DE SANTANDER
By_____________________________
Name:
Title:
$12,352,000 BANCA CASSA DI RISPARMIO DI
TORINO S.P.A.
By______________________________
Name:
Title:
By_____________________________
Name:
Title:
-103-
<PAGE>
Commitment: Lenders:
- - - - - - - - - ---------- -------
$8,236,000 THE BANK OF TOKYO TRUST
COMPANY
By_____________________________
Name:
Title:
$8,236,000 BANK JULIUS BAER AND COMPANY,
NEW YORK BRANCH
By_____________________________
Name:
Title:
$8,236,000 KREDIETBANK N.V.
By_____________________________
Name:
Title:
By______________________________
Name:
Title:
$8,236,000 ROYAL BANK OF SCOTLAND PLC
By_____________________________
Name:
Title:
-104-
<PAGE>
Commitment: Lenders:
- - - - - - - - - ---------- -------
$4,118,000 FIRST VALLEY BANK
By_____________________________
Name:
Title:
-105-
<PAGE>
EXHIBIT A
---------
PROMISSORY NOTE
______________$ September ___, 1992
FOR VALUE RECEIVED, JWP INC., a Delaware corporation (the
"Borrower"), hereby promises to pay to the order of ____________ (the "Lender"),
on the Termination Date (as such term is defined in the Credit Agreement
referred to below), at the office of Fleet Bank (the "Agent") at 56 E. 42nd
Street, New York, New York 10017 (or at such other place as the Agent shall
designate by a notice in writing to the Borrower), in lawful money of the
United States of America and in immediately available funds, the principal sum
of ________ DOLLARS ($_______) or such lesser amount as shall equal the
aggregate unpaid principal amount of the Loans made by the Lender to the
Borrower under the Credit Agreement and/or under the Original Credit Agreement
referred to below, and to pay interest on the unpaid principal amount of each
such Loan, at said office of the Agent, in like money and funds, for the period
commencing on the date of such Loan until such Loan shall be paid in full, at
the rates per annum and on the dates provided in the Credit Agreement.
The Lender is hereby authorized by the Borrower to endorse on the
schedule attached to this promissory note (or any continuation thereof) the
aggregate amount of the Loans made by the Lender to the Borrower under the
Original Credit Agreement and outstanding on the date hereof and the amount of
each Loan made by the Lender to the Borrower pursuant to the Credit Agreement,
the date such Loan is made or paid and the amount of each payment or prepayment
of the principal of such Loans received by the Lender; provided that any failure
by the Lender to make any such endorsement shall not affect the obligations of
the Borrower hereunder or under the Credit Agreement in respect of any Loan.
Each such endorsement by the Lender shall constitute prima facie evidence of the
----- -----
accuracy thereof.
This promissory note is one of the Notes referred to in the Amended
and Restated Credit Agreement dated as of September 11, 1992 (said Amended and
Restated Credit Agreement, as amended from time to time, herein called the
"Credit Agreement") among the Borrower, the Lender, the other financial institu-
tions named therein, Fleet Bank, as Agent and Issuing Bank, and Credit Suisse,
<PAGE>
EXHIBIT A
Page 2
Bank of America National Trust and Savings Association and Chemical Bank, as Co-
Lead Managers, which Credit Agreement amended and restated in its entirety the
Credit Agreement dated as of June 28, 1990, as heretofore amended (the "Original
Credit Agreement"), among the Borrower, the Agent and the financial institutions
named therein. This promissory note evidences Loans made by the Lender to the
Borrower under the Credit Agreement and the Original Credit Agreement and is
issued in substitution for the promissory note issued to the Lender pursuant to
the Original Credit Agreement. Capitalized terms used in this promissory note
have the meanings assigned to them in the Credit Agreement.
Upon the occurrence of an Event of Default under the Credit Agree-
ment, the principal hereof and accrued interest hereon shall become, or may be
declared to be, forthwith due and payable. The Borrower may at its option pre-
pay all or any part of the principal of this promissory note before maturity
upon the terms provided in the Credit Agreement.
This promissory note shall be governed by and construed in accordance
with the laws of the State of New York.
JWP INC.
By__________________
Name:
Title:
<PAGE>
EXHIBIT A
Page 3
Schedule to
Promissory Note dated
September __, 1992 of
JWP INC.
This Promissory Note evidences Loans made to JWP INC. under the
within-described Credit Agreement and Original Credit Agreement, in the
principal amounts and on the dates set forth below, and the repayments or
prepayments of the principal of said Loans.
<TABLE>
<CAPTION>
Principal Principal
Amount Amount Paid Balance Notation
Date of Loan or Prepaid Outstanding Made By
- - - - - - - - - --------- ------------ ----------- ----------- --------
<S> <C> <C> <C> <C>
9/--/92 ---------/*/ ----------- ----------- --------
- - - - - - - - - --------- ------------ ----------- ----------- --------
- - - - - - - - - --------- ------------ ----------- ----------- --------
- - - - - - - - - --------- ------------ ----------- ----------- --------
- - - - - - - - - --------- ------------ ----------- ----------- --------
- - - - - - - - - --------- ------------ ----------- ----------- --------
- - - - - - - - - --------- ------------ ----------- ----------- --------
- - - - - - - - - --------- ------------ ----------- ----------- --------
- - - - - - - - - --------- ------------ ----------- ----------- --------
- - - - - - - - - --------- ------------ ----------- ----------- --------
- - - - - - - - - --------- ------------ ----------- ----------- --------
</TABLE>
/*/ Amount of Lender's Loans outstanding under Original Credit Agreement on the
date of this Promissory Note.
<PAGE>
EXHIBIT 4.13
AMENDMENT
dated as of September 30, 1992
to
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of September 11, 1992
(JWP INC.)
WHEREAS, JWP INC., a Delaware corporation (the "Borrower"), certain banks
named in the Amended and Restated Credit Agreement referred to below (the
"Lenders") and Fleet Bank (formerly Norstar Bank), as agent and Issuing Bank,
are parties to an Amended and Restated Credit Agreement dated as of September
11, 1992 (the "Credit Agreement"), pursuant to which the Lenders have
established certain credit facilities for the Borrower, available on the terms
and subject to the conditions set forth in the Credit Agreement;
WHEREAS, the Borrower wishes and the Required Lenders are willing, on the
terms and subject to the conditions set forth below, to amend the Credit
Agreement in the manner and on the terms provided below;
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions. Except as otherwise provided herein, capitalized terms used
-----------
herein shall have the meaning assigned to such terms in the Credit Agreement.
<PAGE>
2. Amendments to Credit Agreement
------------------------------
(a) Section 1.1 of the Credit Agreement is hereby amended as of September 29,
1992 as follows:
(i) changing the definition of the term "Net Cash Proceeds" in said Section
1.1 by adding to said definition the following new clause (d):
"and (d) in the case of the sale of assets of Enviro-Gro Technologies
Co. to Wheelabrator Technologies, Inc., advances in the aggregate
amount of $19,000,000 made to Enviro-Gro Technologies Co. or its
subsidiaries by the Company"; and
(ii) changing the definition of the term "Consolidated Tangible Net Worth" in
said Section 1.1 by adding the following new sentence at the end of said
definition:
"For purposes of determining "Consolidate Tangible Net Worth" there
shall be included as "Deferred Income Tax" of the Borrower an amount
equal to the greater of (i) $53,000,000 or (ii) the amount set forth
as "Deferred Income Tax" in accordance with GAAP on the Borrower's
consolidated balance sheet as of relevant date of determination."
(b) Section 2.5(a) of the Credit Agreement is hereby amended as follows:
(i) changing the first sentence of subsection (i) of said Section 2.5(a) to
read in its entirety as follows:
"The Facility shall automatically be reduced to $140,000,000 on
January 5, 1993, $125,000,000 on April 15, 1993 and $100,000,000 on
June 30, 1993";
-2-
<PAGE>
(ii) deleting the parenthetical phrase "(including the convertible preferred
stock to be issued by the Borrower to Wheelabrator Technologies Inc. ('WTI')
in connection with the sale by the Borrower to WTI of certain subsidiaries of
the borrower)" set forth in subsection (ii) of said Section 2.5(a);
(iii) deleting in their entirety the following words set forth in the first
sentence of subsection (iii) of said Section 2.5(a):
"provided further, that no such reduction in the Facility under this Section
-------- -------
2.5(a)(iii) shall be required with respect to any sale, transfer or other
disposition of assets occurring after the Facility has been reduced to
$100,000,000 or less";
(iv) deleting the parenthetical phrase "(so long as it exceeds
$100,000,000)" set forth in the second sentence of subsection (iii) of said
Section 2.5(a); and
(v) adding the following new subsection (iv) to said Section 2.5(a):
"(iv) Concurrently with each payment made pursuant to Section 2.8(b)(iv) or
2.8(b)(v), the Facility shall be reduced by the amount of such payment, such
reduction to be applied ratably to the Commitment of each Lender."
(c) Section 2.8(b) of the Credit Agreement is hereby amended by adding the
following new subsections (iv) and (v) thereto:
-3-
<PAGE>
"(iv) If the average daily balance of the available funds in the Borrower's
and its Subsidiaries' (other than the Water Companies) cash concentration
account or similar account or account at Continental Bank or another bank or
banks at which such account or accounts are maintained shall exceed in the
aggregate $65,000,000 in any month, then the Borrower shall prepay the Loans
by 50% of the amount of such excess within five (5) Business Days after the
end of such month.
(v) On November 30, 1992 the Borrower shall prepay the Loans by an amount
equal to the excess, if any, of (x) $10,000,000 over (y) all optional payments
or prepayments of principal, premium and interest made by the Borrower after
the date hereof and prior to november 30, 1992 in respect of its Funded Debt
(other than the Loans)".
(d) Section 5.1(k) of the Credit Agreement is hereby amended as of September
29, 1992 to read in its entirety as follows:
"(k) Maintenance of Consolidated Tangible Net Worth. Maintain a Consolidated
----------------------------------------------
Tangible Net Worth of not less than $140,000,000 on December 31, 1992, not
less than $150,000,000 on March 31, 1993 and not less than $155,000,000 on
June 30, 1993."
(e) Section 5.1(l) of the Credit Agreement is hereby deleted in its entirety
as of September 29, 1992.
(f) Section 5.1(n) of the Credit Agreement is hereby amended as of September
29, 1992 to read in its entirety as follows:
"(n) EBIT. Maintain EBIT of not less than $2,500,000 for the quarter ending
----
March 31, 1993 and not less than $5,000,000 for each quarter thereafter."
-4-
<PAGE>
(g) Section 5.1(o) of the Credit Agreement is hereby amended by adding the
following new clauses (xv), (xvi) (xvii) and (xviii) thereto:
"(xv) promptly after the execution thereof by the relevant parties thereto,
a copy of the Borrower's engagement letters, if any, with Buccino & Associates
and Deloitte & Touche;
(xvi) promptly upon receipt, a copy of each written report, recommendation
or analysis submitted by Buccino & Associates to the Board of Directors or
senior executive officers of the Borrower;
(xvii) within five (5) Business Days after the end of each month, a
certificate of the Treasurer of the Borrower, accompanied by appropriate
account statements from the relevant banks, setting forth the aggregate
average daily amount of the available balance during such month in the cash
concentration accounts maintained by the Borrower and its subsidiaries (other
than the Water Companies) at Continental Bank and/or other banks, together
with the Borrower's computation of such average daily balance; and
(xviii) promptly upon making any optional payment or prepayment in respect
of its Funded Debt (other than the Loans) or purchasing any such Funded Debt,
a statement of the Treasurer of the Borrower setting forth the details of such
payment, prepayment or purchase."
(h) Section 5.2(n) is hereby amended by deleting the figures "$2,000,000" set
forth in said Section 5.2(n) and substituting therefor the figure "$10,000,000",
such amendment to be effective only through November 30, 1992; thereafter said
Section shall be as originally in effect.
-5-
<PAGE>
(i) Section 6.1 is hereby amended by adding the word "or" at the end of clause
(o) thereof and adding the following new clause (p) after clauses (o) thereof:
"(p) The Borrower shall fail to perform or observe any term, covenant or
agreement contained in Section 5.1(o) (xvii) of this Agreement and such
failure shall continue for five (5) Business Days after written notice
thereof shall have been given to the Borrower by the Agent or the Required
Lenders;".
3. Lenders' Financial Advisers. (a) The Borrower agrees that the Required
---------------------------
Lenders shall be entitled at any time, in their sole discretion, to designate a
firm of financial or business consultants or advisers (the "Lenders' Financial
Advisers") to advise the Lenders as to, and to examine and review on behalf of
the Lenders, the books, records, operations, assets and business plans and
projections of the Borrower and its Subsidiaries. The Borrower shall (i) permit
the Lenders' Financial advisers to have access to all facilities, officers,
employees, auditors and advisers of the Borrower and its Subsidiaries, (ii)
permit the Lenders' Financial Advisers to examine, and make copies of and
extracts from, the books and records of the Borrower and its Subsidiaries and
(iii) authorize and instruct its and its subsidiaries' officers, employees,
auditors and financial advisers, including without limitation, Ernst & Young,
Deloitte & Touche and Buccino & Associates, to discuss the affairs, assets,
financial and business conditions and operations and accounts of the Bor-
-6-
<PAGE>
rowers and its subsidiaries with the Lenders' Financial Advisers. The Lenders
shall keep confidential the information obtained by the Lenders' Financial
Advisers from the Borrower or its subsidiaries except (i) any such information
which is publicly available or (ii) in connection with the Lenders' enforcement
of their rights under the Credit Agreement.
(b) The Borrower shall pay all reasonable fees, costs and expenses of the
Lenders' Financial Advisers; provided that the Borrower shall not be liable for
more than $150,000 of such fees, costs and expenses through December 31, 1992
and no more than $15,000 a month thereafter. Upon the execution of this
Amendment by the Borrower and the Required Lenders, the Borrower shall deposit
with the Agent $150,000 to secure the Borrower's obligations under this
paragraph (b). The Agent may debit said deposit to pay the fees, costs and
expenses of the Lenders' Financial Advisers. Any balance of such deposit
remaining after the payment in full of the Loans shall be refunded to the
Borrower.
(c) The Borrower acknowledges that the Lenders' Financial Adviser shall have
no obligation, duty or responsibility whatsoever to the Borrower or its
Subsidiaries, shall not be required to disclose to the Borrower or its
Subsidiaries (or any auditor, adviser, officer or director of the Borrower or
its Subsidiaries) any information, determination, conclusion or opinions of the
Lenders' Financial Advisers, however ob-
-7-
<PAGE>
tained, and may disclose all such information, determinations, conclusions and
opinions to the Lenders.
(d) Failure by the Borrower to comply with the provisions of this Section 3
and the continuation of such failure for a period of 15 days after written
notice thereof by the Required Lenders or by the Agent acting at the instruction
of the Required Lenders or by the Agent acting at the instruction of the
Required Lenders (which notice shall specify that it is a "Notice of Default")
shall constitute an additional "Event of Default" under the Credit Agreement.
4. Effective Date. The amendments to the Credit Agreement specified in
--------------
Section 2 above shall not become effective until the Agent shall have received
(a) counterparts of this Amendment executed by the Required Lenders and (b) the
amendment fee referred to in Section 5(a) below.
5. Miscellaneous.
-------------
(a) Amendment Fee. Concurrently with the execution of this Amendment by the
-------------
Borrower and the Required Lenders, the Borrower shall pay to the Agent for pro
---
rata distribution to the Lenders in proportion to their share of the Facility,
- - - - - - - - - ----
an amendment fee of $500,000.
(b) Expenses. The Borrower agrees to pay all costs and expenses incurred by
--------
the Agent and the Required Lenders (including, without limitation, the fees and
disbursements of counsel for the Agent and the Lenders) in connection with the
preparation and enforcement of this Amendment.
-8-
<PAGE>
(c) Governing Law. This Amendment shall be governed by, and construed in
-------------
accordance with, the laws of the State of New York.
(d) Full Force and Effect. Except as otherwise provided herein, all terms and
---------------------
conditions of the Credit Agreement and the other Loan Documents referred to
therein, and all obligations of the Borrower and rights of the Agent, the
Issuing Bank and the Lenders thereunder shall remain in full force and effect.
(e) Execution in Counterparts. This Amendment may be executed in any number
-------------------------
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of a signature page to this Amendment by telecopier shall
be effective as delivery of a manually executed counterpart of this Amendment.
Any party executing and delivering counterparts of this Amendment by telecopy
shall promptly thereafter deliver to the Agent (for delivery to the appropriate
parties) three manually executed counterparts of this Amendment.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
30th day of September, 1992.
Borrower:
--------
JWP INC.
By
------------------------
Name: Joseph A. Gallo
Title: Vice President
Controller
Lenders:
-------
FLEET BANK
By
------------------------
Name:
Title:
-9-
<PAGE>
Lenders:
-------
FLEET NATIONAL BANK
By
-------------------
Name:
Title:
CREDIT SUISSE
By
-------------------
Name:
Title:
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By
-------------------
Name:
Title:
CHEMICAL BANK
By
-------------------
Name:
Title:
APPLE BANK FOR SAVINGS
By
-------------------
Name:
Title:
-10-
<PAGE>
Lenders:
-------
ROYAL BANK OF CANADA
By
-------------------
Name:
Title:
BANCO DE SANTANDER
By
-------------------
Name:
Title:
BANCA CASSA DI RISPARMIO DI
TORINO S.p.A.
By
-------------------
Name:
Title:
By
-------------------
Name:
Title:
THE BANK OF TOKYO TRUST COMPANY
By
-------------------
Name:
Title:
BANK JULIUS BAER AND COMPANY,
New York Branch
By
-------------------
Name:
Title:
-11-
<PAGE>
Lenders:
-------
KREDIETBANK N.V.
By
-------------------
Name:
Title:
By
-------------------
Name:
Title:
ROYAL BANK OF SCOTLAND plc
By
-------------------
Name:
Title:
FIRST VALLEY BANK
By
-------------------
Name:
Title:
-12-
<PAGE>
Exhibit 4.14
_____________________________________________________________
CREDIT AGREEMENT
among
JWP INC.,
As Debtor and Debtor-in-Possession
CERTAIN SUBSIDIARIES THEREOF,
As Guarantors
and
BELMONT CAPITAL PARTNERS II, L.P.
As Lender
February 14, 1994
_____________________________________________________________
<PAGE>
TABLE OF CONTENTS
-----------------
Page
I. CERTAIN DEFINITIONS.................................................... 1
1.1 Definitions.................................................... 1
1.2 Accounting Terms............................................... 10
II. THE CREDIT............................................................ 10
2.1 The Loans...................................................... 10
2.2 The Note....................................................... 11
2.3 Funding Procedures............................................. 11
2.4 Interest....................................................... 12
(a) Non-Default Rate......................................... 12
(b) Default Rate............................................. 12
(c) Additional Interest...................................... 12
2.5 Commitment Fee................................................. 12
2.6 Reduction or Termination of Loan Commitment.................... 12
(a) Notice................................................... 12
(b) Mandatory Reduction...................................... 12
2.7 Prepayments.................................................... 13
(a) Mandatory Prepayments. .................................. 13
(b) Voluntary Prepayments. .................................. 13
2.8 Payments....................................................... 13
(a) Interest and Principal................................... 13
(b) Form of Payments, Application of Payments, Payment
Administration, Etc...................................... 13
(c) Depositary Procedures. .................................. 13
(d) Net Payments............................................. 14
2.9 Priority and Liens. ........................................... 15
2.10 Changes in Circumstances; Yield Protection. ................... 15
III. REPRESENTATIONS AND WARRANTIES....................................... 16
3.1 Organization, Standing......................................... 16
3.2 Corporate Authority, Etc....................................... 16
3.3 Validity of Documents.......................................... 17
3.4 Litigation..................................................... 17
3.5 ERISA.......................................................... 17
3.6 Financial Statements........................................... 18
3.7 Use of Proceeds................................................ 19
3.8 Not in Default................................................. 19
3.9 Taxes. ........................................................ 19
3.10 Permits, Licenses, Etc......................................... 19
3.11 Compliance With Laws........................................... 19
3.12 Amounts Owed to or from Affiliates; Intercompany Agreements.... 20
(a) Affiliates............................................... 20
<PAGE>
(b) Intercompany Agreements.................................. 21
(c) Dividends................................................ 21
3.13 Title to Assets................................................ 21
3.14 Insurance and Surety Bonds..................................... 21
3.15 Subsidiaries, Etc.............................................. 22
3.16 Patents, Trademarks, etc....................................... 23
3.17 Accounts....................................................... 23
3.18 Inventory...................................................... 23
3.19 Equipment...................................................... 23
3.20 Real Property.................................................. 23
3.21 Corporate and Fictitious Names................................. 23
3.22 Disclosure Generally........................................... 24
IV. SECURITY............................................................. 24
4.1 Security Documents............................................. 24
4.2 Release of Collateral.......................................... 24
V. CONDITIONS PRECEDENT................................................. 25
5.1 Conditions to First Loan....................................... 25
(a) Articles, Bylaws......................................... 25
(b) Evidence of Authorization................................ 25
(c) Legal Opinions........................................... 25
(d) Incumbency............................................... 25
(e) Note. ................................................... 26
(f) Conversion of the Case. ................................. 26
(g) Initial DIP Financing Order.............................. 26
(h) Consents................................................. 26
(i) Change................................................... 26
(j) Continued Bonding........................................ 26
(k) Other Agreements......................................... 26
(l) Absence of Defaults...................................... 26
(m) Documents................................................ 27
5.2 All Loans Subsequent to the First Loan......................... 27
(a) Documents................................................ 27
(b) Covenants; Representations............................... 27
(c) Defaults................................................. 27
(d) DIP Financing Order...................................... 27
(e) Legal Proceedings........................................ 27
(f) Filing of Reorganization Plan............................ 28
(g) Continued Bonding........................................ 28
(h) Absence of Defaults...................................... 28
(i) Support for Reorganization Plan.......................... 28
VI. AFFIRMATIVE COVENANTS................................................ 28
-ii-
<PAGE>
6.1 Financial Statements and Reports............................... 28
(a) Monthly Reports.......................................... 28
(b) Quarterly Statements..................................... 29
(c) Annual Statements........................................ 29
(d) No Default............................................... 30
(e) ERISA.................................................... 30
(f) Net Cash Proceeds........................................ 30
(g) Material Changes. ....................................... 30
(h) Other Information........................................ 31
6.2 Taxes and Other Charges........................................ 31
6.3 Corporate Existence............................................ 31
6.4 Compliance with ERISA.......................................... 31
6.5 Compliance with Regulations. .................................. 32
6.6 Notice of Events............................................... 32
6.7 Maintenance of Records; Audits................................. 33
6.8 Generally Accepted Accounting Principles....................... 34
6.9 Information relating to the Case............................... 34
6.10 Filing of Reorganization Plan.................................. 34
6.11 Subsequent Financing........................................... 34
VII. NEGATIVE COVENANTS................................................... 34
7.1 Merger, Consolidation.......................................... 34
7.2 Indebtedness for Borrowed Money................................ 34
7.3 Liens. ....................................................... 36
7.4 Guarantees. ................................................... 37
7.5 Sale of Stock of Subsidiaries.................................. 37
7.6 Judgment, Attachment........................................... 37
7.7 Loans, Advances and Investments................................ 38
7.8 Transfer of Assets............................................. 39
7.9 Modification of Loan Agreements or Policies; Payment of Debt... 39
7.10 Claims......................................................... 39
7.11 Accounting Change. ............................................ 40
7.12 Backlog........................................................ 40
7.13 Losses from Operations......................................... 40
VIII. DEFAULT............................................................. 40
8.1 Events of Default.............................................. 40
(a) Principal, Interest or Other Amounts..................... 40
(b) Covenants................................................ 40
(c) Representations, Warranties, Etc......................... 40
(d) Bankruptcy, Etc. of Material Guarantor or Core Collateral
Subsidiary............................................... 41
(e) Modification of DIP Financing Order...................... 41
(f) Failure to Maintain Bonding in the Ordinary Course....... 41
-iii-
<PAGE>
(g) Material Adverse Change.................................. 41
(h) Certain Other Defaults................................... 42
IX. GUARANTY.............................................................. 42
9.1 Guaranty....................................................... 42
9.2 No Impairment of Guaranty...................................... 43
9.3 Continuation and Reinstatement, Etc............................ 44
9.4 Representations and Warranties................................. 44
X. MISCELLANEOUS........................................................ 44
10.1 Waiver......................................................... 44
10.2 Amendments..................................................... 45
10.3 Governing Law.................................................. 45
10.4 Assignments and Participations................................. 45
10.5 Captions....................................................... 45
10.6 Notices........................................................ 45
10.7 Expenses of the Lender; Indemnification of the Lender and the
Banks.......................................................... 46
10.8 Survival of Warranties and Certain Agreements.................. 47
10.9 Severability................................................... 47
10.10 CONSENT TO JURISDICTION AND SERVICE OF PROCESS................. 47
10.11 WAIVER OF JURY TRIAL........................................... 48
10.12 Counterparts; Effectiveness.................................... 49
10.13 Use of Defined Terms........................................... 49
10.14 Good Faith..................................................... 49
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<PAGE>
EXHIBITS
- - - - - - - - - --------
A Depositary Agreement
B DIP Financing Order
C Initial DIP Financing Order
D Guarantor Security Agreement
E Pledge and Security Agreement
F Note
G Loan Requests
H Opinion of Counsel for JWP
I Petition and Reorganization Plan
J Inspection and Management Rights Letter Agreement
SCHEDULES
- - - - - - - - - ---------
1.1(b) Existing Liens
2.4(c) Agreed Percentage
2.8(c) Depositary Accounts and Concentration Accounts
3.2 Consents
3.5 ERISA
3.4 Litigation
3.6 Liabilities
3.9 Taxes
3.11 Compliance with Laws; Licenses, Permits, Etc.
3.12 Intercompany Debt; Intercompany Agreements; Dividends
3.14 Sureties
3.15 Subsidiaries; Location of Inventory and Equipment; Corporate
and Fictitious Names
3.16 Patents, Trademarks
3.20 Real Property
5.1 Change
7.2 Other Indebtedness for Borrowed Money
7.4 Existing Guarantees
7.7 Investments
7.13 Losses from Operations
8.1(d) Guarantors in Bankruptcy
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<PAGE>
CREDIT AGREEMENT
----------------
THIS CREDIT AGREEMENT, dated as of February 14, 1994 (this
"AGREEMENT"), is entered into by and among JWP INC., a Delaware corporation
(the "BORROWER"), as debtor and as debtor-in-possession under Chapter 11 of
the Bankruptcy Code, certain of its subsidiaries (each, a "GUARANTOR and
collectively the "GUARANTORS"), and Belmont Capital Partners II, L.P. (the
"LENDER").
WITNESSETH:
----------
WHEREAS, on December 21, 1993 (the "Petition Date"), certain
creditors of the Borrower initiated an involuntary bankruptcy proceeding
against the Borrower in the United States District Court for the Southern
District of New York (the "Bankruptcy Court");
WHEREAS, on February 14, 1994, the Borrower moved the Court to
convert the involuntary bankruptcy proceeding to a voluntary chapter 11
proceeding and an order for relief was entered by the Court on February 14,
1994;
WHEREAS, the Borrower has continued to operate its business and
manage its assets as a debtor-in-possession pursuant to Section 1107 and 1108
of the Bankruptcy Code;
WHEREAS, the Borrower has requested, and the Lender has agreed to
provide, a credit facility providing loans in the maximum aggregate principal
amount of $35,000,000, the proceeds of which will be used by the Borrower as
general working capital and/or loaned by the Borrower to the Guarantors for
such Guarantors' general working capital; and
WHEREAS, to provide for the repayment of the loans incurred and all
other obligations of the Borrower hereunder, the Borrower will provide to the
Lender a lien upon substantially all of its assets that will have priority over
the liens of all other parties pursuant to Section 364(c)(1) and 364(d)(1) of
the Bankruptcy Code and each Guarantor will guaranty the obligations of the
Borrower herein, which guaranty will be secured by a lien upon certain of its
property.
NOW, THEREFORE, in consideration of the premises and intending to be
legally bound hereby, the parties hereto agree as follows:
I. CERTAIN DEFINITIONS.
-------------------
1.1 DEFINITIONS. As used in this Agreement, the following terms
shall have these meanings:
"ACCOUNTS" shall mean any "accounts," as such term is defined in the
Uniform Commercial Code as in effect from time to time in the State of New York
"AFFILIATE" shall mean any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, the Borrower.
A Person shall be deemed to control
<PAGE>
another person if such Person possesses, directly or indirectly, the power (i)
to vote 10% or more of the outstanding stock or other ownership interests
having ordinary voting power for the election of directors of such other Person
or (ii) to direct or cause the direction of the management and policies of such
corporation, whether by contract or otherwise.
"AGREED PERCENTAGE" shall have the meaning set forth in Section
2.4(c).
"BANK GROUP" shall mean the holders of claims against the Borrower
described as "Class 3 Claims" in the form of Reorganization Plan attached as
Exhibit I hereto.
"BANKRUPT SUBSIDIARY" shall mean each of JWP Information Services,
Inc., JWP Information Services S.A.R.L., Sivea Benelux, Micro Avenue, Micro Com
and Antwerp Education Center N.V.
"BANKRUPTCY CODE" shall mean the Bankruptcy Reform Act of 1978 as
heretofore and hereafter amended and codified as 11 U.S.C. (S) 101 et seq.
------
"BANKRUPTCY COURT" shall mean the United States Bankruptcy Court for
the Southern District of New York having jurisdiction over the Case from time
to time.
"BUSINESS DAY" shall mean any day that is not a Saturday, a Sunday,
any day on which banks are required or permitted to be closed in the State of
New York or any day on which the New York Stock Exchange is required or
permitted to be closed.
"CAPITAL LEASES" shall have the meaning set forth in Section 7.2(c).
"CASH COLLATERAL ACCOUNT" shall have the meaning set forth in Section
7.8.
"CASE" shall mean the case of the Borrower before the Bankruptcy
Court.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" shall have the meanings set forth in the Pledge and
Security Agreement and each Guarantor Security Agreement and any other personal
property, tangible or intangible, now existing or hereafter acquired, including
accessions, substitutions and proceeds (including insurance proceeds) that may
at any time be or become subject to a security interest or lien in favor of the
Lender to secure the Obligations.
"COMMITMENT FEE" shall have the meaning set forth in Section 2.6.
"CONFIRMATION ORDER" shall mean a Final Order confirming a plan of
reorganization in the Case.
"CONCENTRATION ACCOUNT" shall have the meaning set forth in Section
2.8(c).
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<PAGE>
"CONCENTRATION BANK" shall have the meaning set forth in Section
2.8(c)
"CORE COLLATERAL SUBSIDIARIES" shall mean Sea Cliff Water Company,
Jamaica Water Supply Company, JWP U.K. Ltd., Drake & Scull Holdings Ltd., Drake
& Scull Engineering Ltd., Drake & Scull Airport Services Ltd., Comstock
Limited, 923452 Ontario Limited, Comstock Canada L.P.
"COVERED PLAN" shall have the meaning set forth in Section 3.5.
"DEBT" shall mean, with respect to any Person, without duplication,
(i) all items (excluding reserves for deferred income taxes) which in
accordance with Generally Accepted Accounting Principles would be included in
determining total liabilities as shown on the liability side of a balance sheet
of such Person as of the date on which Debt is to be determined, (ii) all
indebtedness secured by any Lien on any property or asset owned or held by such
Person subject thereto, whether or not the indebtedness secured thereby shall
have been assumed, (iii) all indebtedness of others with respect to which such
Person has become liable by way of a guarantee, and (iv) all outstanding
letters of credit and payment and performance bonds with respect to which, if
drawn upon, such Person would have any repayment or reimbursement obligations.
"DEFAULT RATE" shall mean 2% per annum above the interest rate
otherwise applicable on all Loans.
"DEPOSITARY ACCOUNT" shall have the meaning set forth in Section
2.8(c).
"DEPOSITARY AGREEMENT" shall mean an agreement in substantially the
form of Exhibit A hereto among the Borrower, the Lender and the Concentration
Bank providing, among other things, that the Lender shall have a security
interest in funds held in the Concentration Account and that, upon the terms
and conditions provided therein, the Lender may require the Concentration Bank
to transfer funds deposited into the Concentration Account solely in accordance
with the instructions of the Lender, and authorizing the Lender to cause the
Concentration Bank to remit to the Lender amounts necessary to pay the Lender
any amount payable under this Agreement, the Note or any other Loan Document
which is not paid in a timely manner.
"DIP FINANCING ORDER" shall mean the order of the Bankruptcy Court
approving this Agreement and the transactions contemplated hereby and making a
determination that the Lender is making loans pursuant to this credit facility
in good faith pursuant to Section 364(e) of the Bankruptcy Code, which order
shall be substantially in the form of Exhibit B hereto and which the Bankruptcy
Court shall have entered after 15 days' notice as required by Bankruptcy Rule
4001(c)(2).
"DOLLARS" and "$" shall mean the lawful currency of the United States
of America.
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<PAGE>
"EFFECTIVE DATE" shall mean the effective date of the Reorganization
Plan pursuant to the Confirmation Order.
"EQUIPMENT" shall mean "equipment," as such term is defined in the
Uniform Commercial Code as in effect from time to time in the State of New
York.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
it may be amended from time to time.
