UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