"ERISA AFFILIATE" means any corporation which is a member of the same
controlled group of corporations as the Borrower within the meaning of Section
414(b) of the Code, or any trade or business which is under common control with
the Borrower within the meaning of Section 414(c) of the Code.
"EVENT OF DEFAULT" shall have the meaning set forth in Section 8.1.
"EXCLUDED SUBSIDIARY" shall mean Sea Cliff Water Company, Jamaica
Water Supply Company, each foreign Subsidiary existing on the date hereof,
University Mechanical Contractors, Inc. and the subsidiaries of each such
company or partnership.
"FINANCIAL PROJECTIONS" shall have the meaning set forth in Section
3.6.
"FINANCIAL STATEMENTS" shall have the meaning set forth in Section
3.6.
"FINAL ORDER" shall mean an order, ruling or judgment of the
Bankruptcy Court that is no longer subject to review, reversal, modification or
amendment by appeal or writ of certiorari.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" shall mean generally
accepted accounting principles as in effect from time to time, consistently
applied.
"GUARANTORS" shall have the meaning set forth in the recitals hereto.
"GUARANTOR SECURITY AGREEMENTS" shall mean the Guarantor Security
Agreements, dated as of the date hereof, between the Lender and each Guarantor
in substantially the form of Exhibit D hereto.
"INDEBTEDNESS FOR BORROWED MONEY" shall mean (i) all indebtedness,
liabilities, and obligations, now existing or hereafter arising for money
borrowed by the Borrower or any of its Subsidiaries, whether or not evidenced
by any note, indenture or agreement (including, without limitation, the Note
and any indebtedness for money borrowed from an Affiliate) and (ii) all
indebtedness, liabilities and obligations of others (including an Affiliate)
now existing or hereafter arising for money borrowed with respect to which the
Borrower or any of its Subsidiaries has become liable by way of a guarantee or
indemnity.
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<PAGE>
"INITIAL DIP FINANCING ORDER" shall mean the initial order of the
Bankruptcy Court approving this Agreement and the transactions contemplated
hereby and making a determination that the Lender is making loans pursuant to
this credit facility in good faith pursuant to Section 364(e) of the Bankruptcy
Code, which order shall be substantially in the form of Exhibit C hereto.
"INSURANCE GROUP" shall mean the holders of claims against the
Borrower described as "Class 2 Claims" in the form of Reorganization Plan
attached as Exhibit I hereto.
"INTERCOMPANY AGREEMENTS" shall have the meaning set forth in Section
3.12(b).
"INTERCOMPANY DEBT" shall have the meaning set forth in Section
3.12(a).
"INTERCOMPANY NOTE" shall mean a promissory note payable by an
Affiliate to the Borrower or a Guarantor evidencing Intercompany Debt (which
Intercompany Debt may be in the nature of a revolving loan).
"INVENTORY" shall mean any "inventory," as such term is defined in
the Uniform Commercial Code as in effect from time to time in the State of New
York now or hereafter owned or acquired, whenever located, and, in any event,
including all inventory, merchandise, goods and other personal property that
are held by or on behalf of a Person for sale or lease or to be furnished under
a contract of service, in each case in the ordinary course of business.
"INVESTMENT" in any Person shall mean:
(a) the acquisition (whether for cash, property, services or
securities or otherwise) of capital stock, bonds, notes, debentures,
partnership or other ownership interests or other securities of such
Person; and
(b) any deposit with, or advance, loan or other extension of
credit to, such Person (other than (i) any such deposit securing
obligations under real or personal property leases or securing
obligations to utilities, in each case in the ordinary course of business
and (ii) any such advance, loan or extension of credit representing the
purchase price of inventory or supplies purchased, or services rendered,
in the ordinary course of business upon payment terms consistent with
past practice in similar transactions) or guarantee or assumption of, or
other contingent obligation with respect to, Indebtedness for Borrowed
Money or other liability of such Person, except as expressly permitted by
Section 7.2 or 7.4; and
(c) (without duplication of the amounts included in (a) and (b)
above) any amount that may, pursuant to the terms of such investment, be
required to be paid, deposited, advanced, lent or extended to or
guaranteed or assumed on behalf of such Person.
-5-
<PAGE>
"LIEN" means any lien, mortgage, security interest, chattel mortgage,
pledge or other encumbrance (statutory or otherwise) of any kind securing
satisfaction of an obligation, including any agreement to give any of the
foregoing, any conditional sales or other title retention agreement, any lease
in the nature thereof, and the filing of or the agreement to give any financing
statement under the Uniform Commercial Code of any jurisdiction or similar
evidence of any encumbrance, whether within or outside the United States.
"LINES OF CREDIT" shall have the meaning set forth in Section 7.2(b)
hereof.
"LOAN" shall have the meaning set forth in Section 2.1(a) hereof.
"LOAN COMMITMENT" shall have the meaning set forth in Section 2.1(a)
hereof.
"LOAN DOCUMENTS" shall mean this Agreement, the Note, the Pledge and
Security Agreement, each Guarantor Security Agreement and each other agreement,
document and instrument referred to herein or therein.
"LOCKBOXES" shall have the meaning set forth in Section 2.8(c)
hereof.
"MATERIAL GUARANTOR" shall mean each Guarantor with total assets,
determined in accordance with Generally Accepted Accounting Principles, of not
less than $10,000,000.
"MATURITY DATE" shall mean the earliest of (i) the date that is 364
days after the date of entry of the Initial DIP Financing Order; (ii) Effective
Date of the Reorganization Plan; (iii) termination of the Loan Commitment and
repayment in full of the Obligations; or (iv) such earlier date as provided in
Section 8.1 hereof.
"MULTIEMPLOYER PLAN" means a multiemployer plan as defined in ERISA
Section 4001(a)(3).
"NET CASH PROCEEDS" shall mean, with respect to the sale, lease,
transfer or disposition of any asset, tangible or intangible, now existing or
hereafter acquired, by the Borrower or a Guarantor from and after the date
hereof, the aggregate amount of cash received (including cash payments received
by way of deferred payment pursuant to any note or installment receivable or
otherwise) and state and federal income tax refunds attributable to such sale,
lease, transfer or disposition, but in each case only as and when received) by
the Borrower or such Guarantor in respect of such transaction, minus the sum of
(i) reasonable fees and commissions incurred in connection with such
transaction and not payable to an Affiliate, (ii) taxes (other than income or
capital gains taxes) incurred in connection with such transactions, (iii)
employee severance costs incurred in connection with the sale, lease, transfer
or disposition of such assets to the extent such costs are due and payable
within ninety (90) days following such transaction, (iv) fixed liabilities,
determined in accordance with Generally Accepted Accounting Principles,
retained by the Borrower or such Subsidiary in connection with such sale,
lease, transfer or disposition to the extent such liabilities are due and
payable within ninety (90) days following such transaction and
-6-
<PAGE>
(v) if such sale or disposition relates to the assets of a Core Collateral
Subsidiary, Indebtedness for Borrowed Money of such Core Collateral Subsidiary
permitted by this Agreement to the extent such Indebtedness for Borrowed Money
is required by its terms to be repaid upon such sale or disposition.
"NOTE" shall have the meaning set forth in Section 2.2 hereof.
"OBLIGATIONS" shall mean all now existing or hereafter arising debts,
obligations, covenants and duties of payment or performance of every kind,
matured or unmatured, direct or contingent, owing, arising, due or payable to
the Lender by or from the Borrower and the Guarantors arising out of this
Agreement or any other Loan Document, including, without limitation, all
obligations to repay principal of and interest, including without limitation
Additional Interest, on all Loans and to pay interest, fees, costs, charges,
expenses, professional fees, and all sums chargeable to the Borrower and the
Guarantors under the Loan Documents, whether or not evidenced by any note or
other instrument.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"PENSION PLAN" shall mean, at any time, any Plan (including a
Multiemployer Plan), subject to the funding requirements of ERISA Section 302
or Code Section 412, which requirements are, or at any time within the six
years immediately preceding the time in question were, in whole or in part, the
responsibility of the Borrower, any Guarantor or any ERISA Affiliate.
"PERMITTED DISPOSITION" shall mean the sale, lease, transfer or
disposition by the Borrower or a Guarantor of (i) Inventory in the ordinary
course of business, (ii) machinery and equipment (a) that is obsolete, damaged
or no longer used or useful in the conduct of the business of the Borrower or a
Guarantor and the disposition of which is in the ordinary course of business or
(b) that is replaced with comparable machinery or equipment, (iii) the capital
stock of a Software House Subsidiary and (iv) other assets, provided that the
aggregate fair market value of all assets sold, leased, transferred or disposed
by the Borrower and all Guarantors as provided in this clause (iv) from and
after the date of this Agreement shall not exceed $500,000.
"PERMITTED LIEN" shall mean:
(a) any Lien upon assets of the Borrower existing on the Petition
Date;
(b) any Liens for current taxes, assessments and other
governmental charges not yet due and payable or being contested in good
faith by the Borrower or the Guarantors by appropriate proceedings and
for which adequate reserves in accordance with Generally Accepted
Accounting Principles have been established by the Borrower or the
Guarantors;
-7-
<PAGE>
(c) any mechanic's, materialman's, carrier's, warehousemen's or
similar Liens for sums not yet due or being contested in good faith by
the Borrower or the Guarantors by appropriate proceedings and for which
adequate reserves in accordance with Generally Accepted Accounting
Principles have been established by the Borrower or the Guarantors;
(d) Liens in favor of the Lender under the Loan Documents;
(e) easements, rights-of-way, restrictions and other similar
encumbrances on the real property or fixtures of the Borrower or the
Guarantors incurred in the ordinary course of business which individually
or in the aggregate are not substantial in amount and which do not in any
case materially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the business of the Borrower or
any of the Guarantors;
(f) Liens (other than Liens imposed on any property of the
Borrower or the Guarantors or any ERISA Affiliate pursuant to ERISA or
section 412 of the Code) incurred or deposits made in the ordinary course
of business, including Liens in connection with workers' compensation,
unemployment insurance and other types of social security and Liens to
secure performance of tenders, statutory obligations, appeal bonds (in
the case of appeal bonds such Lien shall not secure any reimbursement or
indemnity obligation in an amount greater than $250,000), bids, leases
that are not capitalized leases, sales contracts and other similar
obligations, in each case, not incurred in connection with the obtaining
of credit or the payment of a deferred purchase price, and which do not,
in the aggregate, result in a material adverse effect on the business,
operations, assets or condition (financial or otherwise) of the Borrower
or any of the Guarantors;
(g) Liens existing upon the date hereof as set forth in Schedule
1.1(b) hereto and the extensions, renewal or replacement of any such Lien
without any increase in the indebtedness secured by such Lien or the
assets subject to such Lien, except as expressly contemplated by Schedule
1.1(b);
(h) Liens arising as a matter of law or equity or contractually
as set forth on Schedule 1.1(b) securing the obligations of the Borrower
and its Subsidiaries under now existing or hereafter established
performance and payment bonds.
"PERSON" shall mean any individual, corporation, partnership, joint
venture, association, company or entity.
"PETITION DATE" shall have the meaning set forth in the recitals
hereto.
"PLAN" means an employee benefit plan as defined in Section 3(3) of
ERISA, other than a Multiemployer Plan.
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<PAGE>
"PLEDGE AND SECURITY AGREEMENT" shall mean the Pledge and Security
Agreement, dated as of the date hereof, between the Borrower and the Lender in
the form of Exhibit E hereto.
"POST-PETITION" shall mean and refer to any time on or after the
Petition Date.
"POTENTIAL DEFAULT" shall mean an event that with the giving of
notice or lapse of time or both would become an Event of Default.
"PRE-PETITION" shall mean and refer to any time prior on the Petition
Date.
"PRE-PETITION SECURED OBLIGATIONS" shall mean all obligations owing
by the Borrower to any lender incurred Pre-Petition repayment for which is
secured by any assets of the Borrower.
"PROHIBITED TRANSACTION" means a transaction that is prohibited under
Code Section 4975 or ERISA Section 406 and not exempt under Code Section 4975
or ERISA Section 408.
"REGULATION" means any statute, law, ordinance, regulation, order or
rule of any foreign, federal, state, local or other government or governmental
body, including, without limitation, those covering or related to banking,
financial transactions, securities, public utilities, environmental control,
energy, safety, health, transportation, bribery, record keeping, zoning,
antidiscrimination, antitrust, wages and hours, employee benefits, and price
and wage control matters.
"REORGANIZATION PLAN" shall mean a plan of reorganization in the
Case.
"REPORTABLE EVENT" means, with respect to a Pension Plan: (a) any of
the events set forth in ERISA Sections 4043(b) (other than a reportable event
as to which the provision of 30 days' notice to the PBGC is waived under
applicable regulations) or 4063(a) or the regulations thereunder, (b) an event
requiring the Borrower, any Guarantor or any ERISA Affiliate to provide
security to a Pension Plan under Code Section 401(a)(29) and (c) any failure by
the Borrower, any Guarantor or any ERISA Affiliate to make payments required by
Code Section 412(m).
"SOFTWARE HOUSE SUBSIDIARIES" shall mean (i) JWP Energy Products,
Inc., (ii) JWP/MEC Corp., (iii) JWP Pacific International, Inc., (iv) JWP
Telecom Inc., (v) JWP Telephone Services, Inc., (vi) Standard
Telecommunications, Inc., (vii) Standard Telecommunications Equipment, Inc.,
(viii) University Technical Services, Inc., (ix) University Energy Services of
California, Inc., (x) JWP Telecommunications, Inc and (xi) JWP Technical
Services of Guam, Inc.
"SOLVENT" shall mean that the aggregate present fair saleable value
of a Person's assets is in excess of the total amount of its probable liability
on its existing debts as they become absolute and matured, such Person has not
incurred debts beyond its foreseeable ability to pay such debts as they mature,
and such Person has capital adequate to conduct the business in which it is
presently or is about to engage in.
-9-
<PAGE>
"SUPER-PRIORITY CLAIM" shall mean a claim against the Borrower in the
Case that is an administrative claim having priority over any or all
administrative expenses of the kind specified in Section 503(b) and 507(a) and
(b) of the Bankruptcy Code.
"SUPER-PRIORITY LIEN" shall mean a Lien established pursuant to
Section 364(d) of the Bankruptcy Code securing a Super-Priority Claim.
"SUBSIDIARY" shall mean any Person at least 50% of the voting stock
of which is held, directly or indirectly, by the Borrower.
"TERMINATION EVENT" means, with respect to a Pension Plan: (a) a
Reportable Event, (b) the termination of a Pension Plan, or the filing of a
notice of intent to terminate a Pension Plan, or the treatment of a Pension
Plan amendment as a termination under ERISA Section 4041(e), (c) the
institution of proceedings to terminate a Pension Plan under ERISA Section 4042
or (d) the appointment of a trustee to administer any Pension Plan under ERISA
Section 4042.
"TRANSACTION" shall mean the establishment of the facility
contemplated by this Agreement.
"UNFUNDED PENSION LIABILITIES" means, with respect to any Pension
Plan at any time, the amount determined by taking the accumulated benefit
obligation, as disclosed in accordance with Statement of Accounting Standards
No. 87, over the fair market value of Pension Plan assets.
"UNRECOGNIZED RETIREE WELFARE LIABILITY" means, with respect to any
Plan that provides post-retirement benefits other than pension benefits, the
amount of the accumulated post-retirement benefit obligation, as determined in
accordance with Statement of Financial Accounting Standards No. 106, as of the
most recent valuation date, which has not previously been recognized. Prior to
the date such statement is applicable to the Borrower or any Guarantor, such
amount of the obligation shall be based on an estimate made in good faith. For
purposes of determining the aggregate amount of the Unrecognized Retiree
Welfare Liability, Plans maintained by a Subsidiary that is not otherwise a
ERISA Affiliate shall be taken into account.
1.2 ACCOUNTING TERMS. All accounting terms used herein shall
----------------
be construed in accordance with Generally Accepted Accounting Principles.
II. THE CREDIT
----------
2.1 THE LOANS.
---------
(a) Subject to the terms and conditions hereof, the Lender agrees
to make revolving credit loans (collectively called the "LOANS" and
individually a "LOAN") to the Borrower from time to time during the period
commencing on the date hereof and ending on the Maturity Date in outstanding
principal amounts not to exceed at any time in the aggregate $35,000,000 (the
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<PAGE>
"Loan Commitment"); provided, however, that the amount of the first
-------- -------
Loan hereunder shall not exceed $15,000,000.
(b) Except a Loan that exhausts the full remaining amount of the
Loan Commitment, each Loan when made shall be in an amount at least equal to
$5,000,000 or, if greater, then in such minimum amount plus $100,000 multiples.
(c) Within the limits of the Loan Commitment the Borrower may
borrow, prepay (in accordance with Section 2.7) and reborrow Loans,
provided that total the number of borrowings hereunder (including the
- - - - - - - - - --------
initial Loan) shall not exceed five. All Loans shall, in any event, be repaid
by the Borrower on the Maturity Date.
(d) The Borrowers shall not be entitled to borrow under this
Agreement more than thirty (30) days following entry of the Bankruptcy Court's
order confirming the Borrower's Reorganization Plan.
2.2 THE NOTE. The Loans made by the Lender shall all be
--------
evidenced by a single promissory note of the Borrower (the "NOTE") in
principal face amount equal to $35,000,000 payable to the order of the Lender
and otherwise in the form attached hereto as Exhibit F. The Note shall be
dated the date the first Loan is made and shall bear interest at the rate per
annum and be repayable in accordance with the terms hereof and as specified in
such Note. The Note shall mature upon the Maturity Date, and, upon maturity,
each outstanding Loan evidenced thereby shall be due and payable. The Lender
shall maintain records of all Loans evidenced by the Note and of all payments
thereon, which records shall be conclusive absent manifest error.
2.3 FUNDING PROCEDURES.
------------------
(a) Each request for a Loan shall be made not later than 11:00
a.m. (Eastern Standard Time) on a Business Day by notice by telephone to the
Lender to the attention of Carol Smith, Wendy Schnipper Clayton or such other
person as they shall instruct the Borrower in writing, and by delivery to the
Lender of a written request signed by the Borrower, in substantially the form
attached hereto as Exhibit G, specifying the date and amount of the Loan to be
made and wiring instructions for disbursement of such Loan. Subject to the
terms and conditions stated herein, Loans shall be made not more than seven
Business Days following receipt by the Lender of a request for such Loan (with
the Lender using reasonable efforts to make each such Loan as soon as possible
within such period but in no event shall the Lender be required to make a Loan
in fewer than seven Business Days following receipt by the Lender of a request
for such Loan). No request shall be effective until actually received by the
Lender.
(b) Upon receipt by the Lender of a request for a Loan such
request shall not be revocable by the Borrower.
(c) On the date of a Loan, the Lender shall wire to the bank
designated by the Borrower the amount of such Loan in immediately available
funds.
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2.4 INTEREST.
--------
(a) NON-DEFAULT RATE. Each Loan shall bear interest on the
principal amount thereof from the date made until such Loan is paid in full at
the rate of 12% per annum, calculated on the basis of the actual number of days
elapsed in a year of 360 days.
(b) DEFAULT RATE.
(i) If any Event of Default specified in Section 8.1(a) or
Section 8.1(d) shall occur; or
(ii) If any other Event of Default occurs and the Lender
declares the Note to be immediately due and payable;
THEN, the rate of interest applicable to each Loan then outstanding shall
be the Default Rate. Unless waived by the Lender, the Default Rate shall apply
from the date of the Event of Default until the date such Event of Default is
cured, and interest accruing at the Default Rate shall be payable upon demand.
(c) ADDITIONAL INTEREST. On the Maturity Date, the Borrower
shall pay to the Lender, at the option of the Borrower, either (a) the Agreed
Percentage of $250,000,000 payable in cash or (b) the Agreed Percentage of each
type of consideration issued pursuant to the Reorganization Plan (including
each type of equity security, each type of debt instrument or security, all
other instruments or securities, cash or other assets) payable in kind;
provided, however, that in lieu of delivery of the Agreed Percentage of
- - - - - - - - - -------- -------
the Series B Secured Notes as described in the Reorganization Plan attached as
Exhibit I hereto, the Borrower may deliver cash equal to the face amount of the
Agreed Percentage of such securities. The "AGREED PERCENTAGE" shall
initially be one percent and shall increase in accordance with Schedule 2.4(c).
2.5 COMMITMENT FEE. The Borrower shall pay to the Lender as
--------------
compensation for the Lender's Loan Commitment a fee (the "COMMITMENT FEE")
equal to $500,000, payable on the earlier of (a) ten days following entry by
the Bankruptcy Court of the Initial DIP Financing Order and (b) the date of the
initial Loan.
2.6 REDUCTION OR TERMINATION OF LOAN COMMITMENT.
-------------------------------------------
(a) NOTICE. The Borrower may at any time, on not less than
one Business Days' written notice, terminate or permanently reduce the Loan
Commitment, provided that any reduction shall be in the amount of $1,000,000 or
a multiple thereof.
(b) MANDATORY REDUCTION. The Loan Commitment shall be
reduced from time to time by the portion, if any, of Net Cash Proceeds received
by the Borrower, any Guarantor or any Core Collateral Subsidiary on or after
the date hereof that is not (i) proceeds of a
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Permitted Disposition or (ii) promptly deposited in the Cash Collateral Account
pursuant to Section 7.8.
2.7 PREPAYMENTS.
-----------
(a) MANDATORY PREPAYMENTS. In the event the Loan Commitment
is reduced, the Borrower shall, simultaneously with such reduction, make a
prepayment of principal and interest in respect of the Loans in such amount as
is necessary to assure that the aggregate principal amount of Loans outstanding
immediately after such reduction will not exceed the Loan Commitment as
reduced. In the event the Loan Commitment is terminated, the Borrower shall,
simultaneously with such termination, make a prepayment of all principal of and
interest on all Loans, and shall pay all other Obligations then outstanding.
(b) VOLUNTARY PREPAYMENTS. In addition, on one Business
Day's notice to the Lender, the Borrower may, at its option, prepay the Loans
in whole at any time or in part from time to time, provided that each partial
prepayment shall be in the principal amount of $1,000,000 or, if greater, then
in $100,000 multiples.
2.8 PAYMENTS.
--------
(a) INTEREST AND PRINCIPAL. Accrued interest, other than
Additional Interest, on all Loans shall be due and payable in arrears on the
first Business Day of each month and on the Maturity Date. The principal
amount of all Loans then outstanding and Additional Interest shall be due and
payable on the Maturity Date.
(b) FORM OF PAYMENTS, APPLICATION OF PAYMENTS, PAYMENT
ADMINISTRATION, ETC. All payments (including prepayments) of principal of
or interest on any Loan and all fees and other amounts payable by the Borrower
hereunder shall be made in Dollars and, except as otherwise provided herein,
shall be remitted to the Lender by wire transfer to the account set forth
opposite its name on the signature page hereof or at such office or account as
the Lender shall specify to the Borrower, in immediately available funds not
later than 11:00 a.m. (Eastern Time) on the day when due. Whenever any payment
is stated as due on a day which is not a Business Day, the maturity of such
payment shall be extended to the next succeeding Business Day and interest
shall continue to accrue during such extension.
(c) DEPOSITARY PROCEDURES.
(i) From and after the date hereof all receipts and other amounts
received by the Borrower or any Subsidiary, other than an Excluded Subsidiary,
from any source, including without limitation payments from any account debtor,
but excluding funds disbursed by the Borrower to a "zero-balance" account of a
Subsidiary to cover such Subsidiary's disbursements in the ordinary course of
business drawn on such account, upon receipt, shall be deposited into a
depositary account in the name of the Borrower or such Subsidiary and listed on
Schedule 2.8(c) (each, a "DEPOSITARY ACCOUNT"). All available amounts on
deposit in any Depositary
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Account of the Borrower or such Subsidiary shall be transferred by same-day or
next-day wire transfer to one of the concentration depositary accounts listed
on Schedule 2.8(c) (each, a "CONCENTRATION ACCOUNT") maintained by the
Borrower at NationsBank, N.A. (the "CONCENTRATION BANK") for application in
accordance with this Agreement and the Depository Agreement and for use by the
Borrower and its Subsidiaries. As of the date of this Agreement, the only
depositary accounts maintained by the Borrower and its Subsidiaries, other than
the Excluded Subsidiaries, are as set forth on Schedule 2.8(c) hereto.
(ii) The Borrower and any Subsidiary may close Depositary Accounts
and/or open new Depositary Accounts only with prior written notice to the
Lender. The Borrower shall not open any new concentration account without the
prior written consent of the Lender.
(iii) The Lender may at any time request that the Concentration Bank
confirm the Lender's security interest in the Concentration Account and the
funds and items contained therein granted pursuant to the Depositary Agreement.
(d) NET PAYMENTS. All payments made to the Lender by the
Borrower hereunder, under the Note or under any other Loan Document will be
made without setoff, counterclaim or other defense. All such payments will be
made free and clear of, and without deduction or withholding for, any present
or future taxes, levies, imposts, duties, fees, assessments or other charges of
whatever nature now or hereafter imposed by any jurisdiction or any political
subdivision or taxing authority thereof or therein (but excluding, except as
provided below, any tax imposed on or measured by the gross or net income of
the Lender or its partners (including all interest, penalties or similar
liabilities related thereto) pursuant to the laws of the United States of
America or any State or political subdivision thereof, or taxing authority of
the United States of America or any State or political subdivision thereof, in
which the principal office of the Lender is located), and all interest,
penalties or similar liabilities with respect thereto (collectively, together
with any amounts payable pursuant to the next sentence, "TAXES"). The
Borrower shall also reimburse the Lender, upon the written request of the
Lender, for Taxes imposed on or measured by the gross or net income of the
Lender or its partners pursuant to the laws of the United States of America (or
any State or political subdivision thereof), or the jurisdiction (or any
political subdivision or taxing authority thereof) in which the principal
office of the Lender is located as the Lender shall determine are payable by
the Lender in respect of Taxes paid to or on behalf of the Lender or its
partners pursuant to the preceding sentence. If any Taxes are so levied or
imposed, the Borrower agrees to pay the full amount of such Taxes, and such
additional amounts as may be necessary so that every payment of all amounts due
hereunder, under any Note or under any other Loan Document, after withholding
or deduction for or on account of any Taxes, will not be less than the amount
provided for herein or in such Note. The Borrower will furnish to the Lender
upon request certified copies of tax receipts evidencing such payment by the
Borrower. The Borrower will indemnify and hold harmless the Lender, and
reimburse the Lender upon its written request, for the amount of any Taxes so
levied or imposed and paid or withheld by the Lender or its partners.
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2.9 PRIORITY AND LIENS.
------------------
(a) The Borrower hereby covenants, represents and warrants that
(i) pursuant to Section 364(c)(1) of the Bankruptcy Code, the Obligations of the
Borrower shall constitute allowed super-priority administrative expense claims
in the Case having priority over any and all administrative expenses of the kind
specified in Section 503(b) and 507(a) and (b) and (ii) pursuant to Section
364(d) of the Bankruptcy Code, the Obligations shall at all times be secured by
a Super-Priority Lien (subject to those Liens set forth as item (a)(3) of
Schedule 1.1(b) hereto) upon that portion of the Collateral granted by the
Borrower pursuant to the Loan Documents. The entry of the Confirmation Order
shall not in any manner affect the nature and extent of the Lender's Super-
Priority Claim status or Super-Priority Lien upon all the Collateral granted by
the Borrower pursuant to the Loan Documents and the DIP Financing Order.
(b) Upon the maturity (whether by acceleration or otherwise) of
any of the Obligations, the Borrower shall immediately pay all such Obligations
and the Lender shall be entitled to immediately exercise all remedies available
to it under this Agreement or otherwise (including remedies against the
Guarantors or any Collateral owned by a Guarantor), all without further
application to or order by the Bankruptcy Court.
2.10 CHANGES IN CIRCUMSTANCES; YIELD PROTECTION.
------------------------------------------
(a) If the Lender shall determine that any law, rule or
regulation regarding capital adequacy or the adoption of any law, rule or
regulation regarding capital adequacy, which law, rule or regulation is
applicable to lending institutions (or their holding companies) generally and
not the Lender (or its holding company) specifically, or any change therein, or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Lender (or its holding company)
with any such request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, has the effect of reducing the rate of return on the Lender's capital
as a consequence of its obligations hereunder to a level below that which the
Lender could have achieved but for such adoption, change or compliance (taking
into consideration the Lender's policies with respect to capital adequacy) by
an amount deemed by the Lender to be material, the Borrower shall promptly pay
to the Lender, upon demand, such additional amount or amounts as will
compensate the Lender for such reduction.
(b) Determination by the Lender for purposes of this Section 2.10
of the effect of any change or circumstance referred to above on its costs of
making or maintaining Loans or on amounts receivable by it in respect of the
Loans, and of the additional amounts required to compensate the Lender in
respect of any additional costs, shall be made in good faith and shall be
evidenced by a certificate, signed by an officer of the Lender and delivered to
the Borrower, as to the fact and amount of the increased cost incurred by or
the reduced amount accruing to the Lender owing to such event or events. Such
certificate shall be prepared in reasonable detail and shall be conclusive as
to the facts and amounts stated therein, absent manifest error.
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<PAGE>
III. REPRESENTATIONS AND WARRANTIES
------------------------------
The Borrower represents and warrants to the Lender that:
3.1 ORGANIZATION, STANDING. The Borrower and each Material
----------------------
Guarantor or Core Collateral Subsidiary (i) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, (ii) has the corporate power and authority necessary to own its
assets, carry on its business and, if such Subsidiary is a Guarantor, enter
into and perform its obligations hereunder and under each Loan Document to
which it is a party and (iii) is qualified to do business and is in good
standing in each jurisdiction where the nature of its business or the ownership
of its properties requires such qualification except where the failure to be so
qualified would not have a material adverse effect on the business, operations,
assets or condition (financial or otherwise) of the Borrower, any Material
Guarantor or Core Collateral Subsidiary, or the Borrower and its Subsidiaries
taken as a whole.
3.2 CORPORATE AUTHORITY, ETC. The making and performance of
------------------------
the Loan Documents to which it is a party are within the power and authority of
the Borrower, the Material Guarantors and the Core Collateral Subsidiaries and
have been duly authorized by all necessary corporate action. The making and
performance of the Loan Documents do not and under present law will not require
any consent or approval of the Borrower's shareholders or the Board of
Directors or shareholders of any Material Guarantor or Core Collateral
Subsidiary whose consent or approval has not heretofore been obtained or any
other person (other than entry of the Initial DIP Financing Order and the DIP
Financing Order or which consent or approval is described on Schedule 3.2
hereto and has been obtained), do not and under present law will not violate
any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award, do not violate any provision of the charter or by-laws
of the Borrower or any Material Guarantor or Core Collateral Subsidiary, do not
and will not result in any breach of any material agreement, lease or
instrument (other than, in the case of the Borrower, Pre-Petition agreements
relating to money borrowed) to which the Borrower or any Material Guarantor or
Core Collateral Subsidiary is a party, by which it is bound or to which any of
its assets are or may be subject, and do not and will not give rise to any Lien
upon any of the assets of the Borrower or any Material Guarantor or Core
Collateral Subsidiary except in favor of the Lender (other than, in the case of
the Borrower, Pre-Petition agreements relating to money borrowed). Further,
except as set forth on Schedule 3.2, neither the Borrower nor any Material
Guarantor or Core Collateral Subsidiary is in default under any such agreement,
lease or instrument (other than, in the case of the Borrower, Pre-Petition
agreements relating to money borrowed) except to the extent such default is not
likely to have a material adverse effect on the business, operations, assets or
condition (financial or otherwise) of the Borrower, any Material Guarantor or
Core Collateral Subsidiary, or the Borrower and its Subsidiaries taken as a
whole. Except as set forth on Schedule 3.2, no authorizations, approvals or
consents of, and no filings or registrations with, any governmental or
regulatory authority or agency (other than filings or notices required to
perfect any security interests in favor of the Lender) are necessary for the
execution, delivery or performance by the Borrower or any Material Guarantor or
Core Collateral Subsidiary of any Loan Document to
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<PAGE>
which the Borrower or such Material Guarantor or Core Collateral Subsidiary is
a party or for the validity or enforceability thereof.
3.3 VALIDITY OF DOCUMENTS. This Agreement is, and each other
---------------------
Loan Document when executed and delivered, will be, the legal, valid and
binding obligation of the Borrower and each Guarantor that is a party thereto,
enforceable against the Borrower and/or such Guarantor in accordance with its
terms.
3.4 LITIGATION. Except as set forth in Schedule 3.4 hereto, as
----------
of the date of this Agreement, there is no action, suit or proceeding pending
or, to the knowledge of the Borrower, threatened against or affecting the
Borrower, any Subsidiary (other than a Bankrupt Subsidiary) or any assets of
the Borrower or any Subsidiary before any court, government agency, or other
tribunal, involving claims against the Borrower or any Subsidiary (other than a
Bankrupt Subsidiary) that are uninsured, exceed insurance coverage, comprise
the deductible portion of any such insurance coverage or are otherwise not
expressly accepted for coverage without reservation by any applicable insurer,
in each case in an amount in excess of $1,700,000. The status (including the
tribunal, the nature of the claim and the amount in controversy) of each such
litigation matter as of the date of this Agreement is set forth in such
Schedule.
3.5 ERISA. The provisions of each Plan in which the Borrower,
-----
any Guarantor or any ERISA Affiliate participates or to which the Borrower, any
Guarantor or any ERISA Affiliate contributes, whether or not they are the sole
participant or contributor, comply, in all material respects, with all
applicable requirements of ERISA and of the Code, and with all applicable
rulings and regulations issued under the provisions of ERISA and the Code
setting forth those requirements. No event has occurred with respect to any
Plan in which the Borrower, any Guarantor or any ERISA Affiliate participates
or to which any of them contributes (hereinafter referred to as a "COVERED
PLAN") that constitutes a Reportable Event, or, if such event has occurred,
the employer and plan administrator have complied with Section 4043 of ERISA
and the regulations thereunder, and have discharged all notification
obligations, if any, imposed on either of them by Section 4043 of ERISA, to the
extent that the employer or plan administrator has not been relieved of such
obligations by regulation or otherwise by the PBGC; there does not exist with
respect to any Covered Plan any accumulated funding deficiency within the
meaning of Section 412 of the Code nor has there been issued either a variance
or a waiver of the minimum funding standards imposed by the Code with respect
to any Covered Plan, nor are there any excise taxes due or hereafter to become
due under Section 4971 of the Code with respect to the funding of any covered
Plan for any plan year or fiscal period ending prior to the date hereof; except
as described on Schedule 3.5, no Covered Plan to which Section 4021 of ERISA
applies has been terminated or, if such termination has occurred, the
requirements of ERISA Sections 4041 and 4044 have been satisfied and the
Internal Revenue Service has issued a letter of determination that the Covered
Plan met the requirements of Code Section 401(a) at the time of such
termination; no Covered Plan has incurred any liability to the PBGC under
Sections 4062, 4063 or 4064 of ERISA which has not been satisfied or
discharged; and, to the best knowledge of the Borrower or any Guarantor, no
Covered Plan has engaged in any Prohibited Transaction. Except as described on
Schedule 3.5, none of the Borrower, any Guarantor or any ERISA
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Affiliate has withdrawn from any Multiemployer Plan or incurred any withdrawal
liability within the meaning of Section 4201 of ERISA which has not been fully
satisfied. As of the date hereof, except as described on Schedule 3.5, there
are no actual or potential withdrawal liability payments for withdrawals that
have occurred, as determined in accordance with Title IV of ERISA, by the
Borrower, any Guarantor or any ERISA Affiliate with respect to all
Multiemployer Plans. Except as described on Schedule 3.5, as of the date of
this Agreement, none of the Borrower, any Guarantor or any ERISA Affiliate has
established or maintained any Plan or arrangement which provides
post-employment welfare benefits or coverage (other than (i) severance benefits
or (ii) health care benefits as required pursuant to Section 4980B of the
Code). Except as described on Schedule 3.5, as of the date of this Agreement,
none of the Borrower, any Guarantor or any ERISA Affiliate has ever
established, maintained or contributed to, or has any liability, actual or
contingent, with respect to, a Plan subject to Title IV of ERISA. The
Borrower, each Guarantor and each ERISA Affiliate has, as of the date of this
Agreement, made all contributions or payments to or under each such Plan
required by law or the terms of such Plan.
3.6 FINANCIAL STATEMENTS. Except as set forth on Schedule 3.6,
--------------------
the unaudited consolidated financial statements of the Borrower and its
Subsidiaries as of and for the fiscal years ending December 31, 1992 and
December 31, 1991, consisting in each case of a balance sheet, a statement of
operations, a statement of shareholders' equity, a statement of cash flows and
accompanying footnotes, and the interim unaudited consolidated financial
statements of the Borrower and its Subsidiaries as of September 30, 1993 and
September 30, 1992 furnished to the Lender in connection herewith (the
"FINANCIAL STATEMENTS"), present fairly, in all material respects, the
financial position, results of operations and cash flows of the Borrower and
its Subsidiaries as of the dates and for the periods referred to, in conformity
with Generally Accepted Accounting Principles (subject, in the case of interim
statements, to changes resulting from audits and year-end adjustments). There
are no liabilities, fixed or contingent, which are not reflected in such
financial statements, other than liabilities which are not required to be
reflected in such balance sheets and which do not have a material impact on the
financial statements taken as a whole. Other than the commencement of the
Case, entry of the order for relief therein or as otherwise disclosed to the
Lender in writing, there has been no material adverse change in the business,
operations or assets or condition (financial or otherwise) of the Borrower or
any of the Guarantors since September 30, 1993. The Schedule of Position on
Contracts, Bonded and Unbonded, as of September 30, 1993 as to the Borrower and
each of its Subsidiaries provided by the Borrower to the Lender is true,
complete and correct in all material respects as of the date thereof (subject
to changes resulting from audits and annual and quarterly adjustments). The
management of the Borrower believes that the fiscal year 1994-1997 projections
of the consolidated and consolidating balance sheet, consolidated statement of
income and consolidated statement of cash flow for the Borrower and its
Subsidiaries dated January 25, 1994 (the "FINANCIAL PROJECTIONS") are
presented on a basis consistent with Generally Accepted Accounting Principles
as applied to the historical financial statements of the Borrower and its
Subsidiaries and, to the knowledge of the Borrower and based upon the
assumptions attached thereto, presents fairly, in all material respects, the
anticipated balance sheet, income and cash flow of the Borrower and its
Subsidiaries as of the dates and for the periods referred to therein.
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3.7 USE OF PROCEEDS. The proceeds of the loans shall be used
---------------
only (i) for general working capital of the Borrower (including the payment of
administrative expenses in the Case, not in excess of $1,000,000, consisting of
fees and expenses of attorneys, financial advisor and accountants of the
Borrower and an amount not in excess of $500,000, consisting of fees and
expenses of professionals appointed to represent the statutory committee of
unsecured creditors to be appointed in the Case) (ii) to fund loans giving rise
to Intercompany Debt to be made by the Borrower to the Guarantors to the extent
permitted by Section 7.2(j), which Intercompany Debt shall be used by the
Guarantors for general working capital and to fund loans giving rise to
Intercompany Debt to be made by the Guarantors to Subsidiaries to the extent
permitted by Section 7.2(j) and (iii) to pay fees and expenses incurred in
connection with the Loan Documents. In no event shall the proceeds of any Loan
be used by the Borrower to provide loans or other distributions to any Excluded
Subsidiary or to any Subsidiary that is not Solvent at the time of such loan or
distribution from the Borrower.
3.8 NOT IN DEFAULT. No Event of Default or Potential Default
--------------
under any Loan Document has occurred and is continuing.
3.9 TAXES. Except as set forth on Schedule 3.9, the Borrower
-----
and each Subsidiary (other than a Bankrupt Subsidiary) has filed all federal,
state, local and foreign tax returns and reports which it is required by law to
file and has paid all taxes, including wage taxes, assessments, withholdings
and other governmental charges which are presently due and payable (other than
those being contested in good faith by appropriate proceedings). The tax
charges, accruals and reserves reflected on the Financial Statements relating
to taxes that have accrued but are not presently due and payable are in
accordance with Generally Accepted Accounting Principles. The Borrower is a
member of an affiliated group of corporations filing consolidated returns for
United States federal income tax purposes, and is the "common parent" of such
group.
3.10 PERMITS, LICENSES, ETC. The Borrower and each Material
----------------------
Guarantor and Core Collateral Subsidiary possesses all permits, licenses,
franchises, trademarks, trade names, copyrights and patents necessary to the
conduct of its business as presently conducted or as presently proposed to be
conducted, except where the failure to possess the same is not likely to have a
material effect on the financial condition, operations or assets of the
Borrower, any Material Guarantor or Core Collateral Subsidiary or the Borrower
and its Subsidiaries taken as a whole.
3.11 COMPLIANCE WITH LAWS.
--------------------
(a) Except as set forth on Schedule 3.11 hereto, the Borrower and
each Material Guarantor or Core Collateral Subsidiary is in compliance in all
material respects with all Regulations applicable to its business (including
obtaining all authorizations, consents, approvals, orders, licenses, exemptions
from, and making all filings or registrations or qualifications with, any court
or governmental department, public body or authority, commission, board,
bureau, agency, or instrumentality), the noncompliance with which is likely to
have a material adverse effect on the business, operations, assets or condition
(financial or otherwise)
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of the Borrower, any Material Guarantor or Core Collateral Subsidiary or the
Borrower and its Subsidiaries taken as a whole.
(b) Except as set forth on Schedule 3.11 hereto, the Borrower and
each Subsidiary has obtained all permits, licenses and other authorizations
required under any Regulation relating to pollution or protection of the
environment, including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes into the environment (including,
without limitation, ambient air, surface water, groundwater, or land), or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
except where the failure to possess the same is not likely to have a material
adverse effect on the business, operations, assets or condition (financial or
otherwise) of the Borrower, any Material Guarantor or Core Collateral
Subsidiary or the Borrower and its Subsidiaries taken as a whole. Except as
set forth on Schedule 3.11 hereto, the Borrower and each Subsidiary is in
compliance in all material respects with all terms and conditions of the
required permits, licenses and authorizations, and is also in compliance in all
respects with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
any Regulation, order, decree, judgment, injunction, notice or demand letter
issued, entered, promulgated or approved thereunder which has the force of law,
the failure to comply with which is likely to have a material adverse effect on
the business, operations, assets or conditions (financial or otherwise) of the
Borrower, any Material Guarantor or Core Collateral Subsidiary or the Borrower
and its Subsidiaries taken as a whole. Except as described on Schedule 3.11
hereto the Borrower is not aware of, nor has received written notice of, any
past or present events, conditions, circumstances, activities, practices,
incidents or actions which may interfere with or prevent compliance or
continued compliance with those laws or with any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder which has the force of law, or which may
give rise to any common law or legal liability, or otherwise form the basis of
any claim, action, demand, suit, proceeding, hearing, study or investigation,
based on or related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling, or the emission,
discharge, release or threatened release into the environment, of any
pollutant, contaminant, chemical, or industrial, toxic or hazardous substance
or waste, except where such events, conditions, circumstances, activities,
practices, incidents or actions are not likely to have a material adverse
effect on the business, operations, assets or condition (financial or
otherwise) of the Borrower, any Material Guarantor or Core Collateral
Subsidiary or the Borrower and its Subsidiaries taken as a whole.
3.12 AMOUNTS OWED TO OR FROM AFFILIATES; INTERCOMPANY
-------------------------------------------------
AGREEMENTS.
- - - - - - - - - ----------
(a) AFFILIATES. Except as disclosed on Schedule 3.12, as of
December 31, 1993, there is not outstanding and unpaid any debt, loan, advance,
guaranty or investment (i) by the Borrower or any Guarantor to or for the
benefit of any Affiliate or (ii) to the Borrower or any Guarantor from any
Affiliate (collectively, "INTERCOMPANY DEBT") and Schedule 3.12 further
sets forth the amount of Intercompany Debt of the Software House Subsidiaries
as of February 13,
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<PAGE>
1994, and since September 30, 1993, there has not been paid by the Borrower or
any Guarantor to or for the benefit of any Affiliate any amount for management,
administrative, operational, consulting, brokerage or other services other than
services provided in the ordinary course of business on terms that could be
obtained on an arm's-length basis with a Person that is not an Affiliate and
other than compensation paid to officers and directors of the Borrower and of
the Subsidiaries in the ordinary course of business. None of the Borrower and
the Guarantors has prepaid to or for the benefit of any Affiliate any
Intercompany Debt or amount for management, administrative, operational,
consulting, brokerage or other services. All Intercompany Debt owing to the
Borrower or any Guarantor from any Affiliate is evidenced by an Intercompany
Note.
(b) INTERCOMPANY AGREEMENTS. Except as disclosed on Schedule
3.12 hereto as of the date of this Agreement, there are no agreements between
the Borrower or any Guarantor and any Affiliate relating to the extension of
any funds to the Borrower or any Guarantor, the sharing of any costs among the
Borrower, the Guarantors and any Affiliate or the provision of any management,
administrative, operational, consulting, brokerage or other services to the
Borrower or any Guarantor ("INTERCOMPANY AGREEMENTS").
(c) DIVIDENDS. Except as disclosed on Schedule 3.12 hereto,
during the period from September 30 1993 through the date of this Agreement,
neither the Borrower, any Guarantor nor any Core Collateral Subsidiary declared
or paid any dividend on, or purchased, redeemed, retired or otherwise acquired
for value, any of the Borrower's, Guarantor's or Core Collateral Subsidiaries'
capital stock then outstanding, returned any capital stock to its stockholders,
or made any distribution with respect to its shares, whether in cash, property
or obligations, except to the Borrower and the Guarantors.
3.13 TITLE TO ASSETS. The Borrower, each Guarantor and each
---------------
Core Collateral Subsidiary has good and marketable title to all of its
properties and assets, free and clear of all Liens, other than Permitted Liens.
3.14 INSURANCE AND SURETY BONDS. The Borrower and each
--------------------------
Subsidiary (other than a Bankrupt Subsidiary) have at their own cost and
expense obtained in commercially reasonable kind and form and with reputable
insurers, all risk of physical loss or damage insurance covering the assets of
the Borrower and its Subsidiaries wherever the same may be located, insuring
against the risks of fire, explosion, theft and such other risks as are
prudently insured against by corporations engaged in the same business and
similarly situated with the Borrower and its Subsidiaries (and specifically
including vandalism, malicious mischief coverage, loss overboard and breakage),
in an amount usually carried by corporations engaged in the same business and
similarly situated with the Borrower and its Subsidiaries. Set forth on
Schedule 3.14 is a complete and correct list, as of December 31, 1993, of the
"backlog" of those contracts of the Borrower and the Subsidiaries then subject
to bonding. Except as set forth on Schedule 3.14 and other than the
obligations of the principal of all bonds relating to contracts of the Borrower
and the Subsidiaries, the guaranty by the Borrower of the obligations of the
Subsidiary thereunder and the liability of any Excluded Subsidiary under any
letters of credit issued in support thereof, there are no letters of credit or
other financial accommodations securing the Borrower's or any
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Subsidiary's obligations under such bonds. To the knowledge of the Borrower,
St. Paul Seaboard ("Seaboard"), Cigna, or comparable successor bonding
companies, are making available to the Borrower and its Subsidiaries
performance and payment bonds required for the conduct in the ordinary course
of business of the Borrower and the Subsidiaries.
3.15 SUBSIDIARIES, ETC. Set forth in Schedule 3.15 hereto is a
------------------
complete and correct list, as of the date of this Agreement, of all
Subsidiaries (including, as to each Guarantor, its respective jurisdiction of
incorporation and the location of its chief executive office), and of all
Investments held by the Borrower and any of the Guarantors in any joint venture
or other Person, other than joint ventures or similar pooling of efforts in
respect of a specific project or series of related specific projects for a
limited or fixed duration to conduct a business of the type in which the
Borrower or such Guarantor is presently engaged consistent with past practice
("JOINT VENTURES"). Except as disclosed in Schedule 3.15 hereto, as of the
date hereof, the Borrower owns, directly or through a Subsidiary, free and
clear of Liens, all outstanding shares of each Subsidiary (including without
limitation each Guarantor) and all such shares are validly issued, fully paid
and non-assessable other than in the case of New York corporations under
Section 630 of the New York Business Corporation Law, and the Borrower (or the
respective Subsidiary) also owns, free and clear of Liens, all such
Investments. Schedule 3.15 also sets forth as to each Subsidiary the number of
shares of each class of such capital stock issued and outstanding and held in
treasury and the record and beneficial owners of all such issued and
outstanding shares. Except as set forth on Schedule 3.15, all of the issued
and outstanding shares of capital stock of each Subsidiary have been duly
authorized and validly issued and are fully paid and nonassessable other than,
in the case of New York corporations, under Section 630 of the New York
Business Corporation Law and held free and clear of all Liens whatsoever, and
there are no outstanding subscriptions, options, warrants, calls, conversion or
exchange rights, commitments or agreements of any character obligating any
Subsidiary to issue, deliver or sell additional shares of its capital stock of
any class or any securities convertible into or exchangeable for any such
capital stock. Except as described on Schedule 3.15, the pledge by the
Borrower or any Subsidiary of the capital stock of any Subsidiary, and the
granting by any Subsidiary of a guaranty of the Obligations, which guaranty
would be secured by a lien upon its assets, does not and under present law
will not require any consent or approval of the Borrower's or any Subsidiary's
shareholders or any person (other than entry of the DIP Financing Order and
consents of shareholders obtained prior to the date hereof), does not and under
present law will not violate any law, rule, regulation order, writ, judgment,
injunction, decree, determination or award, does not violate any provision of
the charter or by-laws of the Borrower or any Subsidiary and does not and will
not result in any breach of any material agreement, lease or instrument to
which the Borrower or any Subsidiary is a party, by which it is bound or to
which any of its assets are or may be subject. Each Bankrupt Subsidiary is
currently in a chapter 7 proceeding under the Bankruptcy Code or similar
liquidation proceeding, or is a company whose sole asset is the capital stock
of a company in such a proceeding. Each Subsidiary that is not a Guarantor, an
Excluded Subsidiary, a Software House Subsidiary or a Bankrupt Subsidiary has
total assets, computed in accordance with Generally Accepted Accounting
Principles, not in excess of $200,000 or, in the case of Defender Indemnity,
Ltd., has assets consisting solely of claims against the Borrower.
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3.16 PATENTS, TRADEMARKS, ETC. The Borrower and each
------------------------
Material Guarantor and Core Collateral Subsidiary owns or possesses all
patents, patent rights or licenses, patent applications, trademarks, trademark
rights, trade names, trade name rights, copyrights and rights with respect to
the foregoing which are required to conduct its business as now and presently
planned to be conducted without known conflict with the rights of others, and
Schedule 3.16 lists all patents and trademarks owned by the Borrower and any
Material Guarantor and Core Collateral Subsidiary, indicating the owner
thereof.
3.17 ACCOUNTS. The Accounts of the Borrower and each Material
--------
Guarantor and Core Collateral Subsidiary are bona fide Accounts created in the
ordinary course of business. The reserves for non-payment of the Accounts
reflected on the Financial Statements are in accordance with Generally Accepted
Account Principles.
3.18 INVENTORY.
---------
(i) Condition. All Inventory of the Borrower and each
---------
Material Guarantor and Core Collateral Subsidiary is in
substantially good condition, meets all material standards imposed
by any governmental agency, or department or division thereof,
having regulatory authority over such goods, their use or sale, and
is currently either usable or salable in the normal course of the
Borrower's or the applicable Material Guarantor's or Core
Collateral Subsidiary's business, except to the extent reserved
against in the Financial Statements or as otherwise disclosed to
the Lender.
(ii) Location. To the best of the Borrower's knowledge,
--------
substantially all Inventory of the Borrower and each Material
Guarantor or Core Collateral Subsidiary is located on the premises
set forth on Schedule 3.15, is Inventory in transit to one of such
locations or is at the site of work currently being performed by
the Borrower or such Material Guarantor or Core Collateral
Subsidiary, except as otherwise disclosed in writing to the Lender.
3.19 EQUIPMENT. Substantially all of the Equipment of the
---------
Borrower and each Material Guarantor and Core Collateral Subsidiary is in good
order and repair in all material respects and is located on the premises set
forth on Schedule 3.15 or is at the site of work currently being performed by
the Borrower or such Material Guarantor or Core Collateral Subsidiary.
3.20 REAL PROPERTY. All real property owned by the Borrower and
-------------
each Material Guarantor and Core Collateral Subsidiary, other than an Excluded
Subsidiary, is described on Schedule 3.20.
3.21 CORPORATE AND FICTITIOUS NAMES. Except as otherwise
------------------------------
disclosed on Schedule 3.15, during the five-year period preceding the date
hereof, none of the Borrower, the Material
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Guarantors nor any predecessor thereof has been known as or used any corporate
or fictitious name other than the respective corporate names of such Persons on
the date hereof.
3.22 DISCLOSURE GENERALLY. The representations and statements
--------------------
made by or on behalf of the Borrower or any Material Guarantor or Core
Collateral Subsidiary in connection with this credit facility and each Loan
hereunder, including representations and statements in each of the Loan
Documents and representations and statements made to the Bankruptcy Court, do
not contain any untrue statement of material fact. To the best of Borrower's
knowledge, no written information, exhibit, report or financial statement
furnished by the Borrower or any Guarantor to the Lender in connection with
this Agreement, the Loans or any Loan Document or to the Bankruptcy Court in
connection with the Case, contains any material misstatement of fact or omits
to state a material fact or any fact necessary to make the statements contained
therein not materially misleading.
IV. SECURITY.
--------
4.1 SECURITY DOCUMENTS. Upon entry of the DIP Financing Order
------------------
and without any further action being required other than filings under the
Uniform Commercial Code of various states and delivery to the Lender of shares
of stock, notes and other securities constituting Collateral to be pledged
pursuant to the terms hereof, the Loan Documents will create and grant to the
Lender a valid, perfected and enforceable security interest in and lien upon
the Collateral, securing the Obligations, which security interest, in the case
of the security interest granted by the Borrower, is a Super-Priority Claim,
and no Person, including without limitation any Person that currently provides
or shall hereafter provide to the Borrower or any Subsidiary payment or
performance bonds, will have any right, title or interest in or to the
Collateral that is, or that shall hereafter be, prior, paramount, superior or
equal to the right, title or interest of the Lender therein or thereto, other
than (i) with respect to Collateral granted by the Borrower, those Liens set
forth as item (a)(3) of Schedule 1.1(b) hereto and (ii) with respect to
Collateral granted by the Guarantors, (a) Liens expressly permitted by Section
7.3 and (b) nothing in this Agreement affects or is intended to affect the
rights, if any, of Persons currently, heretofore or hereafter providing payment
or performance bonds to any Subsidiary. Lender agrees that its liens and Super
Priority Claim shall be subject to a carve-out of a sum, not in excess of
$1,000,000, to secure the payment of fees and expenses of attorneys, financial
advisor and accountants of the Borrower incurred in connection with the Case
and a sum, not in excess of $500,000, to secure the payment of fees and
expenses of professionals appointed to represent the statutory committee of
unsecured creditors to be appointed in the Case.
4.2 RELEASE OF COLLATERAL.
---------------------
(a) Upon the payment in full of the entire principal balance and
all interest in respect of the Note and the payment in full of all other
Obligations, and the termination of the Loan Commitment, the Lender shall
release its lien and security interest in the Collateral and shall do such
things as are reasonably requested by the Borrower and the Guarantors to effect
such release.
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(b) Upon the disposition of any Collateral in compliance with
Section 7.8, such Collateral is hereby released by the Lender from its security
interest, and the Lender shall do such things as are reasonably requested by
the Borrower and such Guarantors to evidence such release. In addition, upon
receipt by the Lender of evidence that any liability directly relating to
Collateral disposed in compliance with Section 7.8, other than a Permitted
Disposition, is then currently due and payable but was not deducted from the
proceeds of such disposition to determine Net Cash Proceeds, the Borrower shall
release funds equal to the amount of such liability, not in excess of the Net
Cash Proceeds of such disposition, from the Cash Collateral Account.
(c) All costs (including attorneys' fees) of the preparation,
execution and filing of any documents or the taking of any steps to release or
terminate such security interests shall be for the account of the Borrower and
shall be included in the Obligations.
V. CONDITIONS PRECEDENT.
--------------------
5.1 CONDITIONS TO FIRST LOAN. The obligation of the Lender to
------------------------
make the first Loan hereunder is conditioned upon the following:
(a) ARTICLES, BYLAWS. The Lender shall have received copies
of the Articles or Certificates of Incorporation (or in the case of any foreign
company, other equivalent document) and Bylaws (or in the case of any foreign
company, other equivalent document) of the Borrower and each Guarantor,
certified by the secretary or assistant secretary of the Borrower.
(b) EVIDENCE OF AUTHORIZATION. The Lender shall have
received certified copies of all corporate or other action taken by each Person
other than the Lender who is a party to any Loan Document to authorize its
execution and delivery and performance of the Loan Documents and to authorize
the Loans hereunder, together with such other related papers as the Lender
shall reasonably require.
(c) LEGAL OPINIONS. The Lender shall have received a
favorable written opinion of Stroock & Stroock & Lavan, counsel for the
Borrower, and the General Counsel of the Borrower who shall have acted as
counsel for the Guarantors, which shall be addressed to the Lender and be dated
the date of the first Loan, in substantially the form attached as Exhibit H
hereto, and such other legal opinion or opinions as the Lender may reasonably
request.
(d) INCUMBENCY. The Lender shall have received a certificate
signed by the secretary or assistant secretary of each corporate signatory to
the Loan Documents other than the Lender, together with the true signature of
the officer or officers authorized to execute and deliver the Loan Documents
and certificates thereunder, upon which the Lender shall be entitled to rely
conclusively until the Lender shall have received a further certificate of the
appropriate secretary or assistant secretary amending the prior certificate and
submitting the signature of the officer or officers named in the new
certificate as being authorized to execute and deliver Loan Documents and
certificates thereunder.
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<PAGE>
(e) NOTE. The Lender shall have received an executed Note
payable to the order of the Lender and otherwise in the form of Exhibit F
hereto. In addition, the Lender shall have received all certificates,
instruments and other documents then required to be delivered pursuant to any
Loan Documents, in each instance in form and substance reasonably satisfactory
to the Lender.
(f) CONVERSION OF THE CASE. The Lender shall have received a
certified copy of the order of the Bankruptcy Court converting the case to a
chapter 11 proceeding as well as evidence acceptable to the Lender that neither
the Bank Group nor the Insurance Group shall have abandoned support for a
Reorganization Plan in substantially in the form of Exhibit I, with such
changes as are not in any significant respect adverse to the Lender, either as
Lender hereunder or as holder of debt securities of the Borrower (or such other
evidence of support of the Reorganization Plan as may be acceptable to the
Lender).
(g) INITIAL DIP FINANCING ORDER. The Lender shall have
received a certified copy of the Initial DIP Financing Order that shall have
been entered by the Bankruptcy Court, which Initial DIP Financing Order and the
making of the first Loan, shall not be subject to any stay pending appeal.
(h) CONSENTS. The Borrower shall have provided to the Lender
evidence satisfactory to the Lender that, in addition to the Initial DIP
Financing Order, all governmental, shareholder and third party consents and
approvals necessary in connection with the transactions contemplated hereby, if
any, have been obtained and remain in effect.
(i) CHANGE. Except as disclosed on Schedule 5.1 hereto, no
material adverse change shall have occurred in the financial condition, cash
flows or operations, including backlog, of the Borrower and its Subsidiaries
taken as a whole since September 30, 1993, other than any change falling within
a ten percent (10%) variance of the financial condition, cash flow or
operations expressly contemplated by the Financial Projections.
(j) CONTINUED BONDING. Seaboard and Cigna, or any comparable
successor bonding companies, are making available to the Borrower and its
Subsidiaries performance and payment bonds required for the conduct in the
ordinary course of business of the Borrower and the Subsidiaries.
(k) OTHER AGREEMENTS. The Borrower and the Guarantors shall
have executed and delivered all Loan Document required hereunder, including the
Pledge and Security Agreement and the Guarantor Security Agreements. The
Borrower and the Concentration Bank shall have executed and delivered the
Depository Agreement.
(l) ABSENCE OF DEFAULTS. No default by any Material
Guarantor or Core Collateral Subsidiary under any existing material agreements
shall exist or occur as a result of consummation of the transactions
contemplated hereby, other than as a result of the involuntary
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<PAGE>
bankruptcy proceeding initiated against the Borrower or the conversion by the
Borrower of such proceeding to a voluntary chapter 11 proceeding.
(m) DOCUMENTS. The Borrower shall have delivered and the
Lender shall have received a request for a Loan, as provided in Sections 2.1
and 2.3.
(n) INSPECTION AND MANAGEMENT RIGHTS. The Borrower shall
have executed and delivered a letter agreement granting to the Lender certain
inspection and management rights in substantially the form of Exhibit J hereto.
(o) CONCENTRATION ACCOUNTS. The Borrower shall have provided
to the Lender evidence satisfactory to the Lender that the Concentration
Accounts are established in the name of the Borrower in compliance with Section
2.8(c) hereof.
5.2 ALL LOANS SUBSEQUENT TO THE FIRST LOAN. The obligation of the
Lender to make any Loan after the first Loan is conditioned upon the following:
(a) DOCUMENTS. The Borrower shall have delivered and the
Lender shall have received a request for a Loan, as provided in Sections 2.1
and 2.3.
(b) COVENANTS; REPRESENTATIONS. Each Person that is a party
thereto other than the Lender shall be in compliance in all material respects
with all covenants, agreements and conditions in each Loan Document and each
representation and warranty contained in each Loan Document shall be true with
the same effect as if such representation or warranty had been made on the date
such Loan is made, except that any such representation or warranty that relates
to a specific date shall be correct as of such date. Also, the Lender shall
have received a certificate dated the date of the Loan signed by the chief
executive officer, Senior Vice President and Treasurer or Senior Vice
President-Finance of the Borrower to the foregoing effect.
(c) DEFAULTS. After giving effect to such transaction, no
Event of Default or Potential Default shall exist.
(d) DIP FINANCING ORDER. Neither the Initial DIP Financing
Order entered prior to the first Loan hereunder nor the form of Reorganization
Plan filed by the Borrower as provided in Section 6.11 below shall have been
modified, amended or reversed in any significant respect adverse to the Lender,
either as Lender or as holder of debt securities of the Borrower, without the
written consent of the Lender. In addition, the Bankruptcy Court shall have
entered the DIP Financing Order after 15 days' notice as required by Bankruptcy
Rule 4001(c)(2), which order, and the making of which Loans, shall not be
subject to any stay pending appeal.
(e) LEGAL PROCEEDINGS. The Lender shall be satisfied that,
in its reasonable judgment, there is no (i) injunction, stay, decree or order
issued by any court or arbitrator or any governmental body, agency or official
or (ii) action, suit or proceeding pending against or affecting, the Borrower
or any Material Guarantor or Core Collateral Subsidiary before any court
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<PAGE>
or arbitrator or any governmental body, agency or official in which there is a
reasonable likelihood of an adverse decision, and, in either case, which in any
manner draws into question the validity of any of the Loan Documents, the
transactions contemplated hereby and thereby or either of the Initial DIP
Financing Order or the DIP Financing Order or which could materially adversely
affect the ability of the Borrower or any Material Guarantor or Core Collateral
Subsidiary to perform any of their obligations hereunder and thereunder.
(f) FILING OF REORGANIZATION PLAN. The Borrower shall have
filed with the Bankruptcy Court the pre-arranged Reorganization Plan in the
form of Exhibit I, with such changes as are not in any significant respect
adverse to the Lender, either as a Lender hereunder or as a holder of debt
securities of the Borrower, together with the Borrower's Disclosure Statement
which shall be in form and substance satisfactory to the Lender.
(g) CONTINUED BONDING. Seaboard and Cigna, or any comparable
successor bonding companies, are making available to the Borrower and its
Subsidiaries performance and payment bonds required for the conduct in the
ordinary course of business of the Borrower and the Subsidiaries.
(h) ABSENCE OF DEFAULTS. No default by any Material
Guarantor or Core Collateral Subsidiary under any existing material agreements
shall exist or occur as a result of consummation of the transactions
contemplated hereby, other than as a result of the involuntary bankruptcy
proceeding initiated against the Borrower or the conversion by the Borrower of
such proceeding to a voluntary chapter 11 proceeding.
(i) SUPPORT FOR REORGANIZATION PLAN. Neither the Bank Group
nor the Insurance Group shall have abandoned support for a Reorganization Plan
in the form of Exhibit I, with such changes as are not in any significant
respect adverse to the Lender, either as Lender hereunder or as holder of debt
securities of the Borrower.
VI. AFFIRMATIVE COVENANTS
---------------------
The Borrower covenants and agrees that, without the prior written consent
of the Lender, from and after the date hereof and so long as the Loan
Commitments are in effect or any Obligations remain unpaid or outstanding, the
Borrower, and, where applicable, each Subsidiary (including each Guarantor but
excluding each Bankrupt Subsidiary) will:
6.1 FINANCIAL STATEMENTS AND REPORTS. Prepare, maintain and
--------------------------------
furnish to the Lender the following financial information, except that the
information required by subsections (a)(ii), (a)(iv), (b), (c), (e), (g) and
(h) hereof shall be furnished to the Lender only upon request:
(a) MONTHLY REPORTS. Within thirty (30) calendar days after
the end of each month other than the third month of each fiscal quarter, and
within forty-five (45) calendar days after the end of the third month of each
fiscal quarter, (i) a consolidated balance sheet of the Borrower and the
Subsidiaries and related consolidated statements of operations, shareholders'
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equity and cash flow for such month and for the period from the beginning of
the fiscal year to the end of such month, along with consolidating information
(subject to changes resulting from audits and annual and quarterly
adjustments), (ii) a summary aging of Accounts of the Borrower and each
Subsidiary as of the end of such prior month (subject to changes resulting from
audits and annual and quarterly adjustments), (iii) a report as to backlog
amounts and work-in-progress of all then existing contracts of greater than
$1,000,000 of the Borrower and each Subsidiary as of the end of such prior
month (subject to changes resulting from audits and annual and quarterly
adjustments), and (iv) a report, to the knowledge of the Company, as to the
contracts of the Borrower and each Subsidiary subject to bonding, the status of
claims made under any existing bonds and the contracts any existing bonding
company has declined to bond, in each case as of the end of such prior month,
in each case certified by the Senior Vice President and Treasurer or Senior
Vice President-Finance of the Borrower. In addition, the Borrower will file
with the Bankruptcy Court the information included in clauses (i) and (iii)
above at the time such information is furnished to the Lender.
(b) QUARTERLY STATEMENTS. As soon as available but no later
than forty-five (45) calendar days after the end of each fiscal quarter of each
fiscal year, other than the fourth quarter of each fiscal year, a consolidated
balance sheet of the Borrower and the Subsidiaries and related consolidated
statements of operations, shareholders' equity and cash flows for such
quarterly period and for the period from the beginning of such fiscal year to
the end of such fiscal quarter and a corresponding financial statement for the
same periods in the preceding fiscal year certified by the Senior Vice
President and Treasurer or Senior Vice President-Finance of the Borrower as
having been prepared in accordance with Generally Accepted Accounting
Principles (subject to changes resulting from audits and year-end adjustments).
(c) ANNUAL STATEMENTS. As soon as available but no later than
ninety days after the end of each fiscal year, a balance sheet of the Borrower
and the Subsidiaries as of the end of such year and the prior year in
comparative form, and related statements of operations, shareholders' equity,
and cash flows for the Borrower and the Subsidiaries for the fiscal year and
the prior fiscal year in comparative form. The financial statements shall be
on a consolidated basis and shall include consolidating information. The
financial statements shall be in reasonable detail with appropriate notes and
be prepared in accordance with Generally Accepted Accounting Principles. The
annual financial statements (other than the consolidating information) shall be
certified by independent public accountants of the Borrower, if any, and, if
none, by the Senior Vice President and Treasurer or the Senior Vice
President-Finance and shall be accompanied by a report of such independent
certified public accountants (if other than consolidating information), if any,
or such Senior Vice President and Treasurer or the Senior Vice
President-Finance (if there are no such independent certified public
accountants) stating that, in the opinion of such accountants or officer,
respectively, such financial statements present fairly, in all material
respects, the financial position, and the results of operations and the cash
flows of the Borrower and the Subsidiaries for the period then ended in
conformity with Generally Accepted Accounting Principles, and that the
examination by such accountants, if any, of such financial statements has been
made in accordance with generally accepted auditing standards and accordingly
and to the extent of any such examination, the examination included, on a test
basis, evidence supporting
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the amounts and disclosures in the financial statements and assessing the
accounting principles used and significant estimates made, as well as
evaluating the overall financial statement presentation. Each financial
statement prepared under this subsection (c) (other than the consolidating
financial statements) shall be accompanied by a certificate signed by such
accountants, if any, and, if none, by the Senior Vice President and Treasurer
or Senior Vice President-Finance, either stating that nothing has come to their
attention which would cause them to believe that any event has occurred and is
continuing which constitutes an Event of Default or Potential Default, or
describing each such event. In addition to the annual financial statements,
the Borrower shall, upon request, furnish to the Lender a copy of each other
report submitted to the board of directors of the Borrower by its independent
accountants, if any, in connection with any annual, interim or special audit
made by them of the financial records of the Borrower or any of the
Subsidiaries.
(d) NO DEFAULT. Within thirty (30) calendar days after the
end of each month, a certificate signed by the Senior Vice President and
Treasurer or the Senior Vice President-Finance of the Borrower certifying that,
to the best of such officer's knowledge, after due inquiry, (i) the Borrower
and the Guarantors have complied with all covenants, agreements and conditions
in each Loan Document and (ii) no event has occurred and is continuing which
constitutes an Event of Default or Potential Default, or describing each such
event and the remedial steps being taken by the Borrower.
(e) ERISA. All reports and forms filed with respect to all
Plans, except as filed in the normal course of business and that would not
result in an adverse action to be taken under ERISA, and details of related
information of a Reportable Event.
(f) NET CASH PROCEEDS. Promptly upon receipt of Net Cash
Proceeds, a certificate of the Senior Vice President and Treasurer or the
Senior Vice President-Finance of the Borrower setting forth the details of the
transaction giving rise to such Net Cash Proceeds, the details of the
calculation of the Net Cash Proceeds and the source thereof. In addition, the
Borrower will file with the Bankruptcy Court the information included in such
certificate at the time such information is furnished to the Lender.
(g) MATERIAL CHANGES. Promptly upon its occurrence,
notification of any litigation, administrative proceeding, investigation,
business development (relating particularly to the Borrower or any of its
Subsidiaries and not generally to economic conditions or the industry in which
they are engaged), or change in financial condition as to which the Borrower
has knowledge which could reasonably be expected to have a material adverse
effect on the business, operations, including backlog, cash flows, assets or
condition (financial or otherwise) of the Borrower, any Material Guarantor or
Core Collateral Subsidiary, or of the Borrower and its Subsidiaries taken as a
whole.
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(h) OTHER INFORMATION. Such other information and reports
regarding the operations, business affairs, prospects and financial condition
of the Borrower, any Guarantor or any Subsidiary as the Lender may reasonably
request, including shareholder and Securities and Exchange Commission notices,
reports and filings and any material press release.
6.2 TAXES AND OTHER CHARGES. Pay or cause to be paid after
-----------------------
notice that the same are due all taxes, assessments and governmental charges
imposed upon the Borrower and its Subsidiaries (other than Bankrupt
Subsidiaries) or the assets of any of the Borrower or the Subsidiaries (other
than Bankrupt Subsidiaries) or which the Borrower and its Subsidiaries are
required to withhold and pay over, except (a) as may be contested in good faith
by the Borrower or its Subsidiaries (other than Bankrupt Subsidiaries) by
appropriate proceedings and (b) estimated taxes of the type disclosed on
Schedule 3.9, in each case for which reserves in accordance with Generally
Accepted Accounting Principles have been established by the Borrower or such
Subsidiary as reflected in the Borrower's or such Subsidiary's financial
statements.
6.3 CORPORATE EXISTENCE. Preserve its corporate existence and
-------------------
material franchises, licenses, patents, copyrights, trademarks and trade names
consistent with good business practice, to the extent required to continue to
comply with the representations and warranties of Section 3.1.
6.4 COMPLIANCE WITH ERISA. Maintain each Covered Plan in
---------------------
compliance in all material respects with all applicable requirements of ERISA
and the Code, including all applicable rulings and regulations under ERISA and
the Code. As soon as practicable and, in any event, within 10 days after the
Borrower, any Guarantor or any ERISA Affiliate knows, or has reason to know,
that:
(a) any Termination Event with respect to a Pension Plan (other
than a Multiemployer Plan) has occurred or will occur; or
(b) the Borrower, any Guarantor or any ERISA Affiliate has
applied for a waiver of the minimum funding standard under Section 412 of
the Code with respect to a Pension Plan; or
(c) the aggregate amount of the Unfunded Pension Liabilities
under all Pension Plans (other than Multiemployer Plans) has increased to
an amount in excess of $1,000,000; or
(d) the aggregate amount of Unrecognized Retiree Welfare
Liability under all applicable Plans has increased to an amount in excess
of $1,000,000; or
(e) the Borrower, any Guarantor or any ERISA Affiliate has
engaged in a Prohibited Transaction with respect to a Plan; or
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(f) there is a partial or complete withdrawal (as described in
ERISA Section 4203 or 4205) by the Borrower, any Guarantor or any ERISA
Affiliate from a Multiemployer Plan; or
(g) the Borrower, any Guarantor or any ERISA Affiliate is in
"default" (as defined in ERISA Section 4219(c)(5)) with respect to
payments to a Multiemployer Plan by reason of its complete or partial
withdrawal from such Multiemployer Plan; or
(h) a Multiemployer Plan terminates or is in "reorganization" (as
described in Code Section 418 or Title IV or ERISA); or
(i) the actual withdrawal liability that has been assessed (as
determined in accordance with Title IV or ERISA) against the Borrower,
any Guarantor or any ERISA Affiliate with respect to all Multiemployer
Plans has, in any year, increased to an amount in excess of $1,000,000;
or
(j) there is an action brought against the Borrower, any
Guarantor or any ERISA Affiliate under ERISA Section 502 with respect to
its failure to comply with ERISA Section 515;
the Borrower shall prepare and, upon request of the Lender, furnish or cause to
be furnished to the Lender, a notice of such event.
Any notice required hereunder shall include a certificate addressed to
the Lender and signed by the Senior Vice President and Treasurer or the Senior
Vice President-Finance of the Borrower, setting forth all pertinent details
relating to the events described in such notice is based and the action which
is proposed to be taken with respect thereto.
6.5 COMPLIANCE WITH REGULATIONS. Comply in all material
----------------------------
respects with all Regulations applicable to its business, the noncompliance
with which is reasonably likely to have a material adverse effect on the
business, operations, assets or condition (financial or otherwise) of Borrower,
any Material Guarantor or Core Collateral Subsidiary, or the Borrower and its
Subsidiaries taken as a whole.
6.6 NOTICE OF EVENTS. Promptly upon discovery by the Borrower
----------------
or any officer of the Borrower of any of the events described in subsections
(a) through (e) hereof other than as a result of the involuntary bankruptcy
proceeding initiated against the Borrower or conversion by the Borrower of such
proceeding to a voluntary chapter 11 proceeding, the Borrower shall deliver to
Carol A. Smith (or to such other person as Ms. Smith shall indicate to the
Borrower in writing) telephone notice, and within three (3) calendar days of
such telephone notice deliver to the Lender and, if required by the Lender,
shall file with the Bankruptcy Court, a written notice, which describes the
event and all action the Borrower proposes to take with respect thereto:
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(a) an Event of Default or Potential Default under this
Agreement;
(b) any default or event of default under a contract or contracts
which default or event of default (i) involves payments by the Borrower
or any Subsidiary in an aggregate amount equal to or in excess of
$5,000,000 or (ii) is reasonably likely to result in the loss by the
Borrower or any Subsidiary of the right to receive payments otherwise
owing to the Borrower or such Subsidiary in an aggregate amount equal to
or in excess of $5,000,000;
(c) failure by a Material Guarantor to comply with its obligation
to remit funds received to a Depository Account for transfer to a
Concentration Account in accordance with Section 2.8(c);
(d) the entry of any default judgment, order, stipulated judgment
or order or settlement in any suit, action, arbitration, administrative
proceeding, criminal prosecution or governmental investigation involving
the Borrower or any Material Guarantor or Core Collateral Subsidiary in
which the amount to be paid by the Borrower or such Material Guarantor or
Core Collateral Subsidiary is at least $1,000,000; or
(e) any change in any Regulation, including, without limitation,
changes in tax laws and regulations, which could reasonably have a
material adverse impact on the ability of the Borrower or any of the
Subsidiaries to perform their obligations under the Loan Documents or a
material adverse effect on the business, operations, assets or condition
(financial or otherwise) of the Borrower, any Material Guarantor or Core
Collateral Subsidiary or the Borrower and its Subsidiaries taken as a
whole.
6.7 MAINTENANCE OF RECORDS; AUDITS. Create and maintain, (a)
------------------------------
on each Business Day, a report as to cash received by the Borrower from each
Subsidiary on the immediately preceding Business Day, the cash provided by the
Borrower to each such Subsidiary on such preceding Business Day, and a
comparison of each such Subsidiary's net cash against such Subsidiary's
forecast provided to the Borrower and (b) within two Business Days after the
end of each week, a summary of the Daily Reports for each day of such preceding
week, and, upon request, provide any or all such reports to the Lender. The
Lender shall have the right to have conducted annually by the Lender or its
designees an audit of the Borrower and the Subsidiaries and all the Borrower's
and the Subsidiaries' books and records, including without limitation an audit
of all books and records relating to the Collateral, provided that such audits
may be conducted more frequently within the reasonable discretion of the
Lender. The Borrower shall bear the expense of such annual audit, and the
Lender shall bear the expense of such audits conducted more frequently than
annually. In addition, the Lender may at any time consult with any director,
authorized officer, employee, agent or representative of the Borrower or, upon
reasonable notice to the Borrower, of any Subsidiary regarding any matter
deemed by the Lender to be material to the transactions contemplated hereby or
the operations of the Borrower or such Subsidiary.
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<PAGE>
6.8 GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. Maintain its
----------------------------------------
books and records at all times in accordance with Generally Accepted Accounting
Principles.
6.9 INFORMATION RELATING TO THE CASE. Furnish to the Lender
--------------------------------
promptly after the same are available copies of all pleadings, motions,
applications, judicial information, financial information and other documents
filed (and not under seal) with the Bankruptcy Court by the Borrower or any
other Person and, upon request by the Lender, any such documents distributed to
any official committee appointed in the Case including without limitation the
monthly operating reports required to be provided to the Bankruptcy Court
pursuant to Rule 2015 of the Federal Rules of Bankruptcy Procedure.
6.10 FILING OF REORGANIZATION PLAN. On or before the date 15
-----------------------------
days following entry by the Bankruptcy Court of the Initial DIP Financing
Order, file with the Bankruptcy Court the pre-arranged Reorganization Plan in
the form of Exhibit I, with such modifications or amendments as are not in any
significant respect adverse to the Lender, either as Lender or as holder of
debt securities of the Borrower, or as to which the Lender shall have consented
in writing, together with the Borrower's Disclosure Statement which shall be in
form and substance satisfactory to the Lender.
6.11 SUBSEQUENT FINANCING. Not later than six months following
--------------------
the initial Loan, provide evidence satisfactory to the Lender that the Borrower
has obtained a written commitment for financing necessary to insure
implementation of the Reorganization Plan, the enforceability of which
commitment is subject only to satisfactory documentation and such other
conditions as shall be reasonably satisfactory to the Lender.
VII.NEGATIVE COVENANTS.
------------------
The Borrower covenants and agrees that, without the prior written consent
of the Lender, from and after the date hereof and so long as the Loan
Commitment is in effect or any Obligations remain unpaid or outstanding,
neither it nor any Subsidiary (including any Guarantor) will:
7.1 MERGER, CONSOLIDATION. Except as otherwise provided in
---------------------
Section 7.8, merge or consolidate with or into any corporation except, if no
Potential Default or Event of Default shall have occurred and be continuing
either immediately prior to or upon the consummation of such transaction, (a) a
Subsidiary that is not a Guarantor may be merged into another Subsidiary that
also is not a Guarantor and (b) a Guarantor may be merged into another
Guarantor.
7.2 INDEBTEDNESS FOR BORROWED MONEY. Incur, create, or permit
-------------------------------
to exist any Indebtedness for Borrowed Money, or apply to the Bankruptcy Court
for authority to do so, except:
(a) the Obligations;
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(b) existing Indebtedness for Borrowed Money set forth on
Schedule 7.2, including existing lines of credit, drawn and undrawn,
described on such Schedule ("LINES OF CREDIT"), together with
renewals, extensions or replacements of such Indebtedness for Borrowed
Money (including such Lines of Credit) so long as such renewal, extension
or replacement of any item of Indebtedness for Borrowed Money listed on
Schedule 7.2 (including such Lines of Credit) does not increase the
amount of such item of Indebtedness for Borrowed Money (including such
Lines of Credit);
(c) Indebtedness for Borrowed Money of the Borrower or any
Subsidiary under any lease of property, real or personal, as to which the
present value of the minimum rental commitment would be capitalized in
accordance with Generally Accepted Accounting Principles ("CAPITAL
LEASES");
(d) Indebtedness for Borrowed Money of the Borrower or any
Subsidiary incurred to finance the purchase of inventory, machinery or
equipment in the ordinary course of business;
(e) Additional Indebtedness for Borrowed Money of Comstock Canada
Ltd. such that, when added to the existing Indebtedness for Borrowed
Money set forth on Schedule 7.2, the aggregate Indebtedness for Borrowed
Money of Comstock Canada, Ltd., other than Intercompany Debt, shall not
exceed $20,000,000 (Canadian);
(f) Additional Indebtedness for Borrowed Money of JWP U.K. Ltd.
and its Subsidiaries such that, when added to the existing Indebtedness
for Borrowed Money set forth on Schedule 7.2, the aggregate Indebtedness
for Borrowed Money of JWP U.K. Ltd. and its subsidiaries, other than
Intercompany Debt, shall not exceed (POUNDS)15,000,000;
(g) Additional Indebtedness for Borrowed Money of Lunar Drake &
Scull (UAE), Drake & Scull Assarin, Drake & Scull (Cayman Islands) Ltd.,
JWP (Cayman Islands) Ltd., Drake & Scull Oman and a Malaysian Subsidiary
being formed that will be the direct or indirect wholly-owned subsidiary
of JWP UK Ltd., such that, when added to the existing Indebtedness for
Borrowed Money set forth on Schedule 7.2, the aggregate Indebtedness for
Borrowed Money of Money of such Subsidiaries, other than Intercompany
Debt, shall not exceed (POUNDS)5,000,000;
(h) Indebtedness for Borrowed Money consisting of the deferred or
financed payment obligation of the Borrower or any Subsidiary of
insurance premiums in the ordinary course of business as and to the
extent provided on Schedule 7.2;
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<PAGE>
(i) Indebtedness for Borrowed Money of Subsidiaries consisting of
reimbursement obligations with respect to documentary letters of credit
issued for its own account to support the purchase of goods in the
ordinary course of business, which letters of credit, by their terms, are
drawable in 60 days from the date of issuance; and
(j) Intercompany Debt among the Borrower and its Subsidiaries
evidenced by Intercompany Notes, provided that (i) at no time shall
Intercompany Debt owing to the Borrower by a Subsidiary that is not a
Guarantor exceed the amount of such Intercompany Debt set forth in
Schedule 3.12, (ii) at no time shall Intercompany Debt owing to all
Guarantors by all Subsidiaries that are not Guarantors exceed $5,000,000
and (iv) at no time shall the amount of such Intercompany Debt owed to
the Borrower or any Guarantor by any Subsidiary cause such Subsidiary to
cease to be Solvent.
7.3 LIENS. Create, assume or permit to exist any Lien on the
-----
Borrower's or any Guarantor's property or assets, whether now owned or
hereafter acquired, or upon any income or profits therefrom, except
(a) Permitted Liens;
(b) Liens upon assets subject to, and securing, Capital Leases;
(c) purchase money mortgages securing Indebtedness for Borrowed
Money permitted by Section 7.2(d);
(d) Liens upon assets of the obligors of Indebtedness for
Borrowed Money permitted by Sections 7.2(e), (f) and (g) securing such
Indebtedness for Borrowed Money;
(e) Liens upon insurance policies securing the financed premiums
thereof permitted by Section 7.2(h);
(f) Liens upon restricted depositary accounts of Subsidiaries
required to be maintained in connection with specific jobs or contracts
into which all or a portion of payments with respect to the respective
job or contract are required to be deposited and from which disbursements
relating to such job or contract are required to be made;
(g) Liens upon cash collateral deposits made by the Borrower or
Defender Indemnity Ltd. in the ordinary course of business in connection
with the Borrower's insurance program consistent with past practice.
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<PAGE>
7.4 GUARANTEES. Guarantee or otherwise in any way become or be
----------
responsible for indebtedness or obligations (including working capital
maintenance, take-or-pay contracts, etc.) of any other person, contingently or
otherwise, except:
(a) the endorsement of negotiable instruments of deposit in the
normal course of business;
(b) guarantees further described on Schedule 7.4 hereto, which,
unless otherwise expressly noted on such Schedule 7.4, are existing on
the date hereof, such guarantees not to be renewed except in the ordinary
course of business, and each such renewal not to exceed the amount of the
guarantee renewed thereby;
(c) guarantees by the Borrower or a Subsidiary of Indebtedness
for Borrowed Money permitted by Section 7.2(d);
(d) guarantees by the Borrower of the obligations of any
Subsidiary under performance and payment bonds, guarantees by JWP West of
the obligations of University Mechanical Contractors, Inc. (a Washington
corporation) under performance and payment bonds, guarantees by JWP
International of the obligations of Comstock Canada, a limited
partnership, under performance and payments bonds and guarantees by the
Borrower of the performance or payment obligations of a Subsidiary in the
ordinary course of business for the benefit of other Persons to induce
such Persons to forego the issuance of a performance or payment bond; and
(e) guarantees by a Subsidiary that is not a Guarantor of the
obligations of another Subsidiary.
7.5 SALE OF STOCK OF SUBSIDIARIES. Except pursuant to the
-----------------------------
terms of Section 7.8,
(a) sell, assign, pledge or otherwise dispose of any shares of
stock or other equity interests in (or warrants, rights or options to
acquire stock of or equity interests in) any Subsidiary other than (i)
the transfer of the shares of a Subsidiary that it not a Guarantor to
another Subsidiary that is also not a Guarantor or (ii) the transfer of
the shares of a Guarantor to another Guarantor; or
(b) in the case of a Subsidiary, issue or sell any shares of its
stock or other equity interests in itself (or warrants, rights or options
to acquire, or securities convertible into, such stock or other equity
interests) to any Person other than to the Borrower or a Guarantor.
7.6 JUDGMENT, ATTACHMENT. Permit any of its assets to be
--------------------
subject to any judgments, attachments or levies the aggregate amount of which
exceeds $500,000 and which judgments,
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<PAGE>
attachments or levies have not been stayed by appeal, satisfied, bonded or
discharged within thirty (30) calendar days after service of notice thereof to
the Borrower or such Subsidiary.
7.7 LOANS, ADVANCES AND INVESTMENTS. Purchase or otherwise
-------------------------------
acquire or hold any Investments, except that:
(a) the Borrower may make and own those Investments in a Person
that is an Affiliate which Investments are existing as of the date
hereof;
(b) the Borrower or any Subsidiary may make and own Investments
in a Person that is not an Affiliate which Investments are existing as of
the date hereof and are set forth on Schedule 7.7;
(c) the Borrower or any Subsidiary may make and own Investments
consisting of Intercompany Debt permitted under Section 7.2 above;
(d) the Borrower or any Subsidiary may make and own stock,
obligations or securities received in settlement of debts (created in the
ordinary course of business) owing to the Borrower or such Subsidiary;
(e) the Borrower or any Subsidiary may make loans or advances to
employees of the Company or any Subsidiary, which loans and advances, in
the aggregate, will not exceed $500,000 at any time outstanding;
(f) the Borrower or any Subsidiary may make Investments
consisting of notes, bonds, debentures or other securities or instruments
(other than general partnership and similar instruments) acquired by the
Borrower or such Subsidiary in connection with the sale of assets
permitted by Section 7.8; provided, however, that such Investments
received in connection with any such a disposition of assets shall not
exceed 25% of the total consideration received upon such disposition;
(g) the Borrower or any Subsidiary may make and own:
(i) Investments in certificates of deposit or time deposits
having maturities in each case not exceeding one year from the date
of issuance thereof and issued by any FDIC-insured commercial bank
incorporated in the United States or any state thereof having a
combined capital and surplus of not less than $500,000,000;
(ii) Investments in marketable direct obligations issued or
unconditionally guaranteed by the United States of America or
issued by any agency thereof and backed by the full faith and
credit of the United States of America, in each case maturing
within one year from the date of issuance or acquisition thereof;
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<PAGE>
(iii) Investments in commercial paper or demand notes issued
by a corporation incorporated in the United States or any State
thereof maturing no more than one year from the date of issuance
thereof and, at the time of acquisition, having a rating of A-1 (or
better) by Standard & Poor's Corporation or P-1 (or better) by
Moody's Investors Service, Inc.; and
(iv) Investments in money market mutual funds all of the
assets of which are invested in cash or investments described in
clauses (i), (ii) and (iii) of this paragraph (d).
7.8 TRANSFER OF ASSETS. Except as otherwise provided in this
------------------
Agreement, sell, lease, transfer, pledge, assign or otherwise dispose of any
assets of the Borrower or any Guarantor or Core Collateral Subsidiary, unless
(i) such sale or disposition is a Permitted Disposition or (ii) the Net Cash
Proceeds of such transaction are deposited into the Cash Collateral Account (as
defined below) and, in any such case, no Event of Default or Potential Default
shall have occurred or will thereby occur. The "CASH COLLATERAL ACCOUNT"
shall be a depositary account maintained by the Borrower, but under the sole
control and subject to the lien and security interest of the Lender provided in
Section 4.1 hereof pursuant to an agreement among the depositary institution
holding such account, the Borrower and the Lender, which agreement shall be in
form and substance acceptable to the Lender.
7.9 MODIFICATION OF LOAN AGREEMENTS OR POLICIES; PAYMENT OF
--------------------------------------------------------
DEBT. Except as may occur pursuant to the Reorganization Plan in the form
- - - - - - - - - ----
of Exhibit I, with such changes as are not in any significant respect adverse
to the Lender, either as Lender or as holder of debt securities of the
Borrower, or as are approved by the Lender in writing, (i) consent to or permit
any amendment, modification or waiver of any material provision or term
contained in any agreement or indenture governing any Indebtedness for Borrowed
Money or (ii) prepay, redeem, purchase or otherwise acquire, or make any
payment on account of, any Indebtedness for Borrowed Money other than
repayments by a Subsidiary in the ordinary course of business of scheduled
amortization of debt or outstanding amounts under a revolving credit, or apply
to the Bankruptcy Court for authority to do so, except Intercompany Debt
permitted under Section 7.2(j) above.
7.10 CLAIMS. Incur, create, assume or suffer or permit to exist
------
any claim against the Borrower in the Case, any claim against any Guarantor, or
any Lien on any of the assets of the Borrower or the Guarantors, that would be
pari passu with or senior to the claims of the Lender against the
- - - - - - - - - ---- -----
Borrower or the Guarantors or the Lien of the Lender under the Loan Documents,
or apply to the Bankruptcy Court for authority to do so, other than (a) claims,
not relating to Indebtedness for Borrowed Money, arising in the ordinary course
of business, (b) claims against the Guarantors expressly permitted by Section
7.2 and (c) Liens expressly permitted by Section 7.3.
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<PAGE>
7.11 ACCOUNTING CHANGE. Make or permit any change in financial
-----------------
accounting policies or financial reporting practices, except as required by
Generally Accepted Accounting Principles or as may be agreed by the Lender.
7.12 BACKLOG. Permit the aggregate amount of backlog and
-------
work-in-progress of all then-existing contracts of the Borrower and the
Subsidiaries to diminish by an amount in excess of (a) 10% of the total amount
of backlog and work-in-progress as of the end of the immediately preceding
month or (b) 30% of the total amount of backlog and work-in-progress as of the
end of the month immediately preceding the date of the Initial DIP Financing
Order.
7.13 LOSSES FROM OPERATIONS. Permit the aggregate of losses
----------------------
from operations of the Borrower and those Subsidiaries identified on Schedule
7.13 hereto incurred in any month ending after the date hereof to equal or
exceed $2,500,000, which losses shall be determined prior to any adjustment
arising out of FAS 112 - Employer's Accounting for Post-Retirement Benefits and
without taking into account administrative expenses relating solely to the Case
which expenses would not have been incurred had the Borrower not been engaged
in such bankruptcy proceedings.
VIII. DEFAULT.
-------
8.1 EVENTS OF DEFAULT. The Borrower shall be in default if any
-----------------
one or more of the following events ("EVENT OF DEFAULT") occurs:
(a) PRINCIPAL, INTEREST OR OTHER AMOUNTS. The Borrower fails
to pay any principal of or interest on the Note when due and payable (whether
at maturity, by notice of intention to prepay, or otherwise) or fails to pay
when it is due and payable any other amount payable under any Loan Document or
under the DIP Financing Order;
(b) COVENANTS.
(i) The Borrower fails to observe or perform as and when
required any of the terms, conditions or covenants contained in any
Loan Document (other than those referred to in clause (ii) below
unless waived by the Lender); or
(ii) The Borrower fails to observe or perform as and when
required any of the terms, conditions or covenants contained in
Sections 6.3 (other than as to the corporate existence of the
Borrower or any Guarantor), 6.4, 6.5, 6.6(c), 6.6(d) or 6.6(e) of
this Agreement, and such failure shall continue for thirty (30)
days after written notice to the Borrower by the Lender.
(c) REPRESENTATIONS, WARRANTIES, ETC. Any representation or
warranty made by the Borrower or any Material Guarantor or Core Collateral
Subsidiary herein or in any Loan
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<PAGE>
Document or in any exhibit, schedule, report or certificate delivered pursuant
hereto or thereto shall prove to have been false, misleading or incorrect in
any material respect when made or deemed to have been made;
(d) BANKRUPTCY, ETC. OF MATERIAL GUARANTOR OR CORE COLLATERAL
SUBSIDIARY. Any Material Guarantor or Core Collateral Subsidiary, other than
those Guarantors identified on Schedule 8.1(d) hereof, is dissolved or
liquidated, makes an assignment for the benefit of creditors, files a petition
in bankruptcy, is adjudicated insolvent or bankrupt, petitions or applies to
any tribunal for any receiver or trustee, commences any proceeding relating to
itself under any bankruptcy, reorganization, readjustment of debt, dissolution
or liquidation law or statute of any jurisdiction, has commenced against it any
such proceeding which remains undismissed for a period of forty-five (45) days,
indicated its consent to, approval of or acquiescence in any such proceeding,
or any receiver of or trustee for such Material Guarantor or Core Collateral
Subsidiary or any substantial part of the property of such Material Guarantor
or Core Collateral Subsidiary is appointed, or any Material Guarantor or Core
Collateral Subsidiary suffers any such receivership or trusteeship to continue
undischarged for a period of forty-five (45) days;
(e) MODIFICATION OF DIP FINANCING ORDER. The Bankruptcy
Court shall enter an order with respect to the Borrower dismissing the Case or
converting it to a case under Chapter 7 of the Bankruptcy Code; or appointing a
Trustee in the Case; or an application shall be filed for the approval of, or
there shall arise, any claim or any Lien (other than those of the Lender
hereunder or as otherwise expressly permitted hereby) in the Case having a
priority (whether under Section 364 of the Bankruptcy Code or otherwise)
superior to or pari passu with that of the Lender; or the Bankruptcy
---- -----
Court shall enter an order granting relief from the automatic stay applicable
under Section 362 of the Bankruptcy Code to the holder of any security interest
other than in favor of the Lender in any assets of the Borrower having an
aggregate value in excess of $100,000; or the Borrower shall pay, or apply to
the Bankruptcy Court for authority to pay, any Pre-Petition claim except as
expressly contemplated by this Agreement or otherwise approved in writing by
the Lender; or the Bankruptcy Court shall enter an order approving a disclosure
statement in connection with a plan of reorganization, which plan does not
provide for payment in full in cash of the Obligations on the Maturity Date or
the issuance of the equity securities and debt instruments or securities
required by Section 2.5 hereof;
(f) FAILURE TO MAINTAIN BONDING IN THE ORDINARY COURSE.
Seaboard and Cigna, or any comparable successor bonding companies, shall not
continue to make available to the Borrower and the Subsidiaries performance and
payment bonds required for the conduct in the ordinary course of the business
of the Borrower and the Subsidiaries;
(g) MATERIAL ADVERSE CHANGE. Except as disclosed on Schedule
5.1, any material adverse change shall have occurred in the financial
condition, cash flows or operations, including backlog, of any Guarantor or of
the Borrower and the Subsidiaries taken as a whole since September 30, 1993,
other than any change falling within a ten percent (10%) variance of the
financial condition, cash flow or operations expressly contemplated by the
Financial Projections;
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<PAGE>
(h) CERTAIN OTHER DEFAULTS. Any Material Guarantor or Core
Collateral Subsidiary shall fail to pay when due any Indebtedness for Borrowed
Money which singularly or in the aggregate exceeds $500,000, and such failure
shall continue beyond any applicable cure period, or any Material Guarantor or
Core Collateral Subsidiary shall suffer to exist any default or event of
default in the performance or observance, subject to any applicable notice or
grace period, of any agreement, term, condition or covenant with respect to any
agreement or document, other than as a result of the involuntary bankruptcy
proceeding initiated against the Borrower or the conversion by the Borrower of
such proceeding to a voluntary chapter 11 proceeding, if the effect of such
default is to permit, with the giving of notice or passage of time or both, the
holders thereof, or any trustee or agent for said holders, to terminate or
suspend any commitment (which is equal to or in excess of $1,000,000) to lend
money or to cause or declare any portion of any borrowings thereunder to become
due and payable prior to the date on which it would otherwise be due and
payable, provided that during any applicable cure period the Lender's
obligations hereunder to make further Loans shall be suspended;
THEN and in every such event other than that specified in clause (d) and,
as to each such event other than that specified in clause (a), only so long as
such event shall be continuing, the Lender may terminate the Commitment and may
declare the Loans and all other Obligations, including without limitation
accrued interest, to be, and the Loans and all other Obligations shall
thereupon become, due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower and each
Guarantor. Upon the occurrence of any event specified in clause (d) above, the
Commitment shall automatically terminate and the Loans and all other
Obligations, including without limitation accrued interest, shall immediately
be due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrower and each Guarantor. Any
date on which the Loans and such other Obligations are declared due and payable
pursuant to this Section 8.1, shall be a Maturity Date for purposes of this
Agreement.
IX. GUARANTY.
--------
9.1 GUARANTY.
--------
(a) Each Guarantor unconditionally and irrevocably guarantees the
due and punctual payment by, and performance of, the Obligations of the
Borrower (including interest accruing on and after the filing of any petition
in bankruptcy or of reorganization of the Borrower whether or not post filing
interest is allowed in such proceeding). Each Guarantor further agrees that
the Obligations may be extended or renewed, in whole or in part, without notice
or further assent from it (except as may be otherwise required herein), and it
will remain bound upon this guaranty notwithstanding any extension or renewal
of any Obligation.
(b) Each Guarantor waives presentation to, demand for payment
from and protest to, as the case may be, the Borrower, any Guarantor or any
other guarantor of the Obligations, and also waives notice of protest for
nonpayment. The obligations of each Guarantor hereunder shall not be affected
by (i) the failure of the Lender to assert any claim or demand or
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to enforce any right or remedy against the Borrower, any Guarantor or any other
guarantor of the Obligations under the provisions of this Agreement, any other
Loan Document, any other agreement or otherwise; (ii) any extension or renewal
of any provision hereof or thereof; (iii) the failure of the Lender to notify
or obtain the consent of any Guarantor with respect to any rescission, waiver,
compromise, acceleration, amendment or modification of any of the terms or
provisions of this Agreement, the Note, any other Loan Document, or of any
other agreement; (iv) the release, exchange, waiver or foreclosure of any
security held by the Lender for the Obligations or any of them; (v) the failure
of the Lender to exercise any right or remedy against any Guarantor or any
other guarantor of the Obligations; or (vi) the release or substitution of any
Guarantor.
(c) Each Guarantor further agrees that this guaranty constitutes
a guaranty of performance and of payment when due and not just a collection,
and expressly waives any right to require that any resort be had by the Lender
to any security held for payment of the Obligations or to any balance of any
deposit, account or credit on the books of the Lender in favor of the Borrower,
any Guarantor or any other guarantor of the Obligations or to any other Person.
(d) Each Guarantor hereby expressly assumes all responsibilities
to remain informed of the financial condition of the Borrower and any
circumstances affecting the ability of the Borrower to perform under this
Agreement or any other Loan Document.
(e) Each Guarantor's guaranty shall not be affected by the
genuineness, validity, regularity or enforceability of the Obligations, the
Note or any other Loan Documents, or by the existence, validity,
enforceability, perfection, or extent of an collateral therefor or by any other
circumstances relating to the Obligations which might otherwise constitute a
defense to this Guaranty. The Lender makes no representation or warranty in
respect to any such circumstances and has no duty or responsibility whatsoever
to each Guarantor in respect to the management and maintenance of the
Obligations or any collateral security for the Obligations.
9.2 NO IMPAIRMENT OF GUARANTY. The obligations of each
-------------------------
Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason, including, without limitation, any
claim of waiver, release, surrender, alteration or compromise, and shall not be
subject to any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality or unenforceability of the
Obligations or otherwise. Without limiting the generality of the foregoing,
the obligations of each Guarantor hereunder shall not be discharged or impaired
or otherwise affected by the failure of the Lender to assert any claim or
demand or to enforce any remedy under this Agreement or any other agreement, by
any waiver or modification of any provision thereof, by any default, failure or
modification of any provision thereof, by any default, failure or delay,
willful or otherwise, in the performance of the Obligations, or by any other
act or thing or omission or delay to do any other act or thing which may or
might in any manner or to any extent vary the risk of such Guarantor or would
otherwise operate as a discharge of such Guarantor as a matter of law, unless
and until the Obligations are finally and indefeasibly paid in full.
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9.3 CONTINUATION AND REINSTATEMENT, ETC.
------------------------------------
(a) Each Guarantor further agrees that its guaranty hereunder
shall continue to be effective or be reinstated, as the case may be, if at any
time payment, or any part thereof, of any Obligation is rescinded or is
otherwise restored by the Lender. In furtherance of the provisions of this
Section 9, and not in limitation of any other right which the Lender may have
at law or in equity against the Borrower or a Guarantor by virtue hereof, upon
failure of the Borrower to pay any Obligation when and as the same shall become
due, whether at maturity, by acceleration, after notice or otherwise, each
Guarantor hereby promises to and will, upon receipt of written demand by the
Lender (and without further application to or order of the Bankruptcy Court),
forthwith pay or cause to be paid to the Lender in cash an amount equal to the
unpaid amount of all the Obligations with interest at a rate of interest equal
to the rate specified in Section 2.4(b) hereof.
(b) All rights of the Guarantors against the Borrower, arising as
a result of the payment by any Guarantor of the sums to the Lender by way of
right of subrogation or otherwise shall in all respects be subordinated and
junior in right of payment to the prior final and indefeasible payment in full
of all the Obligations to the Lender. If any amount shall be paid to such
Guarantor for the account of the Borrower, such amount shall be held in trust
for the benefit of the Lender and shall forthwith be paid to the Lender to be
credited and applied to the Obligations, whether matured or unmatured.
(c) Each Guarantor shall have a right of contribution from each
other Guarantor with respect to any sums paid by a Guarantor to the Lender
hereunder, which right of contribution shall in all respects be subordinated
and junior in right of payment to the prior final and indefeasible payment in
full of the Obligations to the Lender.
(d) The obligations of the Guarantors hereunder shall terminate
upon the final and indefeasible payment in full of the Obligations to the
Lender. In addition, the Lender shall release a Guarantor from its obligations
hereunder upon the disposition of all of the capital stock of such Guarantor in
accordance with Section 7.8.
9.4 REPRESENTATIONS AND WARRANTIES. Each Guarantor hereby
------------------------------
represents and warrants to the Lender that each representation and warranty by
the Borrower set forth in this Agreement and each other Loan Document relating
to such Guarantor or any Subsidiary of such Guarantor, including without
limitation the representations and warranties contained in Article III hereof,
is true, correct and complete in all respects.
X. MISCELLANEOUS.
-------------
10.1 WAIVER. No failure or delay on the part of the Lender or
------
any holder of any Note in exercising any right, power or remedy under any Loan
Document shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy under any
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Loan Document. The remedies provided under the Loan Documents are cumulative
and not exclusive of any remedies provided by law.
10.2 AMENDMENTS. No amendment, modification, termination or
----------
waiver of any Loan Document or any provision thereof nor any consent to any
departure by the Borrower or any Guarantor therefrom shall be effective unless
the same shall have been approved by the Lender, be in writing and be signed by
the Lender and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. No notice to
or demand on the Borrower shall entitle the Borrower to any other or further
notice or demand in similar or other circumstances.
10.3 GOVERNING LAW. The Loan Documents and all rights and
-------------
obligations of the parties thereunder shall be governed by and be construed and
enforced in accordance with the laws of the State of New York without regard to
principles of conflict of laws.
10.4 ASSIGNMENTS AND PARTICIPATIONS. Each Loan Document shall
------------------------------
bind and inure to the benefit of the Borrower, each Guarantor and the Lender
and their respective successors and assigns, and upon any trustee or successor
subsequently appointed in the Case or in any subsequent Chapter 7 proceeding,
except that neither the Borrower nor any Guarantor shall have the right to
assign any of its rights or interests under any Loan Document without the prior
written consent of the Lender. No person not a party to any Loan Document is
intended to be benefitted thereby.
10.5 CAPTIONS. Captions in the Loan Documents are included
--------
for convenience of reference only and shall not constitute a part of any Loan
Document for any other purpose.
10.6 NOTICES. All notices, requests, demands, directions,
-------
declarations and other communications between the Lender, the Borrower and the
Guarantors provided for in any Loan Document shall, except as otherwise
expressly provided, be mailed by registered or certified mail, return receipt
requested, or telegraphed, or telefaxed, or delivered in hand to the applicable
party at its address indicated below:
If to the Lender, to:
Belmont Capital Partners II, L.P.
82 Devonshire Street F7C
Boston, Massachusetts 02109
Attention: Portfolio Manager
Telecopier No.: 617-570-7688
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<PAGE>
with a copies to:
Wendy Schnipper Clayton, Esquire
Fidelity Management & Research Co.
82 Devonshire Street F7C
Boston, Massachusetts 02109
Telecopier No.: 617-570-7688
and
Morgan, Lewis & Bockius
2000 One Logan Square
Philadelphia, Pennsylvania 19103
Attention: Michael A. Bloom, Esquire
Telecopier No.: 215-963-5299
If to the Borrower or any Guarantor, to:
JWP INC.
Six International Drive
Rye Brook, New York 10573
Attention: Mr. Joseph A. Gallo
Telecopier No.: 914-935-4178
with a copy to:
Stroock & Stroock & Lavan
Seven Hanover Square
New York, New York 10004
Attention: Lawrence Handelsman, Esquire
Telecopier No.: 212-806-6006
The foregoing shall be effective and deemed received three days after being
deposited in the mails, postage prepaid, addressed as aforesaid and shall
whenever sent by telegram, telegraph or telefax or delivered in hand be
effective when received. Any party may change its address by a communication
in accordance herewith.
10.7 EXPENSES OF THE LENDER; INDEMNIFICATION OF THE LENDER AND THE
--------------------------------------------------------------
BANKS.
- - - - - - - - - -----
(a) The Borrower will from time to time reimburse the Lender
promptly following demand for all out-of-pocket expenses (including the
reasonable fees and expenses of legal counsel) in connection with (i) the
preparation of the Loan Documents, (ii) the making of any Loans, (iii) the
administration of the Loan Documents, and (iv) the enforcement of the Loan
Documents.
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<PAGE>
(b) In addition to the payment of the foregoing expenses, the
Borrower hereby agrees to indemnify, protect and hold the Lender and any holder
of the Note and the officers, directors, employees, agents, affiliates and
attorneys of the Lender and such holder (collectively, the "INDEMNITEES")
harmless from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses and
disbursements of any kind or nature, including reasonable fees and expenses of
legal counsel, which may be imposed on, incurred by, or asserted against such
Indemnitee by the Borrower or other third parties and arise out of or relate to
this Agreement or the other Loan Documents or any other matter whatsoever
related to the transactions contemplated by or referred to in this Agreement or
the other Loan Documents; provided, however, that the Borrower shall have no
obligation to an Indemnitee hereunder to the extent that the liability incurred
by such Indemnitee has been determined by a court of competent jurisdiction to
be the result of gross negligence or willful misconduct of such Indemnitee.
For purposes of this Section 10.7, the past or future purchase by the Lender or
any other Indemnitee of any debt or equity securities of the Borrower, other
than the Note, any interest thereon and the Additional Interest, shall not be
deemed to be related to the transactions contemplated by or referred to in this
Agreement or the other Loan Documents.
10.8 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS. All
---------------------------------------------
agreements, representations and warranties made or deemed made herein shall
survive the execution and delivery of this Agreement, the making of the Loans
hereunder and the execution and delivery of the Note. Notwithstanding anything
in this Agreement or implied by law to the contrary, the agreements of the
Borrower set forth in Section 10.7 shall survive the payment of the Loans and
the termination of this Agreement. This Agreement shall remain in full force
and effect until the latest to occur of the termination of the Commitment or
the repayment in full of all amounts owed by the Borrower under any Loan
Document.
10.9 SEVERABILITY. The invalidity, illegality or
------------
unenforceability in any jurisdiction of any provision in or obligation under
this Agreement, the Note or other Loan Documents shall not affect or impair the
validity, legality or enforceability of the remaining provisions or obligations
under this Agreement, the Note or other Loan Documents or of such provision or
obligation in any other jurisdiction.
10.10 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. EACH
----------------------------------------------
GUARANTOR HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN THE BOROUGH OF MANHATTAN, THE CITY OF NEW YORK AND IRREVOCABLY
AGREES THAT, SUBJECT TO LENDER'S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING
OUT OF OR RELATING TO THE NOTE, THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS
SHALL BE LITIGATED IN SUCH COURTS. EACH GUARANTOR ACCEPTS FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH THIS AGREEMENT, THE NOTE, OR SUCH OTHER LOAN DOCUMENT. EACH
GUARANTOR DESIGNATES AND APPOINTS
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<PAGE>
PRENTICE HALL (OR SUCH OTHER PERSON AS SHALL ACT AS REGISTERED AGENT OF ANY
GUARANTOR IN NEW YORK AND AS TO WHOM ANY GUARANTOR SHALL PROVIDE NOTICE IN
WRITING TO THE LENDER) AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY
SUCH PERSON WHICH IRREVOCABLY AGREE IN WRITING TO SO SERVE AS ITS AGENT TO
RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY
SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY EACH GUARANTOR TO BE
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF ANY SUCH PROCESS SO
SERVED SHALL BE MAILED BY REGISTERED MAIL TO EACH GUARANTOR, AS APPLICABLE, AT
ITS ADDRESS AS PROVIDED IN SECTION 10.6, EXCEPT THAT UNLESS OTHERWISE PROVIDED
BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY
OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY ANY GUARANTOR REFUSES TO
ACCEPT SERVICE, EACH GUARANTOR HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL
CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE
LENDER TO BRING PROCEEDINGS AGAINST ANY GUARANTOR IN THE COURTS OF ANY OTHER
JURISDICTION.
10.11 WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE GUARANTORS
--------------------
AND THE LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF
THE LOAN DOCUMENTS, OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER
OF THIS AGREEMENT AND THE LENDER/BORROWER RELATIONSHIP ESTABLISHED HEREBY. THE
SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES
THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS
TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH
OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE BORROWER,
EACH GUARANTOR AND THE LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO THE TRANSACTION, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN
ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER
IN THEIR RELATED FUTURE DEALINGS. THE BORROWER, EACH GUARANTOR AND THE LENDER
FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, AND THE
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT, THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS
OR AGREEMENTS RELATING TO THE LOANS. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
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10.12 COUNTERPARTS; EFFECTIVENESS. This Agreement and any
---------------------------
amendment hereto or waiver hereof may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. This Agreement and any
amendments hereto or waivers hereof shall become effective when the Lender
shall have received signed counterparts or notice by telecopy of the signature
page that the counterpart has been signed and is being delivered to the Lender
or facsimile that such counterparts have been signed by all the parties hereto
or thereto.
10.13 USE OF DEFINED TERMS. All words used herein in the
--------------------
singular or plural shall be deemed to have been used in the plural or singular
where the context or construction so requires. Any defined term used in the
singular preceded by "any" shall be taken to indicate any number of the members
of the relevant class.
10.14 GOOD FAITH. Lender is entering into this Agreement in good
----------
faith, and, if the Bankruptcy Court enters an order approving this Agreement
and the transactions contemplated hereby which is subsequently vacated by the
Bankruptcy Court or reversed by a court of
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competent jurisdiction, Lender shall have all of the protections afforded a
good-faith lender under Section 364(e) of the Bankruptcy Code.
IN WITNESS WHEREOF, the Borrower, the Guarantors and the Lender have
caused this Agreement to be executed by their proper corporate officers
thereunto duly authorized as of the day and year first above written.
JWP INC. AFGO ENGINEERING CORP.
By:___________________________ By:________________________
Title: Title:
AFGO ENGINEERING CORP. OF AZCO INC.
WASHINGTON
By:___________________________ By:________________________
Title: Title:
B & B CONTRACTING & SUPPLY CONTRA COSTA ELECTRIC, INC.
COMPANY
By:___________________________ By:________________________
Title: Title:
DYN SPECIALTY CONTRACTING, DYNALECTRIC COMPANY
INC.
By:___________________________ By:________________________
Title: Title:
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<PAGE>
DYNAELECTRIC COMPANY OF FORT CORP.
NEVADA
By:___________________________ By:________________________
Title: Title:
GENERAL ENERGY GIBSON ELECTRIC CO., INC.
DEVELOPMENT INC.
By:___________________________ By:________________________
Title: Title:
GONE INC. HANSEN MECHANICAL CONTRACTORS, INC.
By:___________________________ By:________________________
Title: Title:
HERITAGE AIR SYSTEMS INC. INTEC BUSINESS PHONES INC.
By:___________________________ By:________________________
Title: Title:
ISYS SECURITY SYSTEMS, INC. JAMAICA WATER SECURITIES CORP.
By:___________________________ By:________________________
Title: Title:
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JWP ASSET MANAGEMENT INC. JWP BRANDT ENGINEERING CO.,
INC.
By:___________________________ By:________________________
Title: Title:
JWP COMMUNICATIONS INC. JWP CONTROLS INC.
By:___________________________ By:________________________
Title: Title:
JWP CONTROLS HOLDING, INC. JWP CREDIT CORP.
By:___________________________ By:________________________
Title: Title:
JWP ENVIRONMENTAL SERVICES JWP EQUIPMENT SERVICES INC.
COMPANY
By:___________________________ By:________________________
Title: Title:
JWP FOREST ELECTRIC CORP. JWP GOWAN, INC.
By:___________________________ By:________________________
Title: Title:
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<PAGE>
JWP GUZOVSKY ELECTRICAL CORP. JWP/HCCII CORP.
By:___________________________ By:________________________
Title: Title:
JWP OF HARTFORD, INC. JWP/HYRE ELECTRIC CO. OF
INDIANA, INC.
By:___________________________ By:________________________
Title: Title:
JWP INTERNATIONAL INC. JWP/IS NETWORK INTEGRATION
SERVICES, INC.
By:___________________________ By:________________________
Title: Title:
JWP/J.C. HIGGINS CORP. JWP MAINTENANCE AND
SERVICES, INC.
By:___________________________ By:________________________
Title: Title:
JWP MECHANICAL/ELECTRICAL JWP MECHANICAL/ELECTRICAL
SERVICES, INC. SERVICES (EAST), INC.
By:___________________________ By:________________________
Title: Title:
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<PAGE>
JWP MECHANICAL/ELECTRICAL JWP MECHANICAL/ELECTRICAL
SERVICES (MIDWEST), INC. SERVICES (SOUTH), INC.
By:___________________________ By:________________________
Title: Title:
JWP MECHANICAL/ELECTRICAL JWP MECHANICAL SERVICES
SERVICES (WEST), INC. OF NEW YORK, INC.
By:___________________________ By:________________________
Title: Title:
JWP MIDWEST, INC. JWP NEW ENGLAND INC.
By:___________________________ By:________________________
Title: Title:
JWP PENGUIN AIR CONDITIONING CORP. JWP RISK HOLDINGS INC.
By:___________________________ By:________________________
Title: Title:
JWP/SHI CORP. JWP SYSTEMS/KIRKWOOD
ELECTRIC CO., INC.
By:___________________________ By:________________________
Title: Title:
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JWP TECHNICAL SERVICES CORP. JWP TECHNICAL SERVICES
OF OHIO, INC.
By:___________________________ By:________________________
Title: Title:
JWP TRAUTMAN & SHREVE, INC. JWP WELSBACH ELECTRIC CORP.
By:___________________________ By:________________________
Title: Title:
JWP WELSBACH ELECTRIC CORP. JWP WEST
OF LONG ISLAND
By:___________________________ By:________________________
Title: Title:
JWP ZACK INC. KERBY SAUNDERS-WARKOL, INC.
By:___________________________ By:________________________
Title: Title:
SLR CONSTRUCTORS INC. SUPERIOR ENGINEERING CORPORATION
By:___________________________ By:________________________
Title: Title:
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SUTTER HILL INDUSTRIES, INC. T.L. CHOLETTE, INC.
By:___________________________ By:________________________
Title: Title:
UNIVERSITY MECHANICAL UNIVERSITY COGENERATION, INC.
CONTRACTORS OF ARIZONA, INC.
By:___________________________ By:________________________
Title: Title:
WACHTEL, DUKLAUER & FEIN JWP UNRESTRICTED SUB 3, INC.
INCORPORATED
By:___________________________ By:________________________
Title: Title:
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<PAGE>
BELMONT CAPITAL PARTNERS II, L.P.
By: Fidelity Capital Partners II
Corp., managing general partner
By:__________________________
Title:
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<PAGE>
SCHEDULE 2.4(C)
AGREED PERCENTAGE
-----------------
1. If at no time during the fourth month following entry of the Initial DIP
Financing Order are any Loans outstanding, the Agreed Percentage will not
increase during such month.
2. On the first day during the fourth month following entry of the Initial
DIP Financing Order that the outstanding balance of the Loans is greater
than $0 (but is not on such day greater than $5 million), the Agreed
Percentage shall increase 25 basis points.
3. On the first day during the fourth month following entry of the Initial
DIP Financing Order that the outstanding balance of the Loans is greater
than $5 million, the Agreed Percentage will increase in an amount such
that the total increase in such fourth month equals 50 basis points.
4. Until repayment in full of all Obligations and termination of the
commitment of the Lender, on the first day of the fifth month following
entry of the Initial DIP Financing Order and the first day of each month
thereafter, the Agreed Percentage will increase 50 basis points.
For purposes of the foregoing, "month" shall mean each 30-day period following
the entry of the Initial DIP Financing Order.
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EXHIBIT 10(d)
LOGO JWP
Corporate Headquarters
Andrew T. Dwyer
Chairman
and Chief Executive Officer
November 16, 1992
Mr. Edward F. Kosnik
9 Ashton Drive
Greenwich, Connecticut 06831
Dear Ed:
It is my pleasure to confirm our offer of employment to you and welcome you
to the JWP team. The following are the agreed upon terms of our offer:
1. Position. Executive Vice President, Chief Financial Officer and member of
--------
the Board of Directors of JWP, reporting to Andrew T. Dwyer, Chairman and Chief
Executive Officer.
2. Base Salary. $400,000
-----------
3. Annual Bonus. You will participate in the Executive Bonus Program
------------
consistent with other executive officers of the Company.
4. Restricted Stock. 100,000 shares of JWP common stock will be granted to
----------------
you on your date of hire. The shares will vest and restrictions on their
transfer of sale will lapse, with respect to one-third of the shares on
November 24, 1993, one-third on November 24, 1994, and one-third on November
24, 1995.
If all the shares are not vested, the unvested shares will be forfeited if
you terminate your employment with the Company or if you are terminated with
Cause. The shares will become fully vested if you are terminated by the Company
for any reason other than Cause or if there is a Change of Control of JWP and
within three months thereafter you elect to terminate your employment with the
Company.
The term of this agreement shall be memorialized in a separate restricted
stock grant agreement.
5. Stock Options. You will be granted options, at an option price equal to
-------------
the average of the high and low prices for a share of JWP common stock on
November 24, 1992, to purchase 100,000 shares of JWP common stock; the options
shall become
<PAGE>
exercisable as follows: one-third on November 24, 1993, one-third on November
24, 1994, and one-third on November 24, 1995. The terms of this agreement shall
be memorialized in the form of the Company's standard stock option agreement.
The options will become fully vested if you are terminated by the Company for
any reason other than the Cause or if there is a Change of Control of JWP and
within three months thereafter you elect to terminate your employment with the
Company. After one year of employment, the Board of Directors will consider an
additional stock option grant to you based on its assesment of your
performance.
6. Car Allowance. You will be paid a monthly car allowance of $700 per month.
-------------
7. Benefits. You will be eligible to participate in the Company's money
--------
purchase plan, ESOP, 401-K plan. and medical, hospitalization, life and
disability insurance plans, subject to the terms of such plans.
8. Start Date. Your employment will begin as of November 24, 1992 and you
----------
will become an officer and director as of December 1, 1992.
9. Separation Pay. If there is a Change of Control of JWP and within three
--------------
months thereafter you elect to terminate your employment with JWP or if you are
terminated by JWP for any reason other than for Cause, you will continue to
receive your base salary for one year from the date of termination plus the sum
of $200,00 which shall be payable upon such termination of your employment. For
purposes hereof a Change of Control shall be deemed to have occurred if, as a
result of a tender offer, merger, consolidation, sale of assets or contested
election, or any combination of the foregoing transactions (a "Transaction"),
the persons who were directors of the Company immediately before the
Transaction shall cease to constitute a majority of the Board of Directors of
the Company or of any successor of the Company; provided that no Change of
Control shall have been deemed to have occurred so long as Andrew T. Dwyer
continues to be the Chief Executive Officer of the Company.
10. Cause. For purposes hereof, the term "Cause" shall mean (i) any willful
-----
misconduct by you in connection with the performance of your duties hereunder,
including without limitation misappropriation of funds or property of the
Company, securing or attempting to secure personally any profit in connection
with any transaction entered into on behalf of the Company or any willful and
intentional act having the effect of injuring the reputation, business or
business relationships of the Company; (ii) willful failure, neglect or refusal
to perform your duties; (iii) conviction (or nolo contendere plea) in
connection with a felony misdemeanor involving moral turpitude or which in the
opinion of the Board of Directors of the Company
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<PAGE>
is inimicable to the best interests of the Company; or (iv) admission to an act
of fraud, theft or dishonesty against the Company.
This letter is not to be considered an agreement for employment for a term,
and your employment is one "at will". Accordingly, subject to the provisions
hereof, you may terminate your employment at any time and similarly JWP may
terminate your employment at any time and similarly JWP may terminate your
employment at any time.
I look forward to working with you.
Sincerely,
JWP INC.
By: /s/ Andrew T. Dwyer
------------------------
Andrew T. Dwyer
Chairman of the Board
and President
-3-
<PAGE>
EXHIBIT 10(e)
LOGO JWP
Corporate Headquarters
Edward F. Kosnik
Executive Vice President
and Chief Financial Officer
December 21, 1992
Mr. Stephen H. Meyers
10 Roger Sherman Place
Rye, New York 10580
Dear Steve:
I am pleased to extend an offer for you to join the JWP team. The following
are the terms of the offer:
1. Position. Senior Vice President, Finance reporting to Ed Kosnik, Executive
--------
Vice President and CFO.
2. Base Salary. $225,000, paid on a bi-weekly basis.
-----------
3. Annual Bonus. You will participate in the Executive Bonus Program
------------
consistent with other executive officers of the Company.
4. Restricted Stock. 50,000 shares of common stock will be granted to you on
----------------
your date of hire. The shares will vest and restrictions on their transfer or
sale will lapse, with respect to one-third of the shares on January 15, 1994,
one-third of the shares on January 15, 1995, and one-third of the shares on
January 15, 1996.
If all the shares are not vested, the unvested shares will be forfeited if
you terminate your employment with the Company or if you are terminated with
Cause. The shares will become fully vested if you are terminated by the Company
for any reason other than Cause or if there is a Change of Control of JWP and
within three months thereafter you elect to terminate your employment with the
Company.
The term of this arrangement shall be memorialized in a separate restricted
stock grant agreement.
5. Stock Options. You will be granted options, at an option price equal to
-------------
the average of the high and low price for a share of JWP common stock on
January 15, 1993, to purchase 50,000 shares of JWP common stock; the options
shall become
<PAGE>
-2-
exercisable as follows: one-third on January 15, 1994, one-third on January 15,
1995, and one-third on January 15, 1996. The terms of this agreement shall be
memorialized in the form of the Company's standard stock option agreement. The
options will become fully vested if you are terminated by the Company for any
reason other than Cause or if there is a Change of Control of JWP and within
three months thereafter you elect to terminate your employment with the
Company. After one year of employment, the Board of Directors will consider an
additional stock option grant to you based on its assessment of your
performance.
6. Car allowance. You will be paid a monthly car allowance of $700 per month.
-------------
7. Benefits. You will be eligible to participate in the Company's Money
--------
Purchase Plan or the Designated Successor Plan, ESOP, 401-K, and medical,
hospitalization, life and disability insurance plans, subject to the terms of
such plans.
8. Start Date. Your employment will begin as of January 15, 1993.
----------
9. Separation Pay. If there is a Change of Control of JWP and within three
--------------
months thereafter you elect to terminate your employment with JWP or if you are
terminated by JWP for any reason other than for Cause, you will continue to
receive your base salary for one year from the date of termination plus the sum
of $112,500 which shall be payable upon such termination of your employment.
For purposes hereof a Change of Control shall be deemed to have occurred if, as
a result of a tender offer, merger, consolidation, sale of assets or contested
election, or any combination of the foregoing transactions (a "Transaction"),
the persons who were directors of the Company immediately before the
Transaction shall cease to constitute a majority of the Board of Directors of
the Company or of any successor of the Company; provided that no Change of
Control shall have been deemed to have occurred so long as Andrew T. Dwyer
continues to be the Chief Executive Officer of the Company.
10. Cause. For purposes hereof, the term "Cause" shall mean (i) any willful
-----
misconduct by you in connection with the performance of your duties hereunder,
including without limitation misappropriation of funds or property of the
Company, securing or attempting to secure personally any profit in connection
with any transaction entered into on behalf of the Company or any willful and
intentional act having the effect of injuring the reputation, business or
business relationships of the Company; (ii) willful failure, neglect or refusal
to perform your duties; (iii) conviction (or nolo contendere plea) in
connection with a felony or misdemeanor involving moral
<PAGE>
-3-
turpitude or which in the opinion of the Board of Directors of the Company is
inimicable to the best interests of the Company; or (iv) admission to an act of
fraud, theft or dishonesty against the Company.
This letter is not to be considered an agreement for employment for a term,
and your employment is one "at will". Accordingly, subject to the provisions
hereof, you may terminate your employment at any time and similarly JWP may
terminate your employment at any time.
Steve, the offer is contingent upon final Compensation Committee approval of
the terms of this agreement. I expect the Committee to meet in the next several
days. There is much to be done, and I look forward to your joining us. I know
you will add considerable strength to our financial organization. Please give
me a call if you have any questions.
Yours sincerely,
/s/ Edward F. Kosnik
Edward F. Kosnik
EFK: sec
<PAGE>
EXHIBIT 10(k)
JWP INC.
1992 STOCK OPTION PLAN
1. Purpose. The JWP INC. 1992 Stock Option Plan (the "Plan") is intended to
-------
further the interests of JWP INC. (the "Company") by providing added incentives
to key employees of the Company and its subsidiaries to work toward the
continued growth and success of the Company and by attracting capable personnel
and encouraging them to remain in the employ of the Company.
2. Construction. The Plan is intended to allow the granting of options which
------------
will be "Incentive Stock Options" as defined in Section 422A of the Internal
Revenue Code of 1986, as the same may from time to time be amended (the
"Code"), and options that are not Incentive Stock Options ("nonqualified stock
options"). Except with respect to options designated as nonqualified stock
options, all terms and conditions of the Plan and any option agreements or
other instruments evidencing the grant of options pursuant hereto shall be
construed in accordance with provisions of the Code applicable to Incentive
Stock Options.
3. Administration of the Plan. The Plan shall be administered by a committee
--------------------------
(the "Committee") which shall be either the Compensation and Personnel
Committee of the Company or a committee of three (3) or more directors to be
appointed by the Board of Directors of the Company. The members of the
Committee shall serve for such terms as the Board of Directors shall
<PAGE>
determine. The Board may from time to time appoint members of the Committee in
substitution for members previously appointed and may fill vacancies, however
caused, in the Committee. Each member of the Committee shall be a
"disinterested person" within the meaning of Rule 16b-3 under the Securities
Act of 1934.
Subject to the express provisions of the Plan, the Committee shall have the
authority in its discretion to determine the individuals to receive options and
the terms and provisions of the respective option agreements (which need not be
uniform), including without limitation (i) the times when such options shall be
granted, (ii) the option price of each option, (iii) the period during which,
and the terms upon which, each option, may be exercised (and the Committee may,
subsequent to the granting of the option accelerate the time when it may be
exercised), (iv) the number of shares to be subject to each option, (v) the
adjustment, if any, in the exercise price of an option and the number of shares
subject to any option upon the happening of any event described in Paragraph 4,
and (vi) whether an option shall be an Incentive Stock Option. The Committee
may incorporate in any option such other terms and conditions, not inconsistent
with the Plan, as it deems appropriate. The Committee may, subject to the
consent of the holder of an option, amend the terms of such option agreement.
The Committee shall also have authority to construe the respective option
agreements and the Plan, to prescribe, amend and rescind rules and regulations
relating to the Plan, to determine the fair market value of the stock of the
-2-
<PAGE>
Company on the date of granting any option, and to make all other determinations
necessary or advisable for administering the Plan. The Committee may require an
optionee to assent, prior to the exercise of an option, to the imposition of
restrictive provisions for a period determined by the Committee (which shall not
be longer than one year from the date of exercise of the option) requiring the
re-offer to the Company (on terms and conditions determined by the Committee in
its discretion) of shares acquired on such exercise in the event that the
optionee's employment with the Company terminates (other than by reason of
death) during the period of such restrictive provisions, and may require, if the
Committee shall so determine, the surrender for cancellation to the Company of
other options held by the optionee in connection with the grant or continued
effectiveness of options granted hereunder. The Committee may correct any defect
or supply any omission or reconcile any inconsistency in the Plan or in any
option, in the manner and to the extent that it shall deem expedient to carry it
into effect, and it shall be the sole and final judge of such expediency. The
determination of the Committee on matters referred to in this paragraph shall be
final and conclusive.
The Committee shall hold its meetings at such times and places as it may
determine. A majority of its members shall constitute a quorum. All
determinations of the Committee shall be made by a majority of its members. Any
decision or
-3-
<PAGE>
determination reduced to writing and signed by a majority of the members shall
be fully effective as if it had been made by a majority vote at a meeting duly
called and held.
4. Amount of Stock Subject to the Plan. The stock which shall be subject to
-----------------------------------
options shall be Common Stock of the Company, par value $.10 per share. The
total number of shares of Common Stock of the Company which may be sold
pursuant to options granted under the Plan shall not exceed 2,500,000 shares.
The shares sold under the Plan may be either authorized and unissued shares or
issued shares reacquired by the Company. In the event that any option granted
under the Plan shall terminate or expire for any reason without having been
exercised in full, the shares not purchased under the options shall be
available again for the grant of further options under the Plan.
In the event of any change in the outstanding Common Stock of the Company by
reason of a stock dividend, recapitalization, merger, consolidation, split-up,
combination, exchange of shares, or the like, the aggregate number and class of
shares issuable hereunder shall be appropriately adjusted by the Committee,
whose determination shall be conclusive.
5. Eligibility. Options may be granted only to employees of the Company or a
-----------
subsidiary of the Company, who, in the judgment of the Committee, are in
positions to contribute significantly to the Company's or such other
corporations'
-4-
<PAGE>
success. For this purpose the term "subsidiary" shall have the meaning ascribed
to it in Section 425 of the Code. The term "employees" shall include officers
of the Company and its subsidiaries and shall include directors who are also
employees of the Company or of a subsidiary of the Company. No member of the
Board of Directors who is not an employee shall be eligible to receive an
option under the Plan. No person shall be eligible to receive an option while
serving as a member of the Committee.
6. Limitation on Amount of Options. Except to the extent that the Committee
-------------------------------
designates all or a portion of an option as a nonqualified stock option, the
aggregate fair market value (determined as of the time the option is granted)
of the stock for which any employee may be granted an option which first
becomes exercisable in any calendar year under the Plan (and under all
incentive stock options) shall not exceed $100,000.
7. Price. Subject to the provisions of Paragraph 10, the purchase price of
-----
the Common Stock provided under each Incentive Stock Option granted pursuant to
the Plan shall be not less than the fair market value of such stock, as
determined by the Committee, at the time of the granting of the option. The
exercise price of an option which is designated as a nonqualified stock option
shall be determined by the Committee at the time option is granted.
-5-
<PAGE>
8. Period of Option and Certain Limitations on the Right to Exercise. Subject
-----------------------------------------------------------------
to the provisions of Paragraph 10, the term of any Incentive Stock Option shall
not be more than ten years from the date of granting the option. The term of
any nonqualified stock option shall be for such period as the Committee shall
determine at the time of the granting of the option.
The Committee may condition the exercise of an option upon the employee's
remaining in the continuous employ of the Company or a subsidiary of the
Company for a period to be determined by the Committee or other conditions as
the Committee may deem appropriate. Except as provided in this Paragraph and in
Paragraph 12, the holder of an Incentive Stock Option must at all times during
the period beginning on the date of grant of the Incentive Stock Option and
ending on the day three months before the date of exercise, be an employee of
either the Company or a subsidiary of the Company. The holder of an Incentive
Stock Option shall be deemed to be in the employ of the Company during any
period of military, sick leave or other leave of absence meeting the
requirements of Section 1.421-7(h)(2) of the Federal Income tax Regulations or
any similar or successor section. The Committee may provide similar restrictions
with respect to the exercise of non-qualified stock options.
-6-
<PAGE>
No Incentive Stock Option shall be affected by any change of duties or
position of the optionee or holder (including transfer to or from a subsidiary)
so long as he continues to be an employee of the Company or one of its
subsidiaries.
The Committee may, in its sole discretion, impose exercise periods of less
than ten years for Incentive Stock Options and more than ten years for
nonqualified stock options.
9. Exercise of Options. An option may be exercised by an employee as to all
-------------------
or a part of the shares covered thereby by giving written notice to the
Company, at its principal office, directed to the attention of its Secretary,
accompanied by payment of the option price in full for shares being purchased.
The payment of the option price shall be either in cash or, subject to any
conditions set forth in the option agreement, by delivery of shares of Common
Stock of the Company having a fair market value equal to the purchase price for
the shares being acquired, or by any combination of cash and such shares. An
option shall not be exercisable unless the person exercising the option makes
payment to the Company in full in United States Dollars by cash or check of
such amount as is sufficient to satisfy the Company's obligation, if any, to
withhold Federal, state and local taxes by reason of such exercise or make such
other arrangement satisfactory to the Committee as will enable the Company to
satisfy such obligation.
-7-
<PAGE>
Unless there is in effect at the time of exercise a registration statement
under the Securities Act of 1933 (the "Act") permitting the resale to the
public of shares acquired under the Plan (and, if required, there is available
for delivery a prospectus meeting the requirements of Section 10(a)(3) for the
Act), the holder of the option shall, unless determined by the Committee that
such is not required, (i) represent and warrant in writing to the Company that
the shares acquired are being acquired for investment and not with a view to
the distribution thereof, (ii) acknowledge that the shares acquired may not be
sold unless registered for sale under the Act or pursuant to an exemption from
such registration, and (iii) agree that the certificates evidencing such shares
shall bear a legend to the effect of clauses (i) and (ii). If, subsequent to
any such acquisition for investment, there should become effective under the
Act a registration statement permitting the resale to the public for shares so
acquired and, if required, there is available for delivery by the optionee a
prospectus meeting the requirements of Section 10(a)(3) for the Act, then any
representations and warranties previously made that such shares were being
acquired for investment and not with a view to the distribution thereof shall
not preclude the holder of the option from selling such shares pursuant to the
registration statement and in the event of any such sale the holders of such
shares
-8-
<PAGE>
shall be released from such representations and warranties with respect to
shares sold by them pursuant to such registration statement.
10. Certain 10% Shareholders. Except in a case where the Committee shall
------------------------
designate an option as a nonqualified stock option, the Committee shall not
grant an option to an individual who, at the time the option is granted, owns
stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or any parent or subsidiary of the Company
unless at the time such option is granted the option price is at least 110% of
the fair market value of the stock subject to the option and such option by its
terms is not exercisable after the expiration of five years from the date the
option is granted.
11. Nontransferability of Options. No option granted under the Plan shall be
-----------------------------
transferable otherwise than by will or by the laws of descent and distribution
and an option may be exercised during the lifetime of the optionee only by him.
12. Death or Disability of an Optionee. In the event of the death of an
----------------------------------
optionee under the Plan while he is employed by the Company or a subsidiary of
the Company, the option theretofore granted to him may be exercised, during
such period after his death as the Committee shall determine at the time of
granting the option, by the person or persons to whom his rights under the
option shall pass by will or the laws of descent and distribution or, if
appropriate, by the legal representative of
-9-
<PAGE>
the estate of the deceased employee, but only during the option period and only
if and to the extent that the employee was entitled to exercise the option at
the date of his death.
If the optionee's employment terminates on account of disability, the
Committee may determine that he may exercise the option at any time within one
year from the termination of his employment, but only to the extent he was
entitled to exercise it at the date of such termination and only during the
option period. "Disability" shall have the meaning ascribed to it in Section
22(e)(3) of the Code.
13. Rights as a Stockholder. The holder of an option shall not have any of
-----------------------
the rights of a stockholder of the company with respect to the shares subject
to an option until a certificate or certificates for such shares shall have
been issued upon the exercise of the option.
14. Right to Terminate Employment. Nothing in the plan or in any option
-----------------------------
granted under the Plan shall confer upon any optionee the right to continue in
the employment of the Company or affect the right of the Company or any of its
subsidiaries to terminate the employment of the optionee at any time, subject,
however, to the provisions of any agreement of employment between the Company
or any of its subsidiaries and the optionee.
15. Use of Proceeds. The proceeds received from the sale of shares pursuant
---------------
to the Plan will be used for general corporate purposes.
-10-
<PAGE>
16. Amendment and Termination. Unless the Plan theretofore shall have been
-------------------------
sooner terminated as hereinafter provided, the Plan shall terminate on June 30,
2002 and no option under it shall be granted thereafter. The Board of Directors
of the Company at any time prior to that date may terminate the Plan, or make
such amendments to it as the Board of Directors shall deem advisable; provided,
however, that following stockholder approval of the Plan and except as provided
in Paragraph 4 hereof, the Board of Directors may not, without stockholder
authorization, increase the maximum number of shares as to which options may be
granted under the Plan or change the class of persons eligible to receive
options under the Plan. No termination or amendment of the Plan may, without
the consent of the holder of an option then existing, terminate his option or
affect his right under the option.
17. Effective Date. The Plan is effective as of July 1, 1992.
--------------
18. Stockholder Approval. The Plan shall be submitted to the stockholders of
--------------------
the Company for their approval before June 30, 1994. No option granted
hereunder to an officer of the Company, if any, shall be exercisable unless and
until such approval has been obtained. The stockholders shall be deemed to have
approved the Plan only if it is approved at a meeting of the stockholders duly
held before June 30, 1994, by vote taken in the manner required by the laws of
the State of Delaware.
-11-
<PAGE>
EXHIBIT 10(l)
SEPARATION AGREEMENT
--------------------
THIS AGREEMENT dated as of June 30, 1993, is made between JWP INC. (the
"Company") and ANDREW T. DWYER (the "Executive").
WITNESSETH:
----------
WHEREAS, the Employment Agreement (the "Employment Agreement") between the
Company and the Executive, dated December 31, 1988, as amended, expires on
June, 30, 1993;
WHEREAS, simultaneously herewith the Company's subsidiary JWP
Mechanical/Electrical Services, Inc. and the Executive are entering into a
consulting agreement providing for the retention of the executive as a
consultant to the Company through the end of the year; and
WHEREAS, as part of the separation arrangement with then Company, the Company
desires the Executive to enter into a noncompetition covenant as set forth
herein;
NOW, THEREFORE, in consideration of the mutual promises set forth herein and
other valuable consideration, receipt of which is hereby acknowledged, the
Company and the Executive hereby agree as follows:
<PAGE>
1. Termination. (a) Effective June 30, 1993 the Executive's employment with
-----------
the Company shall cease and the Executive shall resign as Chairman of the Board
of the Company.
(b) At the present request of the Company from time to time, the Executive
shall resign as an officer and/or director of any subsidiary of the Company of
which the Executive is an officer and/or director.
2. Separation Arrangement. The Executive shall be paid as a severance payment
----------------------
an aggregate of $200,000 during the period January 1, 1994 through June 30,
1994 payable in equal weekly installments less applicable withholding taxes. In
addition, during such period, the Company shall pay the insurance premiums to
continue the Executive's current coverage under the terms of the JWP INC.
medical, dental and other insurance plans, subject to the provisions of such
plans, in the same proportion as is paid from time to time for senior
executives of the Company.
3. Noncompetition. (a) Covenant. The Executive covenants and agrees that
-------------- --------
during the period January 1, 1994 through December 31, 1994 he will not become
interested (including, without limitation, as an individual, partner,
shareholder, officer, director, principal, agent or consultant) in any business
which (i) induces employees of the Company or any
-2-
<PAGE>
Affiliate (as hereinafter defined) to terminate their employment with the
Company or any Affiliate or compete against the Company or any Affiliate in a
business substantially similar to the Company's Business in the Territory, (ii)
solicits the business of any customer, supplier or joint venturer of the
Company or any Affiliate in connection with a business substantially similar to
the Company's Business in the Territory except in connection with good faith
competition with the Company or any Affiliate, (iii) interferes with, or
attempts to discourage any customers of the Company or any Affiliate from doing
business with the Company or such Affiliate in the Territory except in
connection with good faith competition with the Company or any Affiliate; or
(v) except as otherwise required by law, makes any statement to any third
party, including the press or media, likely to result in adverse publicity for
the Company or any Affiliate thereof. The term Company Business means the
Mechanical and Electrical Services Business as currently conducted by the
Company and its Affiliates. The term Territory means the United States of
America. The term Affiliate means a person or entity that directly, or
indirectly through one or more intermediaries, controls or is controlled by, or
is under common control with, the Company.
(b) Remedies. The Executive acknowledges that the restrictions and covenants
--------
contained in this Section are reasonable and necessary to protect the
legitimate interests of the Company. The Executive understands and agrees that
the
-3-
<PAGE>
remedies at law for any violation of the restrictions or covenants of this
Section may be inadequate, that such violations may cause irreparable injury
within a short period of time and that the Company or any other entity entitled
to the protections afforded by this Section shall be entitled to preliminary
injunctive relief and other injunctive relief against such violation without
the necessity of providing actual damages. Such injunctive relief will be in
addition to and not in limitation of any and all remedies the Company or such
other entities will have at law and in equity for the enforcement of such
restrictions and covenants. Nothing in this Agreement will be construed as
prohibiting the Company from pursuing any other remedies available to the
Company in the event of any breach or threatened breach of this Agreement by
the Executive, including the recovery of damages from the Executive.
(c) Severability. The invalidity or unenforceability of any provision or
------------
portion of this Section will not affect the validity or enforceability of any
other provisions or portion of this Section of this Agreement.
4. Restricted Stock. (a) The Executive and the Company acknowledge that the
----------------
Executive presently owns 1,613,482 shares of the Company common stock, $.10 par
value, which shares were issued from time to time in private placement
transactions or pursuant to the Company's Senior Incentive and Restricted Stock
Award Plan and which are subject to the terms of this
-4-
<PAGE>
Agreement (the "Restricted Shares"). (The Executive also owns other shares of
Common Stock of the Company that are not the subject of this Agreement.) The
Executive also acknowledges that he may be deemed an "affiliate" as defined in
Rule 144 ("Rule 144") promulgated under the Securities Act of 1933, as amended
(the "Act").
The Executive and the Company agree that the Restricted Shares may not be
sold or otherwise be disposed of by the Executive until such shares shall have
vested as set forth in paragraph (b) below; provided that such shares, even
when vested, may not be sold or otherwise disposed of by the Executive unless
there is then in effect a registration statement under the Act permitting the
resale to the public by the Executive of the Restricted Shares or an exemption
from such registration exists and the Executive delivers an opinion of counsel,
satisfactory to counsel to the Company, that such exemption is available.
(b) The Restricted Shares which are not forfeited as provided in paragraph
(d) below shall, subject to the provisions of paragraph (c) below, vest and
cease to be subject to forfeiture as follows: on the fifteenth business day of
each calendar month (a "Vesting Date") commencing on November 15, 1993 that
shall vest that number of shares which is equal to the greatest number of
shares of common stock of the Company that may be sold by the Executive on such
Vesting Date pursuant to Rule 144(e)(1) and (3) (the "Fixed Number").
-5-
<PAGE>
(c) Notwithstanding the foregoing, in the event that as of a Vesting Date (i)
Restricted Shares are not eligible for sale under Rule 144 as a result of the
Company's failure to file reports as required by Rule 144(c)(1) or (ii) the
Executive may not sell Restricted Shares because, in the opinion of his
counsel, which he delivers to the Company, he is in possession of material
inside information, then shares due to vest on such Vesting Date shall not vest
on such Vesting Date (the "Suspended Shares"), and the Suspended Shares shall
continue to be subject to forfeiture. After all remaining Restricted Shares
have been vested, such Suspended Shares shall vest on the fifteenth business
day of each calendar month following the month in which the last remaining
Restricted Shares become vested; subject nevertheless to the same provisions as
to the number of shares vesting on the fifteenth business day of each calendar
month contained in paragraph (b) above with respect to Restricted Shares. (For
example, if there was a three month suspension period from March 15, 1994
through June 15, 1994 and the last Restricted Shares (other than the Suspended
Shares) would become vested on December 15, 1994, then the shares that did not
vest due to the failure to file reports or possession of material inside
information would vest on January 15, 1995, February 15, 1995 and March 15,
1995).
(d) In the event the Executive shall be in breach of his obligations under
Section 4 hereof or of his obligations under Section 2 of a Consulting
Agreement dated as of June 30,
-6-
<PAGE>
1993 between JWP Mechanical/Electrical Services, Inc. and the Executive, and
the Executive shall fail to cure such breach within 30 days after written
notice thereof, any Restricted Shares that shall not have vested as of such
date shall be forfeited. In the event any Restricted Shares shall be forfeited,
the Executive shall promptly deliver such shares to the Company together with a
stock power duly endorsed with signature guaranteed by a commercial bank or a
member firm to the New York Stock Exchange, which shares shall then be
transferred into the name of the Company and the Executive shall have no
further rights thereto.
(e) Once Restricted Shares shall have vested they shall no longer be subject
to forfeiture. On the date that Restricted Shares become vested the value of
such shares may become compensation to the Executive and the Company may be
required to remit a withholding tax to governmental authorities at such time.
It is accordingly understood and agreed that at the time such shares become
vested, the Executive shall pay to the Company in cash or permit the Company to
offset amounts that are otherwise due and owing by it to the Executive for the
purpose of providing withholding tax funds to the Company to remit to
governmental authorities whether federal, state, local or foreign.
5. Assignment. The Executive may not assign any rights, duties or obligations
----------
under this Agreement.
-7-
<PAGE>
6. Miscellaneous. This Agreement constitutes the entire agreement between the
-------------
parties and supersedes all prior agreements and/or understandings with respect
to the subject matter hereof, including the Employment Agreement, and except as
otherwise set forth herein no amounts whatsoever are owed or will be owed to
the Executive under the Employment Agreement. This Agreement will not be
modified or amended except by written agreement executed by the parties hereto.
Failure of either party to enforce any of the provisions of this Agreement will
in no way be considered a waiver of such provisions. If any provision of this
Agreement is found to be invalid or illegal under applicable law, the remainder
of this Agreement will be unaffected.
IN WITNESS WHEREOF, each of the undersigned have duly executed this Agreement
as of the date written above.
JWP INC.
By: /s/ Edward F. Kosnik
---------------------------
Edward F. Kosnik, President
and Chief Executive Officer
/s/ Andrew T. Dwyer
---------------------------
Andrew T. Dwyer
-8-
<PAGE>
EXHIBIT 10(m)
CONSULTING AGREEMENT
--------------------
THIS CONSULTING AGREEMENT dated as of June 30, 1993, is made between JWP
MECHANICAL/ELECTRICAL SERVICES, INC. (the "Company") and ANDREW T. DWYER (the
"Consultant").
WITNESSETH:
----------
WHEREAS, the Company is a wholly-owned indirect subsidiary of JWP INC.
("JWP") and the Consultant has been Chairman of the Board of JWP INC. and has
also served as President and Chief Executive Officer of JWP;
WHEREAS, the Employment Agreement (the "Employment Agreement") between the
Company and the Consultant, dated December 31, 1988, as amended, expires on
June 30, 1993; and
WHEREAS, the Company and the Consultant desire to provide for the retention
of the Consultant as a consultant to the Company through the end of the year
pursuant to the terms hereof;
NOW, THEREFORE, in consideration of the mutual promises set forth herein and
other valuable consideration, receipt of which is hereby acknowledged, the
Company and the Consultant hereby agree as follows:
<PAGE>
1. Consulting Services; Term. (a) During the period July 1, 1993 through
-------------------------
December 31, 1993 (the "Consulting Period") the Company hereby retains the
Consultant as a consultant to perform, and the Consultant hereby agrees to
perform, such consulting services and duties as the President and Chief
Executive Officer of JWP shall from time to time request.
(b) During the Consulting Period, the Company shall pay the Consultant the
aggregate sum of $242,500 payable in equal weekly payments plus $700 per month
as an automobile allowance. In addition during the Consulting Period, the
Company will pay the insurance premiums to continue the Consultant's current
coverage under the terms of the JWP INC. medical, dental and other insurance
plans, subject to the provisions of such plans, in the same proportion as is
paid from time to time for senior executives by the Company.
(c) The Consultant shall be entitled to reimbursement for all reasonable out-
of-pocket expenses incurred by him in the performance of his consulting duties
hereunder.
2. Noncompetition Covenant. (a) Covenant. The Consultant covenants and agrees
----------------------- --------
that during the period July 1, 1993 through December 31, 1993 he will not (i)
become interested (including without limitation as an individual, partner,
shareholder, officer, director, principal, agent or consultant) in any business
which conducts activities in the Territory (as hereinafter defined)
substantially similar to the Company's
-2-
<PAGE>
Business (as hereinafter defined), (ii) induce employees of the Company or any
Affiliate (as hereinafter defined) to terminate their employment with the
Company or any Affiliate or compete against the Company or any Affiliate in a
business substantially similar to the Company's Business in the Territory,
(iii) solicit the business of any customer, supplier or joint venturer of the
Company or any Affiliate in connection with a business substantially similar to
the Company's Business in the Territory, (iv) interfere with, or attempt to
discourage any customers of the Company or any Affiliate from doing business
with the Company or such Affiliate in the Territory; or (v) except as otherwise
required by law, make any statement to any third party, including the press or
media, likely to result in adverse publicity for the Company or any Affiliate
thereof. The term Company Business means the Mechanical and Electrical Services
Business as currently conducted by the Company and its Affiliates. The term
Territory means the United States of America. The term Affiliate means a person
or entity that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with, the Company.
(b) Remedies. The Consultant acknowledges that the restrictions and covenants
--------
contained in this Section are reasonable and necessary to protect the
legitimate interests of the Company. The Consultant understands and agrees that
the remedies at law for any violation of the restrictions or covenants of this
Section may be inadequate, that such violations
-3-
<PAGE>
may cause irreparable injury within a short period of time and that the Company
or any other entity entitled to the protections afforded by this Section shall
be entitled to the protections afforded by this Section shall be entitled to
preliminary injunctive relief and other injunctive relief against such
violation without the necessity of providing actual damages. Such injunctive
relief will be in addition to and not in limitation of any and all remedies the
Company or such other entities will have at law and in equity for the
enforcement of such restrictions and covenants. Nothing in this Agreement will
be construed as prohibiting the Company from pursuing any other remedies
available to the Company in the event of any breach or threatened breach of
this Agreement by the Consultant, including the recovery of damages from the
Consultant.
(c) Severability. The invalidity or unenforceability of any provision or
------------
portion of this Section will not affect the validity or enforceability of any
other provisions or portion of this Section of this Agreement.
3. Assignment. The Consultant may not assign any rights, duties or
----------
obligations under this Agreement.
4. Miscellaneous. This Agreement constitutes the entire agreement between the
-------------
parties with respect to the subject matter hereof. This Agreement will not be
modified or amended
-4-
<PAGE>
except by written agreement executed by the partners hereto. Failure of either
party to enforce any of the provisions of this Agreement will in no way be
considered a waiver of such provisions. If any provision of this Agreement is
found to be invalid or illegal under applicable law, the remainder of this
Agreement will be unaffected.
IN WITNESS WHEREOF, each of the undersigned have duly executed this Agreement
as of the date written above.
JWP MECHANICAL/ELECTRICAL SERVICES,
INC.
By: /s/ Edward F. Kosnik
-----------------------------
Edward F. Kosnik
Authorized Signatory
/s/ Andrew T. Dwyer
___________________________
Andrew T. Dwyer
-5-
<PAGE>
Exhibit 10(n)
RESTRICTED STOCK AGREEMENT
--------------------------
THIS RESTRICTED STOCK AGREEMENT dated as of November 24, 1992 between JWP
INC., a Delaware corporation ("JWP"), and EDWARD F. KOSNIK (the "Executive").
WHEREAS, JWP has adopted the Senior Incentive Compensation and Restricted
Stock Award Plan (the "Plan") pursuant to which it may grant to Eligible
Executives (as defined in the Plan) awards of shares of Common Stock of JWP (the
"Restricted Stock");
WHEREAS, in order to induce the Executive to become an employee of the
Company, JWP has agreed to grant an award of Restricted Stock to the executive;
WHEREAS, the Plan required the Executive to enter into a Restricted Stock
Agreement setting forth the terms and conditions of the grant of such Restricted
Stock;
NOW, THEREFORE, in consideration of the mutual premises set forth herein,
the parties hereto agree as follows:
<PAGE>
1. Restricted Stock Award. In consideration of the Executive's agreement
----------------------
to become Senior Vice President-Finance of JWP, the Executive is hereby granted
100,000 shares of Restricted Stock pursuant to the Plan. The certificates for
such shares shall contain the following legend:
"The shares represented by this certificate have been issued pursuant
to the JWP INC. Senior Incentive Compensation and Restricted Stock Award
Plan, as amended, and cannot be transferred or otherwise hypothecated by
the record holder hereof except in accordance with the Restricted Stock
Agreement dated as of November 24, 1992 between JWP INC. and the record
holder of these shares.
2. Restrictions on Transferability. (a) Shares of Restricted Stock may
-------------------------------
not be sold or otherwise be disposed of by the Executive until such shares shall
have vested as set forth in paragraphs (b) or (d) below; provided that such
shares, even when vested, may not be sold or otherwise disposed of by the
Executive unless there is then in effect a registration statement under the
Securities Act of 1933 (the "Act") permitting the resale to the public by the
Executive of the Restricted Stock or an exemption from such registration exists
and the Executive delivers an opinion of counsel, satisfactory to counsel to
JWP, that such exemption is available.
(b) The shares of Restricted Stock hereby granted and not hereafter
forfeited shall vest and cease to be subject to forfeiture as follows: (i)
one-third of the shares of Restricted Stock shall vest on November 24, 1993,
(ii) one-third of the shares of Restricted Stock shall vest on November 24,
1994, and (iii) one-third of the shares of Restricted Stock shall vest on
-2-
<PAGE>
November 24, 1995, unless vested earlier as set forth below. The shares of
Restricted Stock once vested shall not be subject to forfeiture and not required
to be resold to JWP as provided in paragraph (c) below in the event of
termination of the Executive's employment with JWP under the circumstances set
forth in paragraph (c). Shares of Restricted Stock that may be required to be
resold to JWP as provided herein are referred to herein as "subject to
forfeiture".
(c) Until the shares of Restricted Stock are vested, they are subject to
forfeiture (unless such forfeiture is waived by the Committee (the "Committee")
administering the Plan) and shall be deemed forfeited following any one of the
following events:
(i) in the event the Executive voluntarily terminates his employment
with JWP in the absence of there having occurred an event which constitutes Good
Reason (this term and each other capitalized term used herein shall have the
definition ascribed to it in paragraph (e) below); provided that the Executive
shall not be deemed to have voluntarily terminated his employment (w) if he
---
terminates his employment with JWP within three months of a Change of Control;
(x) if he shall die during his employment with JWP; or (y) if he terminates his
employment for any other meritorious reason as determined in the sole discretion
of the Committee; or
(ii) if the Executive's employment is terminated by JWP for Good
Cause.
-3-
<PAGE>
In the event the shares of Restricted Stock shall be forfeited as provided
above, the Executive shall promptly deliver such shares to JWP duly endorsed in
blank or with a duly executed stock power and JWP shall pay thereupon to the
Executive in respect of each such share an amount equal to the lesser of (x) the
closing price on the New York Stock Exchange of a share of JWP common stock as
of the date of the Executive's termination of employment or (y) the par value of
each such share.
(d) Notwithstanding paragraph (b) of this Section 2, the shares of
Restricted Stock shall vest upon the occurrence of the following: (i)
termination by JWP of Executive's employment without Good Cause, or (ii)
termination by the Executive of such employment, which termination is not
voluntary, as set forth in the proviso of subparagraph (c)(i) above, or (iii)
termination by the Executive of such employment within three months following
occurrence of an event which constitutes Good Reason. Upon such termination,
the shares of Restricted Stock shall cease to be subject to a risk of
forfeiture, and any restrictions on disposition (other than those provided in
the proviso of paragraph (a) above), shall cease.
(e) The capitalized terms used in this Section 2 shall have the meanings
specified below:
(i) "Good Cause" shall mean and be limited to the following events:
(w) the Executive's conviction (or nolo contendre plea) in connection with a
---- ---------
felony or misdemeanor involving moral turpitude or which in the opinion of the
Board of
-4-
<PAGE>
Directors of JWP is inimical to the best interests of JWP; or (x) admission by
the Executive to an act of fraud, theft or dishonesty against JWP or any of its
subsidiaries; or (y) willful neglect failure or refusal by the Executive
substantially to perform his duties (other than any such failure or refusal
resulting from the Executive's incapacity due to physical or mental illness); or
(z) willful misconduct by the Executive in connection with the performance of
his duties, including, without limitation, misappropriation of funds or property
of JWP or any of its subsidiaries, securing or attempting to secure personally
any profit in connection with any transaction entered into on behalf of JWP or
any subsidiary or any willful and intentional act having the effect of injuring
the reputation, business or business relationships of JWP or any subsidiary.
(ii) "Good Reason" shall mean (x) failure to elect or re-elect the
Executive to , or a removal of the Executive from, the office of Executive Vice
President and Chief Financial Officer; (y) a significant change in the nature or
scope of the authorities, powers, functions, duties or responsibilities attached
to such position or a reduction in his base salary as provided in the letter
dated December 21, 1992 by JWP to the Executive, which in either event is not
remedied within 30 days after receipt by JWP of written notice from the
Executive; or (z) the liquidation, dissolution, consolidation or merger of JWP
or transfer of all or a significant portion of JWP'S assets.
-5-
<PAGE>
(iii) "Change of Control" shall be deemed to have occurred if,
as a result of a tender offer, merger, consolidation, sale of assets or
contested election, or any combination of the foregoing transactions (a
"Transaction"), the persons who were directors of JWP immediately before the
Transaction shall cease to constitute a majority of the Board of Directors of
JWP or of any successor of JWP unless, subsequent to the Transaction and during
the period during which the shares are subject to forfeiture, Andrew T. Dwyer
continues to be the chief executive officer of JWP.
3. Taxes. On the date that the shares of Restricted Stock become
-----
vested the value of such shares may become compensation to the Executive and JWP
may be required to remit a withholding tax to governmental authorities at such
time. It is accordingly understood and agreed that at the time such shares
become vested, the Executive shall pay to JWP in cash or permit JWP to offset
amounts that are otherwise due and owing by it to the Executive for the purpose
of providing withholding tax funds to JWP to remit to governmental authorities
whether federal, state, local or foreign.
4. Adjustments. In the event of a change in the outstanding Common
-----------
Stock of JWP by reason of any stock dividend, stock split, recapitalization,
reorganization, merger, consolidation, combination, exchange of shares or the
like, the
-6-
<PAGE>
number and classes of shares of Restricted Stock shall be appropriately adjusted
to prevent dilution or enlargement of rights by the Board of Directors or the
committee administering the Plan, whose determination shall be conclusive, and
if, in connection with any merger, consolidation or sale or transfer by JWP of
substantially all of its assets, the date of termination of the transfer
restrictions set forth in Section 2 hereof shall be advanced to a date to be
fixed by the Board or such committee, which date may not be more than 15 days
prior to such merger, consolidation, or sale or transfer. In the event the
Executive receives additional shares pursuant to this Section 4, such shares
shall be deemed Restricted Stock, subject to the terms and conditions of this
Agreement, and the certificates for such shares shall contain the legend set
forth in Section 1 hereof.
5. Rights as a Stockholder. Except as otherwise provided herein, the
-----------------------
Executive shall have all of the rights of a stockholder of JWP, including the
right to receive any cash or stock dividends and shall have the right to vote
his Shares.
6. No Assignment. The shares of Restricted Stock may not be assigned or
-------------
transferred otherwise than by will or by the laws of descent and distribution
and they shall not be subject to attachment, garnishment, execution or other
creditor's processes.
-7-
<PAGE>
7. Gender. All references herein to the masculine gender shall be deemed
------
to include the feminine or neuter genders, as applicable.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
JWP INC.
By: /s/ ANDREW T. DWYER
-------------------------
Andrew T. Dwyer
/s/ EDWARD F. KOSNIK
-------------------------
Edward F. Kosnik
-8-
<PAGE>
EXHIBIT 10(o)
RESTRICTED STOCK AGREEMENT
--------------------------
THIS RESTRICTED STOCK AGREEMENT dated as of January 3, 1992 between JWP INC.,
a Delaware corporation (the "Company" or "JWP"), and DAVID L. SOKOL (the
"Executive").
WHEREAS, JWP has adopted the Senior Incentive Compensation and Restricted
Stock Award Plan (the "Plan") pursuant to which it may grant to Eligible
Executives (as defined in the Plan) awards of shares of Common Stock of JWP;
WHEREAS, in order to induce the Executive to join the Company, JWP hereby
wishes to grant an award of such shares to the Executive;
WHEREAS, the Plan requires the Executive to enter into a Restricted Stock
Agreement setting forth the terms of the grant of such shares, of which 100,000
shares are treasury shares and of which 50,000 shares are newly issued shares;
NOW, THEREFORE, in consideration of the mutual premises set forth herein, the
parties hereto agree as follows:
1. Restricted Stock Award. In consideration of the sum of one dollar and
----------------------
other good and valuable consideration, the Executive is hereby granted 150,000
shares (the "Shares") pursuant to the Plan, and in connection therewith the
Executive
<PAGE>
is herewith paying JWP $.10 per share in respect of each of the 50,000 newly
issued shares being delivered to him. The certificates for the Shares shall
contain the following legend:
"The shares may not be sold, transferred, or otherwise disposed of unless
the Company shall receive an opinion of counsel reasonably satisfactory to
it that the disposition of such shares is in compliance with the Securities
Act of 1933 and unless such disposition is in compliance with the terms of
an agreement dated as of January 3, 1992 entered into between the Company
and the registered holder hereof pursuant to the terms of the Senior
Incentive Compensation and Restricted Stock Award Plan of the Company."
2. Restrictions on Transferability. (a) The Shares may not be sold or
-------------------------------
otherwise be disposed of ("Disposition") by the Executive prior to the dates
referred to in paragraph (b) below; provided that the Shares, even when
available for Disposition, may not be sold or otherwise disposed of by the
Executive unless there is then in effect a registration statement under the
Securities Act of 1933 (the "Act") permitting the resale to the public by the
Executive of the Shares or an exemption from such registration exists and the
Executive delivers an opinion of counsel, reasonably satisfactory to JWP, that
such exemption is available.
(b) Except as otherwise provided herein, (i) one-third of the Shares shall be
available for Disposition on and after the date hereof, (ii) one-third of the
Shares shall be available for Disposition on and after the first anniversary of
the date
-2-
<PAGE>
hereof, and (iii) the balance of the Shares shall be available for Disposition
on and after the second anniversary of the date hereof.
3. Taxes. The value of the Shares are compensation to the Executive, and JWP
-----
is required to remit a withholding tax in respect thereof to governmental
authorities. Accordingly, promptly following the date hereof, it is understood
and agreed that the Executive shall pay to JWP in cash sufficient funds to
provide withholding tax funds to JWP to remit to governmental authorities
whether federal, state, local or foreign.
4. Adjustments. In the event the Executive receives additional shares by
-----------
reason of any stock dividend, stock split, recapitalization, reorganization,
merger, consolidation, combination, exchange of shares or the like, in respect
of the Shares such shares shall be deemed "Shares," subject to the terms and
conditions of this Agreement, and the certificates for such shares shall
contain the legend set forth in Section 1 hereof. In the event of any merger or
consolidation of JWP in which JWP shall not be the surviving corporation, or in
the event of any sale or transfer by JWP of substantially all of its assets,
the date of termination of the transfer restrictions set forth in Section 2
hereof shall be advanced to a date to be fixed by the Board of Directors of
JWP, which date may not be more than 15 days prior to such merger,
consolidation, or sale or transfer.
-3-
<PAGE>
5. Rights as a Stockholder. Except as otherwise provided herein, the
-----------------------
Executive shall have all of the rights of a stockholder of JWP, including the
right to receive any cash or stock dividends in respect of, and shall have the
right to vote, the Shares.
6. No Assignment. The Shares may not be assigned or transferred otherwise
-------------
than by will or by the laws of descent and distribution.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
JWP INC.
By: /s/ Andrew T Dwyer
------------------
Andrew T Dwyer
/s/ David L. Sokol
------------------
David L. Sokol
-4-
<PAGE>
EXHIBIT 10(p)
Drake & Scull Holdings Ltd.
One Canada Square
London E14 5AJ England
June 30, 1993
Mr. Stephen H. Kornfeld
17 Chapel Street
London SW1X 7BY England
Dear Mr. Kornfeld:
You currently are a Senior Vice President of JWP INC. ("JWP") and hold
directorships and executive officer positions with various JWP direct and
indirect subsidiaries, including JWP International Inc. ("International") and
Drake & Scull Holdings Ltd. ("D&S"). This will confirm your and our desire to
enter into this letter agreement of severance and to provide for future
severance payments and benefits and certain indemnification rights on the terms
set forth herein in return for your execution of certain releases and for other
good and valuable consideration.
By your execution below, you agree that your employment with JWP,
International, D&S and any other direct or indirect subsidiary of JWP or any
entity, company, corporation or association controlled by, or under common
control with JWP, International and/or D&S (all of the foregoing, including
JWP, International and D&S, referred to collectively as "JWP Entities") shall
terminate and be severed, with such severance and termination to become
effective on August 31, 1993 (the "Severance Date").
By way of compensation for loss of office and termination of your employment
and subject to the other terms and conditions herein, you shall become entitled
on the Severance Date to receive from D&S the aggregate sum of 277,000 Pounds
Sterling (the "Severance Sum"), of which 66,000 Pounds Sterling shall be
payable upon the Severance Date and the balance of 211,000 Pounds Sterling
shall be paid in twelve (12) equal monthly installments payable on the first
British business day of each month commencing October 1, 1993 with the last
such payment to occur on the first British business day in September 1994. The
Severance Sum shall be paid free and clear of any withholdings or deductions
other than PAYE at the basic rate of income tax on 36,000 Pounds Sterling
payable upon the Severance Date and PAYE at the basic rate of income tax on
211,00 Pounds Sterling payable in installments thereafter as aforesaid. D&S
warrants that it will properly account for and report PAYE arising hereunder.
D&S further agrees to provide or cause to be provided to you the following
additional benefits ("Severance Benefits") during the period from the Severance
Date until the first British
<PAGE>
business day in September 1994: (i) health insurance benefits comparable to
those you now enjoy, whether such coverage is currently provided in the U.K. or
in the United States through either D&S or any other JWP Entity, and (ii) the
use, in the United Kingdom, of the D&S car presently used by you, provided that
you shall be responsible for all costs and expenses of its operation.
JWP agrees to indemnify you and to hold you harmless against all liabilities,
damages, costs and expenses to the extent permitted by applicable law in
respect of actions taken or omitted to be taken by you in your capacity as a
director or officer of JWP or of any JWP direct or indirect subsidiary at any
time on or prior to the Severance Date. International agrees to indemnify you
and to hold you harmless against all liabilities, damages, costs and expenses
to the extent permitted by applicable law in respect of actions taken or
omitted to be taken by you in your capacity as a director or officer of
International or of any International direct or indirect subsidiary at any time
on or prior to the Severance Date. JWP U.K. Limited ("Limited") agrees to
indemnify you and to hold you harmless against all liabilities, damages, costs
and expenses to the extent permitted by applicable law in respect of actions
taken or omitted to be taken by you in your capacity as a director or officer
of Limited or of any Limited direct or indirect subsidiary at any time on or
prior to the Severance Date. D&S agrees to indemnify you and to hold you
harmless against all liabilities, damages, costs and expenses to the extent
permitted by applicable law in respect of actions taken or omitted to be taken
by you in your capacity as a director or officer of D&S or of any direct or
indirect subsidiary of D&S at any time on or prior to the Severance Date. JWP
shall provide to you the benefit of any directors and officers liability
insurance coverage, if any, provided to directors and officers of JWP generally
to the extent such policies are from time to time in effect. The foregoing
rights of indemnification and insurance coverage, if any, are referred to
herein as the "Indemnification Rights". The obligation, if any, of JWP,
International, Limited and D&S under the terms of this letter to advance you
your legal fees and related costs in any legal proceeding is contained in the
immediately succeeding paragraph.
In connection with your Indemnification Rights, JWP and International shall
advance reasonable legal fees and related costs that you may incur in
connection with any claim or proceeding alleging that you engaged in de facto
management with respect to JWP Information Services S.A.R.L. or JWP (France)
S.A.R.L. or alleging any similar liability with respect to the management of
JWP Information Services S.A.R.L. or JWP (France) S.A.R.L.; notwithstanding the
foregoing and the terms of the immediately preceding paragraph, if any JWP
Entity is a defendant in such proceeding or related proceeding and the law firm
representing a JWP Entity does not have a "conflict" with is additional
representation of you as well as other JWP Entity
-2-
<PAGE>
officers and directors that it may represent, it shall be a condition to a JWP
Entity's obligation to advance your legal fees and related costs and indemnify
you for legal fees and related costs that such law firm shall also represent
you, as well as such other JWP Entity officers and directors; and provided
further that if, because of such a conflict, you are required to retain
separate counsel in such proceeding, such counsel shall be acceptable to JWP,
which acceptance shall not be unreasonably withheld. In the event you incur any
reasonable legal fees and related costs in respect of any other actions taken
or omitted to be taken by you as a director or officer of a JWP Entity for
which a JWP Entity is permitted under applicable law to advance your legal
fees, the JWP Entity which has agreed, in accordance with the terms of the
preceding paragraph, to indemnify you for liabilities, damages, costs and
expenses in respect of a claim shall advance your related reasonable legal fees
and related costs to the extent such advancement is in accordance with
applicable law. As a condition to the covenants in the immediately preceding
sentence and those contained in the immediately preceding paragraph, it is
understood and agreed that to the extent a law firm representing a JWP Entity
does not have a "conflict" with its representation of you and any JWP Entity it
also represents, and any other JWP Entity officers and directors it may
represent, such law firm shall also represent you. Pursuant to the terms
hereof, it is expected that in your appearances before the Securities and
Exchange Commission you will be represented at JWP's expense by JWP's special
counsel, Paul, Weiss, Rifkind, Wharton & Garrison. (The rights referred to in
this paragraph shall be included in the term "Indemnification Rights".)
You hereby acknowledge and agree that the Severance Sum, the Severance
Benefits and the indemnification Rights constitute your entire severance
consideration. D&S hereby acknowledges and agrees that it shall in no way be
relieved of any liability to pay the Severance Sum and to provide or cause to
be provided the Severance Benefits hereunder and the Indemnification Rights to
be provided by it pursuant hereto by reason of you having served as a director
of, an officer of and/or having provided services to JWP and JWP Entities other
than D&S.
In consideration of the Severance Sum, the Severance Benefits and the
Indemnification Rights, you shall, promptly upon execution of this letter
agreement, cause D&S, if it has not already done so, to give an effective
notice of termination of the lease with respect to the house leased for your
use located at 17 Chapel Street, London, England so as to cause the termination
of the leasehold interest on September 15, 1993.
It is also understood and agreed that it shall be a condition precedent to
D&S's, JWP's, Limited's and International's respective obligations hereunder
that you and any corporation or other entity that you own or control shall have
-3-
<PAGE>
executed a blanket release of all claims, amounts or sums (other than the
Severance Sum, the Severance Benefits and the Indemnification Rights) owning or
alleged to be owed to you by any JWP Entity (except for claims, if any, under
that Purchase Agreement dated December 2, 1988 among you and JWP and others
with respect to the acquisition by JWP of the capital stock of H & F Kornfeld,
Inc. and any related agreements), which release shall be in form and substance
reasonably satisfactory to D&S and JWP and their U.S. and English legal
advisors.
Nothing herein contained shall affect your rights as lessor of the premises
located at 30 North McQuesten Parkway, Mount Vernon, New York pursuant to a
lease with JWP and H & F Kornfeld, Inc., as lessees.
Please indicate your agreement to the foregoing by executing a copy of this
letter agreement in the space provided below and returning such copy to us.
Execution of this letter agreement may be in one or more counterparts with all
such counterparts to constitute one an the same instrument.
This letter agreement shall be governed by English law.
By signing a copy of this letter agreement, (i) D&S hereby agrees to the
terms hereof binding upon it as a direct obligor, (ii) International hereby
agrees to the terms hereof binding upon it as a direct obligor, (iii) Limited
hereby agrees to the terms hereof binding upon it as a direct obligor and (iv)
JWP hereby agrees to the terms hereof binding upon it as a direct obligor. By
signing a copy of this letter JWP also hereby agrees to guarantee to you as
principal debtor and with the intent such guarantee shall constitute an
indemnity in your favor, the full and timely payment and performance by D&S of
the Severance Sum and the Severance Benefits, all in accordance with the terms
hereof, such guaranty to be irrevocable, continuing, unconditional and absolute
and to constitute a guarantee of payment and not of collection. Without
limiting the generality of the foregoing, the obligations of JWP as guarantor
hereunder shall in no way be affected or impaired by reason of (i) the release,
modification or waiver of, or failure to enforce, any right or benefit under
this letter agreement, (ii) the settlement or compromise of any obligation
hereunder owed to you by D&S or any other JWP Entity hereunder or (iii) the
voluntary of involuntary liquidation, dissolution, bankruptcy, insolvency or
reorganization of D&S or any other JWP Entity.
The material terms and conditions of this letter agreement have been approved
by the Compensation and Personnel Committee of the Board of Directors of JWP
and shall be approved
-4-
<PAGE>
by the Board of Directors of International and by the stockholders and Board of
Directors of Limited and by the stockholders and Board of Directors of D&S.
Very truly yours,
DRAKE & SCULL HOLDINGS LTD.
By:/s/ Edward F. Kosnik
---------------------------
Edward F. Kosnik
Authorized Signatory
Accepted and Agreed to:
JWP INC.
By: /s/ Edward F. Kosnik
---------------------
Edward F. Kosnik, President
and Chief Executive Officer
Accepted and Agreed to:
JWP INTERNATIONAL, INC.
By: /s/ Edward F. Kosnik
---------------------
Edward F. Kosnik
Authorized Signatory
Accepted and Agreed to:
JWP U.K. LIMITED
By: /s/ Edward F. Kosnik
---------------------
Edward F. Kosnik
Authorized Signatory
Accepted and Agreed to:
/s/ Stephen H. Kornfeld
- - - - - - - - - -------------------------
Stephen H. Kornfeld
-5-
<PAGE>
EXHIBIT 10(q)
LOGO JWP
Corporate Headquarters
Andrew T. Dwyer
Chairman
and Chief Executive Officer
August 21, 1992
Mr. David L. Sokol
516 Cross River Road
Katonah, New York 10536
Dear David:
The Company is facing extraordinary challenges at this juncture in its
development. I and our Board are conscious of the very important contributions
you have made over the recent months since you joined the Company, primarily in
restructuring its divisions and negotiating with our lenders. Given the
difficulties that the Company is facing and the essential role you are playing
in helping to resolve them, the Company desires to have you agree to remain an
employee and officer during the critical months ahead, and you and we have
agreed on the following arrangement:
1. You will continue to be employed by the Company at least through
November 15, 1992 (the "Term"), and during the Term will render exclusive and
full-time services as President and Chief Operating Officer, subject only to the
supervision of the Chairman and the Board of Directors. You will continue to
serve as a member of the Board of Directors and will have special
responsibilities for completing the reorganization of the Company, negotiating
with the Company's lenders and strengthening the Company's financial controls
system. It is recognized that these are high priorities for the Company if it
is to continue as a viable and profitable business entity.
2. It is understood that you have no legal obligation to remain at the
Company after expiration of the Term, although it is expected that we will
discuss your future employment at the end of the Term. Nevertheless, you agree
that if you leave the employ of the Company, you will consult with the Company
for a six-month period after termination on an nonexclusive basis for at least
four hours per week at an hourly fee that is customary and reasonable under the
circumstances plus expenses. Such consultation will be scheduled so as to
minimize any interference with your other activities and you will not be
required to travel on consultation except as you may find convenient.
3. You agree that for one year after termination of your employment you
will not compete in any material way with the Company or join any other business
entity that competes with the
<PAGE>
Company in its major lines of business. You will, after your employment with
the Company, maintain the confidentiality of the Company's proprietary
information including customer lists, trade knowhow, pricing information,
operational methods, and other aspects of its business affairs that are
reasonably viewed as proprietary.
Following termination of your employment, you agree that you will refrain
from disparagement of the Company or any of its subsidiaries or the officers,
directors or employees of the Company or any of its subsidiaries.
4. As you know, the Company is involved in class action litigation and you
agree, after the termination of your employment, to make yourself available to
the Company and its counsel as reasonably required in connection with any
pending or related litigation, governmental investigation or other legal
proceedings. The Company will pay any expenses that may be required in
connection with such cooperative activities.
5. As compensation for your services you will continue to receive your
present salary plus all benefits as presently in effect.
6. In consideration of your agreement hereunder, the Company will pay you
a special bonus of $1,000,000, which will be paid on the date hereof, and the
Company hereby releases you from your covenant not to sell 100,000 shares of the
Company's common stock heretofore granted to you. You have no obligation to
refrain from selling an additional 50,000 shares of the Company's common stock
also heretofore granted to you. However, you continue to be obligated not to
dispose of the 150,000 shares in violation of the Securities Act of 1933. You
have been advised that a reoffer prospectus relating to these 150,000 shares (a
"Reoffer Prospectus") has not yet been filed with the Securities and Exchange
Commission. In order for any such sale to be in compliance with the Securities
Act of 1933, the Company must file a Reoffer Prospectus with respect to the
filed Registration Statement covering shares issued under the Company's Senior
Incentive Compensation and Restricted Stock Award Plan pursuant to which the
150,000 shares were issued to you. Upon your written request, the Company,
within three business days thereof, will file with the Securities and Exchange
Commission a Reoffer Prospectus.
7. This agreement shall be governed by and enforced in accordance with the
laws of the State of New York and sets forth the entire agreement and
understanding between us.
8. This agreement may not be amended, modified, superseded, cancelled,
renewed or extended except by a written instrument between us.
-2-
<PAGE>
9. This agreement has been approved by the Executive Committee and the
Compensation Committee (Thomas W. Keesee, Jr., being absent) of the Board of
Directors following consultation with the members of the Board, other than Mr.
Keesee.
If this agreement is in accordance with our understanding, please sign one
copy and return it to me.
Very truly yours,
/s/ Andrew T. Dwyer
Andrew T. Dwyer, Chairman
Accepted and agreed to:
/s/ David L. Sokol
- - - - - - - - - ---------------------
David L. Sokol
-3-
<PAGE>
EXHIBIT 10(R)
EXHIBIT A
JWP INC. EMPLOYEES'
SEVERANCE PAY/STAY BONUS PLAN
(as amended and restated as of March 16, 1994)
<PAGE>
Exhibit 10(r)
JWP INC. EMPLOYEES'
SEVERANCE PAY/STAY BONUS PLAN
(as amended and restated as of March 16, 1994)
JWP INC. ("Company") hereby establishes and adopts effective as of
June 25, 1993 ("Effective Date"), the JWP INC. Employees' Severance Pay/Stay
Bonus Plan ("Plan") for the benefit of its eligible employees in order to
encourage such employees to contribute their employment over the next two years
during the period in which the Company is restructuring its business operations.
I. Eligibility
-----------
Those employees of the Company (including officers) who are listed on
Appendix A of the Plan will become Plan participants ("Participants") as of the
Effective Date and will be eligible to receive the specific amounts of severance
pay and/or stay bonus, if any, indicated for each individual Participant on
Appendix A ("Designated Amount(s)") in the event they become entitled to receive
severance pay or a stay bonus by satisfying the requirements set forth in
Section II of the Plan.
Each Participant will be notified in writing by the Committee
appointed to administer the Plan pursuant to Section V ("Committee") of his
selection for coverage under the Plan and such notification will specify the
Designated Amounts he is eligible to receive.
<PAGE>
II. Entitlement to Designated Amounts
---------------------------------
A. Severance Pay
-------------
A Participant will be entitled to receive his Designated Amount of
severance pay in the event that his employment with the Company is terminated
(for reasons other than death, disability or his voluntary resignation) during
the two-year period commencing on June 25, 1993 and ending on June 24, 1995;
provided, however, that Participant will not be entitled to any severance pay
under this Plan if his employment with the Company is terminated (whether on
account of discharge or resignation in lieu of discharge) "for cause."
A Participant's termination of employment will be deemed to be "for
cause" in the following situations:
(1) the Participant's conviction (or nolo contendre plea) in
---- ---------
connection with a felony or misdemeanor involving moral turpitude or which in
the opinion of the Board of Directors of the Company is inimical to the best
interests of the Company;
(2) admission by the Participant to an act of fraud, theft or
dishonesty against the Company or any subsidiary;
(3) willful neglect, willful failure or willful refusal by the
Participant substantially to perform his duties (other than any such failure or
refusal resulting from the Participant's incapacity due to physical or mental
illness); or
2
<PAGE>
(4) willful misconduct by the Participant in connection with the
performance of his duties, including, without limitation, misappropriation of
funds or property of the Company or any subsidiary, securing or attempting to
secure personally any profit in connection with any transaction entered into on
behalf of the Company or any subsidiary or any willful and intentional act
having the effect of injuring the reputation, business or business relationships
of the Company or any subsidiary.
In the event a Participant shall terminate his employment with the
Company (by resignation or otherwise) following a reduction in his then base
salary or following a material reduction in his duties or responsibilities, then
for purposes hereof the Company shall be deemed to have terminated his
employment with the Company without cause and the Participant shall be entitled
to the Designated Amount of his severance pay and his stay bonus as provided
herein.
B. Stay Bonus
----------
A Participant will be entitled to receive the Designated Amount of his
stay bonus if he remains continuously employed for the period commencing on June
25, 1993 and ending on the earlier of September 30, 1994 or the date that an
order confirming a plan of reorganization of the Company is signed by the United
States Bankruptcy Court, Southern District of New York (the earlier of which
dates is hereafter referred to as the "Target Date"). Notwithstanding the
preceding, if a
3
<PAGE>
Participant's employment with the Company is terminated (for reasons other than
for cause or by reason of his death, disability, or voluntary resignation) prior
to the Target Date, then such Participant shall be entitled to a stay bonus
which shall be a percentage (not in excess of 100%) of the Designated Amount of
his stay bonus which is equal to the percentage determined by dividing by 12 the
number of consecutive 30-day periods or portions thereof (not exceeding 12), the
first commencing June 25, 1993 and ending July 24, 1993, that the Participant is
employed by the Company during the period commencing on June 25, 1993 and ending
on June 24, 1994.
III. Sources of Benefits
-------------------
A. All severance pay and/or stay bonuses payable under the Plan
represent an obligation of the Company which shall be paid from its general
assets; provided, however, that the Company may, from time to time, in its sole
discretion, make contributions to a taxable trust ("Trust") which it may
establish pursuant to Subparts A and B, Part I, Subchapter J, Chapter 1,
Subtitle A of the Internal Revenue Code of 1986, as amended, ("Code") to pre-
fund all or a portion of a Participant's benefits to which he may become
entitled pursuant to Section II of the Plan. Any such discretionary
contributions will be allocated to the account of each individual Participant
("Account") by the trustee of the Trust ("Trustee") as directed by the
Committee. The Company has no obligation to direct the Trustee to allocate
contributions to the Trust to the Accounts of individual
4
<PAGE>
Participants on a pro rata basis with respect to the Designated Amounts of all
Participants.
B. Payments from the Trust to the Participants shall be in discharge
of the Company's liability under the terms of the Plan to such Participants to
the extent such benefits are paid from the Trust. It is the intent of the
Company that each Account established pursuant to Section III be treated as a
separate trust designed to satisfy, in whole or in part, the Company's liability
under the Plan to the Participant with respect to whose benefits such Account is
maintained.
C. Subject to the provisions of Subsection D of Section VI hereof,
the Trust shall be irrevocable. In addition, the assets of the Trust to be
credited to the Participants' Accounts shall not be subject to the claims of the
creditors of the Company in a bankruptcy or other insolvency proceeding under
federal or state law, and subject to Subsection E of this Section, shall be
maintained for the exclusive purpose of providing benefits to Participants under
the Plan.
D. Each Participant shall have a secured interest in the Account
maintained in the Trust with respect to his benefits payable under the Plan.
Each Participant's Account will be maintained as a separate account within the
meaning of Section 404(a)(5) of the Code. The Company agrees that, except as
otherwise provided in Subsection E of this Section, during the existence of the
Trust the Company shall not permit or cause, or amend this Plan to permit or
cause, the Trust, or any part
5
<PAGE>
hereof, to be sued for or diverted to purposes other than the payment of
benefits under the Plan to Participants.
E. Although the Participants will have a secured interest in the
contributions made by the Company and credited to their Accounts, they shall
have no interest, secured or unsecured, in the income of the Trust (including
unrealized capital gains). The Trustee shall distribute such income quarterly
to the Company which will be responsible for the payment of any federal, state
or local taxes payable on such income and will be deemed the grantor of a
grantor trust for this purpose within the meaning of Subpart E, Part I,
Subchapter J, Chapter 1, Subtitle A of the Code.
IV. Distribution of Benefits.
------------------------
A. As soon as practicable following the date a Participant becomes
entitled to receive a stay bonus or severance pay under Section II of the Plan,
the Company shall direct the Trustee to distribute to him in a lump sum the
lesser of: the amount credited to his Account in the Trust, or the amount of his
stay bonus or severance pay benefit to which he is then entitled. To the extent
that the amount credited to his Account is less than such benefit, he shall
receive the balance from the Company, either in a lump sum or in weekly
installments (not exceeding 52 installments), at such times and such amounts, as
determined by the Committee, in its sole discretion.
B. Payments under the Plan are subject to federal, state and local
income tax withholding and all other
6
<PAGE>
applicable federal, state and local taxes. The Trustee shall withhold from the
Trust and the Company shall withhold from any payments it makes all applicable
federal, state and local withholding taxes and the employee shall be required to
file any necessary certificate or other form in connection therewith prior to
receiving any payments.
C. In the event that a Participant dies or becomes disabled prior to
becoming entitled to any benefit payable under the Plan, his right to such
benefit shall be forfeited. In the event a Participant dies after becoming
entitled to a benefit payable under the Plan but prior to recovering the full
amount of such benefit, his designated beneficiary or his estate (if no
beneficiary has been designated) shall be entitled to receive such unpaid
benefits on the date or dates that the Participant would have received them
while living.
V. Administration
--------------
A. The Plan shall be administered by an administrative Committee
appointed by the Board of Directors, which shall consist of such number of
persons as shall from time to time be determined by the Board of Directors.
Members of the Committee may be officers, directors, employees of the Company or
others and shall hold office at the pleasure of the Board of Directors and
without compensation, unless otherwise determined by the Board of Directors.
The Committee shall be charged with the operation and administration of the
Plan. The Committee shall have the power to interpret and construe this Plan
and to
7
<PAGE>
determine all questions arising under this Plan, to adopt and amend from time to
time such rules and regulations necessary for the administration of this Plan
which are not inconsistent with the terms and provisions of this Plan; provided
that the Board of Directors shall retain the power to determine all questions of
eligibility, status and rights of Participants.
B. In the event that a Participant or former Participant ("Claimant")
submits a written claim to the Committee claiming that all or a portion of his
benefits under the Plan have been denied in error or inappropriately calculated,
the Committee shall notify the Claimant in writing of its decision regarding
such claim within ninety (90) days of the date the claim is received by the
Committee, unless special circumstances warrant an extension of time for
processing the claim. Such extension shall not exceed ninety (90) days and no
extension shall be allowed unless, within the initial ninety (90) days period,
the Claimant is sent a notice of extension indicating the special circumstances
requiring the extension and specifying a date which the Committee expect to
render their decision. If the Committee denies the Participant's claim in whole
or in part, the Committee shall advise the Claimant in writing of: (1) the
specific reason or reasons for the denial; (2) specific references to pertinent
Plan provisions on which the Committee based its denial of the claim (the
"Denial"); (3) a description of any additional material and information needed
for the Claimant to perfect his entitlement to benefits and an
8
<PAGE>
explanation of why the material or information is needed; (4) a statement that
the Claimant may: (a) request a review of the Denial upon written application to
the Committee, and (b) review pertinent Plan documents, and (c) submit issues
and comments in writing; and (5) the names of the members of the Committee and
the name and address of each member of such Committee to whom the claimant may
forward any appeal of the Denial. The Committee's notice must further advise
the Claimant that his failure to appeal the action to the Committee in writing
within the sixty (60) day period will render the Committee's determination
final, binding, and conclusive.
Any appeal that the Claimant wishes to make from the Denial must be
made, in writing, to the Committee, within sixty (60) days after receipt of the
Committee's notice thereof. If the Claimant should appeal to the Committee, he
or his duly authorized representative may submit, in writing, whatever issues
and comments he, or his duly authorized representative, feel are pertinent. The
Committee shall re-examine all facts related to the appeal and make a final
determination as to whether the Denial is justified under the circumstances.
The Committee shall advise the Claimant, in writing, of its decision on appeal,
the specific reasons for the decision, and the specific Plan provisions on which
the decision is based. The notice of the decision shall be given within sixty
(60) days of the Claimant's written request for review, unless special
circumstances (such as a hearing) require an extension of the sixty (60) day
period, but
9
<PAGE>
in no event shall the Committee render a decision on an appeal from the Denial
later than one hundred twenty (120) days after receipt of a request for review.
If an extension of time for review is required because of special circumstances,
written notice of the extension shall be furnished to the Claimant prior to the
date the extension period commences.
VI. Miscellaneous
-------------
A. Nothing contained herein shall give any employee the right to be
retained in the employment of the Company or any successor, or affect the
Company's right to dismiss any employee at will. The Plan is not a term or
condition of any individual's employment and no employee shall have any legal
right to payments hereunder except to the extent all conditions relating to the
receipt of such payments have been satisfied.
B. Nothing contained herein shall give an employee any right to any
employee benefit upon termination of employment with the Company, except as
specifically provided herein, required by law, provided by the terms of another
employment agreement or any employee benefit plan document relating to the
treatment of former employees generally.
C. No person having a benefit under the Plan may assign, transfer or
in any other way alienate the benefit, nor shall any benefit under this Plan be
subject to garnishment, attachment, execution or levy of any kind.
10
<PAGE>
D. The Plan shall terminate automatically, effective as of August 24,
1995, unless the termination date is deferred to a later date by the Board of
Directors of the Company ("Deferred Termination Date"). The Board of Directors
of the Company may amend, suspend or terminate the Plan or any portion thereof
at any time prior to the later of August 24, 1995 or any Deferred Termination
Date; provided, however, that unless the written consent of a Participant is
obtained, no such amendment or termination shall adversely affect the rights of
any Participant. Upon termination of the Plan, all Plan benefits not payable
from the Trust shall be paid by the Company within 60 days of such termination
date. Upon termination of both the Plan and the Trust, any assets remaining in
the Trust after all benefits payable under the plan have been paid in full shall
be returned to the Company.
E. This Plan and all action taken under it shall be governed as to
validity, construction, interpretation and administration by the laws of the
State of New York except to the extent preempted by applicable federal law.
F. The masculine pronoun shall be deemed to include the feminine, and
the singular number shall be deemed to include the plural unless a different
meaning is plainly required by the context.
G. The Company shall take all necessary actions to insure that any
successor, whether direct or indirect, by operation of law, by purchase, merger,
consolidation, liquidation
11
<PAGE>
or otherwise, to substantially all of the business and/or assets of the Company
(sometimes referred to herein as the "successor/acquiror") expressly assumes the
obligations of the Company under this Plan. If the Company does not make this
Plan binding upon any successor/acquiror, the Company shall reserve such amounts
as are necessary to meet the obligations hereunder, from the Company's general
assets or from amounts otherwise realized or derived in connection with the
transaction in which the successor/acquiror succeeds to control of the Company.
12
<PAGE>
EXHIBIT 10(s)
RESTRICTED STOCK AGREEMENT
--------------------------
THIS RESTRICTED STOCK AGREEMENT dated as of January 15, 1993 between JWP
INC., a Delaware corporation ("JWP"), and STEPHEN H. MEYERS (the "Executive").
WHEREAS, JWP has adopted the Senior Incentive Compensation and Restricted
Stock Award Plan (the "Plan") pursuant to which it may grant to Eligible
Executives (as defined in the Plan) awards of shares of Common Stock of JWP
(the "Restricted Stock");
WHEREAS, in order to induce the Executive to become an employee of the
Company, JWP has agreed to grant an award of Restricted Stock to the Executive;
WHEREAS, the Plan requires the Executive to enter into a Restricted Stock
Agreement setting forth the terms and conditions of the grant of such
Restricted Stock;
NOW, THEREFORE, in consideration of the mutual premises set forth herein, the
parties hereto agree as follows:
<PAGE>
1. Restricted Stock Award. In consideration of the Executive's agreement to
----------------------
become Senior Vice President-Finance of JWP, the Executive is hereby granted
50,000 shares of Restricted Stock pursuant to the Plan. The certificates for
such shares shall contain the following legend:
"The shares represented by this certificate have been issued pursuant to
the JWP INC. Senior Incentive Compensation and Restricted Stock Award Plan,
as amended, and cannot be transferred or otherwise hypothecated by the
record holder hereof except in accordance with Restricted Stock Agreement
dated as of January 15, 1993 between JWP INC. and the record holder of
these shares.
2. Restrictions on Transferability. (a) Shares of Restricted Stock may not be
-------------------------------
sold or otherwise be disposed of by the Executive until such shares have vested
as set forth in paragraphs (b) or (d) below; provided that such shares, even
when vested, may not be sold or otherwise disposed of by the Executive unless
there is then in effect a registration statement under the Securities Act of
1933 (the "Act") permitting the resale to the public by the Executive of the
Restricted Stock or an exemption from such registration exists and the
Executive delivers an opinion of counsel, satisfactory to counsel to JWP, that
such exemption is available.
(b) The shares of Restricted Stock hereby granted and not hereafter forfeited
shall vest and cease to be subject to forfeiture as follows: (1) one-third of
the shares of Restricted Stock shall vest on January 15, 1994, (ii) one-third
of the shares of Restricted Stock shall vest on January 15, 1995, and (iii)
one-third of the shares of Restricted Stock shall vest on
-2-
<PAGE>
January 15, 1996, unless vested earlier as set forth below. The shares of
Restricted Stock once vested shall not be subject to forfeiture and not
required to be resold to JWP as provided in paragraph (c) below in the event of
termination of the Executive's employment with JWP under the circumstances set
forth in paragraph (c). Shares of Restricted Stock that may be required to be
resold to JWP as provided herein are referred to herein as "subject to
forfeiture".
(c) Until the shares of Restricted Stock are vested, they are subject to
forfeiture (unless such forfeiture is waived by the Committee (the "Committee")
administering the plan) and shall be deemed forfeited following any one of the
following events:
(i) in the event the Executive voluntarily terminates his employment with JWP
in the absence of there having occurred an event which constitutes Good Reason
(this term and each other capitalized term used herein shall have the
definition ascribed to it in paragraph (e) below); provided that the Executive
shall not be deemed to have voluntarily terminated his employment (w) if he
---
terminates his employment with JWP within three months of a Change of Control;
(x) if he shall die during his employment with JWP; or (y) if he terminates his
employment for any other meritorious reason as determined in the sole
discretion of the Committee; or
(ii) if the Executive's employment is terminated by JWP for Good Cause.
-3-
<PAGE>
In the event the shares of Restricted Stock shall be forfeited as provided
above, the Executive shall promptly deliver such shares to JWP duly endorsed in
blank or with a duly executed stock power and JWP shall pay thereupon to the
Executive in respect of each such share an amount equal to the lesser of (x)
the closing price on the New York Stock Exchange of a share of JWP common stock
as of the date of the Executive's termination of employment or (y) the par
value of each such share.
(d) Notwithstanding paragraph (b) of this Section 2, the shares of Restricted
Stock shall vest upon the occurrence of the following: (i) termination by JWP
of Executive's employment without Good Cause, or (ii) termination by the
Executive of such employment, which termination is not voluntary, as set forth
in the proviso of subparagraph (c) (i) above, or (iii) termination by the
Executive of such employment within three months following occurrence of an
event which constitutes Good Reason. Upon such termination, the shares of
Restricted Stock shall cease to be subject to a risk of forfeiture, and any
restrictions on disposition (other than those provided in the proviso of
paragraph (a) above), shall cease.
(e) The capitalized terms used in this Section 2 shall have the meanings
specified below:
(i) "Good Cause" shall mean and be limited to the following events: (w)
the Executive's conviction (or nolo contendre plea) in connection with a
--------------
felony or misdemeanor involving moral turpitude or which in the opinion of
the Board of
-4-
<PAGE>
Directors of JWP is inimical to the best interests of JWP; or (x) admission by
the Executive to an act of fraud, theft or dishonesty against JWP or any of its
subsidiaries; or (y) willful neglect failure or refusal by the Executive
substantially to perform his duties (other than any such failure or refusal
resulting from the Executive's incapacity due to physical or mental illness);
or (z) willful misconduct by the Executive in connection with the performance
of his duties, including, without limitation, misappropriation of funds or
property of JWP or any of its subsidiaries, securing or attempting to secure
personally any profit in connection with any transaction entered into on behalf
of JWP or any subsidiary or any willful and intentional act having the effect
of injuring the reputation, business or business relationships of JWP or any
subsidiary.
(ii) "Good Reason" shall mean (x) failure to elect or re-elect the Executive
to, or removal of the Executive from, the office of Executive Vice President
and Chief Financial Officer; (y) a significant change in the nature or scope of
the authorities, powers, functions, duties or responsibilities attached to such
position or a reduction in his base salary as provided in the letter dated
December 21, 1992 by JWP to the Executive, which in either event is not
remedied within 30 days after receipt by JWP of written notice from the
Executive; or (z) the liquidation, dissolution, consolidation or merger of JWP
or transfer of all or a significant portion of JWP's assets.
-5-
<PAGE>
(iii) "Change of Control" shall be deemed to have occurred if, as a result of
a tender offer, merger, consolidation, sale of assets or contested election, or
any combination of the foregoing transactions (a "Transaction"), the persons
who were directors of JWP immediately before the Transaction shall cease to
constitute a majority of the Board of Directors of JWP or of any successor of
JWP unless, subsequent to the Transaction and during the period during which
the shares are subject to forfeiture, Andrew T. Dwyer continues to be the chief
executive officer of JWP.
3. Taxes. On the date that the shares of a Restricted Stock become vestee the
-----
value of such shares may become compensation to the Executive and JWP may be
required to remit a withholding tax to governmental authorities at such time.
It is accordingly understood and agreed that at such shares become vested, the
Executive shall pay to JWP in cash or permit JWP to offset amounts that are
otherwise due and owing by it to the Executive for the purpose of providing
withholding tax funds to JWP to remit to governmental authorities whether
federal, state, local, or foreign.
4. Adjustments. In the event of a change in the outstanding Common Stock of
-----------
JWP by reason of any stock dividend, stock split, recapitalization,
reorganization, merger, consolidation, combination, exchange of shares or the
like, the
-6-
<PAGE>
number and classes of shares of Restricted Stock shall be appropriately
adjusted to prevent dilution or enlargement of rights by the Board of Directors
or the committee administering the Plan, whose determination shall be
conclusive, and if, in connection with any merger, consolidation or sale or
transfer by JWP of substantially of its assets, the date of termination of the
transfer restrictions set forth in Section 2 hereof shall be advanced to a date
to be fixed by the Board or such committee, which date may not be more than 15
days prior to such merger, consolidation, or sale or transfer. In the event the
Executive receives additional shares pursuant to this Section 4, such shares
shall be deemed Restricted Stock, subject to the terms and conditions of this
Agreement, and the certificates for such shares shall contain the legend set
forth in Section 1 hereof.
5. Rights as a Stockholder. Except as otherwise provided herein, the
-----------------------
Executive shall have all of the rights of a stockholder of JWP, including the
right to receive any cash or stock dividends and shall have the right to vote
his Shares.
6. No Assignment. The shares of Restricted Stock may not be assigned or
-------------
transferred otherwise than by will or by the laws of descent and distribution
and they shall not be subject to attachment, garnishment, execution or other
creditor's processes.
-7-
<PAGE>
7. Gender. All references herein to the masculine gender shall be deemed to
------
include the feminine or neuter genders, as applicable.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
JWP INC.
By: /s/ EDWARD F. KOSNIK
----------------------------------
Edward F. Kosnik
/s/ STEPHEN H. MEYERS
----------------------------------
Stephen H. Meyers
-8-
<PAGE>
EXHIBIT 10(t)
EXECUTION COPY
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of this 18th day of April, 1994 by and between JWP
INC., a debtor-in-possession (the "Company") and FRANK T. MACINNIS
("Executive").
RECITALS
The Company is operating as a debtor-in-possession under Chapter 11 of the
United States Bankruptcy Code (the "Bankruptcy Code") under the Jurisdiction of
the United States Bankruptcy Court for the Southern District of New York (the
"Court"). The Company has filed with the Court a proposed Plan of Reorganization
(the "Plan") which has not yet been confirmed.
In order to induce Executive to serve as Chief Executive Officer and President
of the Company and as Chairman of the Board of Directors of the Company ("the
Board"), commencing while the Company is still a debtor-in-possession and
continuing after confirmation of the Plan (as it may be modified), the Company
desires to provide Executive with compensation and other benefits under the
conditions set forth in this Agreement.
Executive is willing to accept such employment and perform services for the
Company and its subsidiaries, on the terms and conditions hereinafter set forth.
It is therefore hereby agreed by and between the parties as follows:
1. Employment.
----------
1.1 Subject to the terms and conditions of this Agreement, the Company agrees
to employ Executive during the Period of Employment (as hereinafter defined) as
the Chief Executive Officer and President of the Company. In his capacity as
Chief Executive Officer of the Company, Executive shall have the customary
powers, responsibilities and authorities of chief executive officers of similar
corporations of the size, type and nature of the Company as it may exist from
time to time, including, but not limited to, authority over all personnel
decisions and business policies and practices, subject to the direction of the
Board of Directors of the Company (the "Board").
<PAGE>
2
1.2 The Company shall, during the Period of Employment (as hereinafter
defined), make its best efforts to insure the election and retention of
Executive as Chairman of the Board.
1.3 Subject to the terms and conditions hereof, Executive hereby accepts
employment as Chief Executive Officer and President of the Company and shall
devote his full working time and efforts, to the best of his ability, experience
and talent, to the performance of the services, duties and responsibilities in
connection therewith and agrees to serve, if elected, as Chairman of the Board
of the Company. Except upon the prior written consent of the Board, Executive
will not during the Period of Employment (as hereinafter defined) (i) accept any
other employment or (ii) engage, directly or indirectly, in any other business
activity (whether or not pursued for pecuniary advantage), whether or not it may
be competitive with, or whether or not it might place him in a competing
position to that of, the Company or any subsidiary thereof. Nothing in this
Agreement shall preclude the Executive from (i) engaging, consistent with his
duties and responsibilities hereunder, in charitable community affairs, (ii)
managing his personal investments (iii) continuing to serve on the boards of
directors on which he presently serve (to the extent such service is not
precluded by federal or state law or by conflict of interest by reason of his
position with the Company), or (iv) serving, subject to approval of the Board,
as a member of boards of directors of other companies, provided, that such
--------
activities do not interfere with the performance of Executive's duties
hereunder. Notwithstanding the foregoing, it is expressly acknowledged that
Executive's existing ownership of interests in, and service as a director or
officer of, Spie Construction, Inc. and Comstock Communications, Inc., and
Executive's obligation to provide consulting services to Spie Batignolles and/or
Comstock Group, Inc. relating to six outstanding claims prosecutions (the
"Consulting Services") have been disclosed to the Company and that the
continuing ownership thereof and any reasonable actions associated therewith,
including without limitation, continuing as a director or officer thereof and
providing the Consulting Services, shall be permitted under the terms of this
Agreement and shall in no event constitute a breach hereof; provided, however,
-------- -------
that Executive's service as an officer shall be limited to occasional
supervisory duties with respect to the division heads of Comstock
Communications, Inc. and nominal duties with respect to Spie Construction, Inc.
1.4 The Company represents that this Agreement has been reviewed and approved
by its Board of Directors. The Company agrees immediately to seek approval of
this Agreement (with the support of the Official Committee of Unsecured
Creditors) by the Court by way of order to show cause returnable at the earliest
date obtainable. If an order approving this Agreement has not been entered prior
to April 29, 1994 (or such later date as Executive may agree) or if such order
shall not become final without appeal by May 11, 1994 (or such later date
<PAGE>
3
Executive may agree) Executive and the Company shall have no further obligations
hereunder, other than the obligation to make payments under this Section 1.4. If
Court approval of this Agreement is not obtained as contemplated above, the
Company shall compensate Executive for the period from April 18, 1944 through
the date Executive's employment ceases at double the Base Salary rate for such
period.
2. Period of Employment.
--------------------
Executive's employment shall, subject to Section 1.4 hereof, commence on April
18, 1994 (the "Commencement Date") and shall continue through the earlier of
December 31, 1997 or the date of termination hereunder (the "Period of
Employment"); provided, however, that the Period of Employment shall
automatically be extended for successive one-year periods unless the Company or
Executive, at least six months prior to the end of such period, provides written
notice to the other party of intent not to extend the Period of Employment.
3. Compensation
------------
3.1 Salary. The Company shall pay Executive a base salary ("Base Salary") at
------
the rate of $600,000 per annum for the Period of Employment. Base Salary shall
be payable in accordance with the ordinary payroll practices the Company.
Executive's rate of Base Salary shall be increased on the first day of each
calendar year occurring during the Period of Employment by the percentage
increase for the prior year in the consumer price index for the area in which
the principal office of the Company is located, as determined by the U.S.
Department of Commerce, or the amount specified by the Board, whichever is
greater.
3.2 Bonus. In addition to his Base Salary, Executive shall be entitled, while
-----
he remains employed hereunder, in respect of each calendar year, to an annual
bonus (the "Bonus") payable in cash and at such times as bonuses are customarily
paid to senior executives of the Company. For the period from the Commencement
Date through December 31, 1994, the amount of the Bonus shall be no less than
$150,000 and may be increased in the discretion of the Board. For each calendar
year thereafter, Executive and the Compensation Committee of the Board shall
mutually agree on a formula which shall determine the amount of Executive's
Bonus for the calendar year. It is understood that the failure to agree on a
formula shall not constitute Good Reason (within the meaning of Section 6.1
hereof); provided however, that both parties shall make a good faith effort to
----------------
arrive at a mutually acceptable formula.
3.3 Supplemental Payment. Upon the court approval contemplated by Section 1.4
--------------------
hereof, Executive shall receive from the Company a cash payment of $250,000. The
amounts paid pursuant to this Section 3.3 shall not be taken into account in
computing any other payment or benefit to which Executive may become entitled
hereunder or otherwise with respect to his
<PAGE>
4
employment hereunder, and shall not be deemed a Bonus for purposes of Section
3.2.
3.4 Supplemental Benefit Credits. Executive shall be fully vested in all
----------------------------
employee benefit plans of the Company with respect to which the amount of any
benefits payable thereunder is determined in whole or in part by years of
service with the Company. The Company shall maintain a nonqualified retirement
arrangement to provide any benefits required under this Section 3.4 and
Executive shall, upon commencement of employment hereunder, have a fully vested
interest in such arrangement.
3.5 Stock Options. (a) On the date which is three months and 21 days
-------------
following the reorganization of the Company pursuant to Chapter 11 of the
Bankruptcy Code, Executive shall receive an option ("Option") to purchase
200,000 shares of common stock of the Company ("Shares") at Fair Market Value
pursuant to the 1994 Management Incentive Stock Option Plan of JWP Inc. (the
"Option Plan"). For purposes of this Agreement, "Fair Market Value" shall mean
a price no greater than that determined in accordance with paragraph (N) of
Article IV of the Company's proposed Plan of Reorganization, dated February 14,
1994, and filed with the Court. The Option shall be exercisable with respect to
one-third of the Shares subject thereto on each of the first, second and third
anniversaries of the date of grant.
(b) In the event of the Executive's termination of employment under Section
6.1, the Option shall become immediately exercisable in full and shall remain
exercisable for the balance of its ten-year term; provided, however, that in the
-----------------
event such termination occurs prior to either (i) the grant of the Option or
(ii) shareholder approval of the Option Plan, the factor of two in clause (B) of
subsections 6.1(a) (i) and (ii) shall be increased to three and, if applicable,
the factor of three in clause (B) of subsection 6.1(a) (iii) shall be increased
to four; provided, further, that in the event such termination occurs following
-----------------
shareholder approval of the Option Plan but within six months following the
date of grant of the Option, Executive shall retain the right to exercise the
Option at any time during the balance of its ten-year term.
4. Employee Benefits.
-----------------
4.1 Employee Benefit Plans and Programs. The Company shall provide Executive
-----------------------------------
during the Period of Employment with coverage under any employee benefit
programs, plans and practices (commensurate with his position in the Company) in
accordance with the terms thereof, which the Company currently makes available
generally to its senior executive officers, or which the Company, with Board
approval, elects to make available generally to its senior executive officers
hereafter, including, but not limited to (a) retirement, pension and
profit-sharing; and (b) medical, dental, hospitalization, life insurance (in an
amount not less than $700,000), short and long-term disability,
<PAGE>
5
accidental death and dismemberment and travel accident coverage; provided that
Executive shall pay such portion of the premiums therefor as is customarily paid
by senior executives of the Company.
4.2 Vacation, Fringe and Other Benefits. Executive shall be entitled to the
-----------------------------------
number of vacation days customarily accorded senior executives of the Company.
In addition, during the Period of Employment, the Company shall pay Executive
$600 per month for leasing (plus maintenance and insurance) of an automobile.
The Company shall also reimburse Executive for (a) all initiation fees and
monthly dues for membership in a club suitable for entertaining clients of the
Company and (b) all legal expenses incurred by Executive in connection with the
negotiation and drafting of this Agreement. The Company shall bear the cost of
any increased tax liability of Executive caused by the provisions of this
Section 4.2.
5. Directors and Officers Liability. The Company shall keep in effect during
--------------------------------
the Period of Employment, a policy of directors' and officers' liability
insurance for officers and directors of the Company on terms which take into
account the Company's claims history and Chapter 11 proceeding, to the extent
reasonably available, at such reasonable levels of coverage as are agreed to by
Executive and the Board from time to time.
6. Termination of Employment.
-------------------------
6.1 Termination Not For Cause Or For Good Reason. (a) The Company may
--------------------------------------------
terminate Executive's employment at any time, and Executive may terminate his
employment at any time. If Executive's employment is terminated by the Company
other than for Cause (as hereinafter defined), or Executive terminates his
employment for Good Reason (as hereinafter defined), Executive shall be entitled
to receive a lump sum cash payment (but not in substitution for compensation
already earned) in an amount equal to the sum of:
(i) the greater of (A) Executive's Base Salary at the highest annual rate in
effect during the Period of Employment, for the period from the date of
termination through December 31, 1997 or (B) two times Executive's Base Salary
at its then current annual rate;
(ii) the greater of (A) the Bonus payable by the Company pursuant to Section
3.2 times the number full or partial calendar years remaining from the date of
termination through December 31, 1997 or (B) two times Executive's Bonus. For
purposes of this Section 6.1(a), the amount of the Bonus shall be deemed to be
the highest Bonus paid to Executive during the Period of Employment, but in no
event less than $150,000; and
(iii) In the event of a termination of Executive's employment for Good Reason
(within 60 days following the
<PAGE>
6
occurrence of such Good Reason) following a Change in Control (as hereinafter
defined), the factor of two in clause (B) of subsections 6.1(a)(i) and (ii)
shall be increased to three; provided, however, that this clause (iii) shall
-------- -------
only apply in the case of a Change in Control which occurs following the
consummation of a reorganization plan (the "Plan") of the Company pursuant to
Chapter 11 of the Bankruptcy Code (and not pursuant to the terms of the Plan).
In addition to the amount described in subsections 6.1(a)(i)-(iii), Executive
shall be entitled to receive:
(iv) all unpaid amounts, as of the date of such termination, in respect of any
Bonus, for any calendar year ending before such termination occurs, which would
have been payable had Executive remained in employment until the date such Bonus
would otherwise have been paid;
(v) until the earlier of December 31, 1997 or 18 months from the date of
termination, Executive (and, to the extent applicable, Executive's dependents)
shall continue to be covered, at the Company's expense, under the Company's
medical, dental and hospitalization coverage plans, and until the earlier of
December 31, 1997 or 6 months from the date of termination, Executive shall
continue to be covered, at the Company's expense, under the Company's group
life, short and long-term disability, accidental death and dismemberment and
travel accident coverage plans described in Section 4.1 hereof or the Company
will provide for equivalent coverage; and
(vi) all payments to which Executive has vested rights as of the expiration of
the Period of Employment under employee benefit, disability, insurance and
similar plans which provide for payments beyond the Period of Employment.
(b) For purposes of this Agreement, "Good Reason" shall mean any of the
following (without Executive's express prior written consent):
(i) The assignment to Executive by the Company of duties inconsistent with
Executive's positions, duties, responsibilities, titles or offices as set forth
in Section 1 hereof, or any reduction by the Company of his duties or
responsibilities or any removal of Executive from the position of Chief
Executive Officer or President or any failure to elect or re-elect Executive as
Chairman of the Board, except in connection with the termination of Executive's
employment (A) upon the termination of the Period of Employment on December 31,
1997, (B) upon the termination of a succeeding one-year Period of Employment (as
provided for under Section 2 hereof), (C) for Cause, (D) as a result of
Executive's Permanent Disability (as hereinafter defined) or death or (E) by
Executive other than for Good Reason;
<PAGE>
7
(ii) A reduction by the Company in Executive's Base Salary, except as provided
herein, as in effect at the commencement of employment hereunder or as the same
may be increased from time to time during the Period of Employment;
(iii) The failure by the Company to obtain the specific assumption of this
Agreement by any successor or assign of the Company or any person acquiring
substantially all of the Company's assets;
(iv) Failure by the Company to perform in any material respect its obligations
under this Agreement, where such failure shall not have been remedied within 30
days after Executive shall have notified the Company in writing thereof;
(v) Any material reduction in Executive's compensation or benefits following a
Change in Control or Executive's principal business location is changed to a
location more than 30 miles from Executive's principal business location (other
than a relocation to New York, New York) immediately prior to a Change in
Control; or
(vi) The Company shall cease to keep in effect the policy of directors' and
officers' liability insurance for Executive described in Section 4.3;
(vii) A trustee shall be appointed by the Court, the Company's case under
Chapter 11 shall be converted to Chapter 7 or the automatic stay shall be lifted
as to substantially all the assets of the Company.
(c) If all or any portion of the payments or benefits provided under Section
6.1, either alone or together with other payments and benefits which Executive
receives or is then entitled to receive from the Company, would constitute a
"parachute payment" within the meaning Section 280G of the Internal Revenue Code
of 1986, as amended ("Code"), Executive shall be entitled to such additional
payments as may be necessary to ensure that the net after tax benefit of all
payments under this Section 6.1, including the payment provided for in this
subsection 6.1(c) shall be equal to the net after tax benefit of Executive as if
not excise tax had been imposed under Section 4999 of the Code.
The foregoing calculations shall be made, at the Company's expense, by the
Company and Executive. If no agreement on the calculations is reached, Executive
and the Company shall agree to the selection of an accounting firm to make the
calculations. If no agreement can be reached regarding the selection of an
accounting firm, the Company shall select a nationally recognized accounting
firm which has no current or recent business relationship with the Company. The
determination of any such firm selected shall be conclusive and binding on all
parties.
<PAGE>
8
(d) For purposes of this Agreement a "Change in Control" shall be deemed to
have occurred if (A) there occurs any merger or consolidation of the Company,
other than a merger or consolidation in which the holders of the Company's
common stock immediately prior to the merger or consolidation (excluding holders
of the Company's common stock who are also holders, directly or indirectly, of
the stock of the parties (other than the Company) to the merger or similar
agreement) own at least 75% of the common stock of the surviving corporation
immediately after the merger or consolidation; (B) there occurs any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company; (C)
the stockholders of the Company approve of any plan or proposal for the
liquidation of the Company; (D) any person (as such term is used in Section
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), other than a person who owns senior unsecured claims against
the Company in an outstanding principal amount of $10 million as of the date
hereof, shall become the beneficial owner (within the meaning of Section 13d-3
of the Exchange Act) of 25% or more of the Company's outstanding common stock;
(E) during any consecutive period of two years following consummation of the
Plan, individuals who at the beginning of such period constitute the entire
Board shall cease for any reason to constitute a majority thereof other than
pursuant to the terms of the Plan or unless the election, or the nomination for
election by the Company's stockholders, of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of such period (or who were approved by the Board in
accordance with this clause (E)); or (F) there occurs any other event designated
as a Change in Control by the Board for purposes of this Agreement.
(e) All cash payments under this Section 6.1 shall be made by the Company
within 30 calendar days following the event giving rise to such payments.
6.2 Permanent Disability. If as a result of the Executive's incapacity due
--------------------
to physical or mental illness, the Executive shall have been absent from his
duties with the Company on a full-time basis for six consecutive months (a
"Permanent Disability") during his Period of Employment, the Company or
Executive may terminate his employment on written notice thereof, the Period of
Employment shall terminate on the giving of such notice, and the compensation to
which Executive is entitled pursuant to Section 3.1 shall be paid through the
last day of the month in which the notice is given. In addition, Executive
shall be entitled to receive:
(a) all unpaid amounts, as of the date of such termination, in respect of any
Bonus, for any calendar year ending before, and the calendar year in which, such
termination occurs, which would have been payable had Executive remained in
employment until the date such Bonus would otherwise have been
<PAGE>
9
paid, provided, however, that any amount described in this subsection (a) in
-----------------
respect of the calendar year in which Executive's employment terminates shall be
determined with respect to the period commencing January 1 of such year and
expiring on the day on which the Period of Employment terminates;
(b) until the earlier of December 31, 1997 or 24 months from the date of
termination of Permanent Disability, Executive (and, to the extent applicable,
Executive's dependents) shall continue to be covered under Company's medical,
dental, hospitalization, group life, short and long-term disability, accidental
death and dismemberment and travel accident coverage plans described in Section
4.1 or the Company will provide for equivalent coverage; provided that if
Executive is provided with comparable coverage by a successor employer any such
coverage by the Company shall cease; and
(c) all amounts payable under the Company's disability plans.
6.3 Death. In the event of Executive's death while employed hereunder, the
-----
Period of Employment shall thereupon automatically terminate and the Executive's
estate or designated beneficiaries shall receive (i) payments of Base Salary for
a period of three months after the date of death; (ii) all unpaid amounts, as of
the date of such termination, in respect of any Bonus, for any calendar year
ending before, and the calendar year in which, such termination occurs, which
would have been payable had Executive remained in employment until the date such
Bonus would otherwise have been paid, provided, however, that any amount
-----------------
described in this Section 6.3 in respect of the calendar year in which
Executive's employment terminates shall be determined with respect to the period
commencing January 1 of such year and expiring on the day on which the Period of
Employment terminates; and (iii) any death benefits provided under the employee
benefit programs, in accordance with their terms.
6.4 Voluntary Resignation; Discharge for Cause. If Executive resigns
------------------------------------------
voluntarily, other than for Good Reason or Permanent Disability, or the Company
terminates the employment of Executive at any time for Cause, the Company's
obligations under this Agreement to make any further payments to Executive shall
thereupon, to the extent permitted by law, cease and terminate except with
respect to all unpaid amounts, as of the date of such termination, in respect of
any Bonus for any calendar year ending before such termination occurs, which
would have been payable had Executive remained in employment until the date such
bonus would otherwise have been paid. In addition, Executive shall remain
entitled to all vested amounts and benefits under the Company's employee benefit
programs, plans and practices, including, without limitation, the supplemental
benefit credits provided for under Section 3.4 hereof. The term "Cause shall be
limited to (a) action by Executive involving willful malfeasance in
<PAGE>
10
connection with his employment which results in material harm to the Company,
(b) material and continuing breach by Executive of the terms of this Agreement
which breach is not cured within 60 days after Executive receives written notice
from the Company of any such breach or (c) Executive being convicted of a
felony. Termination of Executive for Cause pursuant to Section 6.4 shall be
communicated by a Notice of Termination given within six months after the Board
both (i) had knowledge of conduct or an event allegedly constituting Cause and
(ii) had reason to believe that such conduct or event could be rounds for
Cause. For purposes of this Agreement a "Notice of Termination" shall mean
delivery to Executive of a copy of a resolution duly adopted by the Board at a
meeting of the Board called and held for the purpose (after not less than 10
days' notice to Executive ("Preliminary Notice") and reasonable opportunity for
Executive, together with the Executive's counsel, to be heard before the Board
prior to such vote), finding that in the good faith opinion of the Board
Executive was guilty of conduct set forth in the second sentence of this Section
6.4 and specifying the particulars thereof in detail. The Board shall no later
than 30 days after the receipt of the Preliminary Notice by Executive
communicate its findings to Executive. A failure by the Board to make its
finding of Cause or to communicate its conclusions within such 30-day period
shall be deemed to be a finding that Executive was not guilty of the conduct
described in the second sentence of this Section 6.4.
6.5 Termination Obligations. (a) Executive hereby acknowledges and agrees that
-----------------------
all personal property, including, without limitation, all books, manuals,
records, reports, notes, contracts, lists, and other documents, and equipment
furnished to or prepared by Executive in the course of or incident to his
employment, belong to the Company and shall be promptly returned to the Company
upon termination of the Period of Employment.
(b) Upon termination of the Period of Employment, the Executive shall be
deemed to have resigned from all offices and directorships then held with the
Company or any subsidiary or affiliate thereof.
7. Confidential Information. During and after the Period of Employment,
------------------------
Executive shall not disclose to any person (other than an employee or agent of
the Company or any affiliate of the Company entitled to receive the same) any
confidential information relating to the business of the Company and obtained by
him while providing services to the Company, without the consent of the Board,
or until such information ceases to be confidential.
8. Non-Competition. In the event Executive's employment is terminated by the
---------------
Company for Cause or Executive terminates his employment with the Company
without Good Reason, Executive shall not, for a period ending on the earlier of
(i) 18 months from the date of such termination or (ii) December 31,
<PAGE>
11
1997, accept any other employment or engage, directly or indirectly, in any
other business activity which is competitive with that of the Company or any
subsidiary thereof.
9. Expenses. Executive is authorized to incur reasonable expenses in
--------
carrying out his duties and responsibilities under this Agreement, including
expenses for travel and similar items related to such duties and
responsibilities. The Company will reimburse Executive for all such expenses
upon presentation by Executive from time to time of an itemized account of such
expenditures.
10. No Obligation to Mitigate Damages. Executive shall not be required to
---------------------------------
mitigate damages or the amount of any payment provided for under this Agreement
by seeking (and no payment otherwise required hereunder shall be reduced on
account of) other employment or otherwise, nor will any payments hereunder be
subject to offset in respect of any claims which the Company may have against
Executive.
11. Notices. All notices or communications hereunder shall be in writing,
-------
addressed as follows:
to Executive:
Frank T. MacInnis
7 Sturges Hollow
Westport, CT 06880
with a copy to:
Kenneth C. Edgar, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
to Company:
Sheldon I. Cammaker, Esq.
Executive Vice President and General Counsel
JWP Inc.
6 International Drive
Rye Brook, NY 10573
Any such notice or communication shall be delivered by hand or sent certified or
registered mail, return receipt requested, postage prepaid, addressed as above
(or to such other address as such party may designate in a notice duly delivered
as described above), and the actual date of delivery or mailing shall determine
the time at which notice was given.
12. Agreement to Perform Necessary Acts. Each party agrees to perform any
-----------------------------------
further acts and to execute and deliver any
<PAGE>
12
further documents that may be reasonably necessary to carry out the provisions
of this Agreement.
13. Separability; Legal Actions; Legal Fees. If any provision of this
---------------------------------------
Agreement shall be declared to be invalid or unenforceable, in whole or in part,
such invalidity or unenforceability shall not affect the remaining provisions
hereof, which shall remain in full force and effect. Subject to the superseding
jurisdiction of the Court while the Company is a debtor-in-possession, any
controversy or claim arising out of or relating to this Agreement or the breach
of this Agreement that cannot be resolved by Executive and the Company,
including any dispute as to the calculation of Executive's benefits or any
payments hereunder, shall be submitted to arbitration in New York, New York in
accordance with the laws of the State of New York and the procedures of the
American Arbitration Association, except that if Executive institutes an action
relating to this Agreement, Executive may, at Executive's option, bring that
action in any court of competent jurisdiction. All expenses, including legal
expenses incurred by Executive, relating to any arbitration shall be paid by the
Company. Judgment may be entered on an arbitrator(s)' award in any court having
jurisdiction.
14. Assignment. This contract shall be binding upon and inure to the benefit
----------
of the heirs and representatives of Executive and the assigns and successors of
the Company, but neither this Agreement nor any rights hereunder shall be
assignable or otherwise subject to hypothecation by Executive (except by will or
by operation of the laws of intestate succession) or by the Company (any such
purported assignment by either shall be null and void), except that the Company
may assign this Agreement to any successor (whether by merger, purchase or
otherwise) to all or substantially all of the stock, assets or business of the
Company.
15. Amendment; waiver. The Agreement may be amended at any time, but only by
-----------------
mutual written agreement of the parties hereto. Any party may waive compliance
by the other party with any provision hereof, but only by an instrument in
writing executed by the party granting such waiver.
16. Entire Agreement. The terms of this Agreement are intended by the parties
----------------
to be the final expression of their agreement with respect to the employment of
Executive by the Company and may not be contradicted by evidence of any prior or
contemporaneous agreement. The parties further intend that this Agreement shall
constitute the complete and exclusive statement of its terms and that no
extrinsic evidence whatsoever may be introduced in any judicial, administrative
or other legal proceeding involving this Agreement.
17. Death or Incompetence. In the event of Executive's death or a judicial
---------------------
determination of his incompetence, reference
<PAGE>
13
in this Agreement to Executive shall be deemed, where appropriate, to refer to
his estate or other legal representative.
18. Survivorship. The respective rights and obligations of the parties
------------
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations. The
provisions of this Section are in addition to the survivorship provisions of any
other section of this Agreement.
19. Governing Law. This agreement shall be construed, interpreted, and
-------------
governed in accordance with the laws of the State of New York without reference
to rules relating to conflicts of law.
20. Withholding. The Company shall be entitled withhold from payment any
-----------
amount of withholding required by law.
<PAGE>
14
21. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which will be deemed an original.
JWP INC.
By:
-----------------------------
By:
-----------------------------
EXECUTIVE
--------------------------------
<PAGE>
EXHIBIT 21
LIST OF SIGNIFICANT SUBSIDIARIES
<TABLE>
<S> <C>
Comstock Limited Ontario
Drake & Scull Holdings Limited United Kingdom
Drake & Scull International Limited United Kingdom
Dyn Specialty Contracting, Inc. Virginia
Dynalectric Company Florida
Jamaica Water Securities Corp. New York
Jamaica Water Supply Company New York
JWP Forest Electric Corp. New York
JWP International Inc. Delaware
JWP Mechanical/Electrical Services, Inc. Delaware
JWP Mechanical/Electrical Services (East), Inc. Delaware
JWP Mechanical/Electrical Services (Midwest), Inc. Delaware
JWP Mechanical/Electrical Services (West), Inc. Delaware
JWP Mechanical/Electrical Services (South), Inc. Delaware
JWP (U.K.) Limited United Kingdom
JWP West California
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1992
<PERIOD-START> JAN-01-1992
<PERIOD-END> DEC-31-1992
<PERIOD-TYPE> YEAR
<CASH> 87
<SECURITIES> 0
<RECEIVABLES> 501
<ALLOWANCES> 43
<INVENTORY> 74
<CURRENT-ASSETS> 662
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0
21
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<INCOME-PRETAX> (356)
<INCOME-TAX> (8)
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<EXTRAORDINARY> 0
<CHANGES> 4
<NET-INCOME> (612)
<EPS-PRIMARY> (15.13)
<EPS-DILUTED> (15.13)
</TABLE>
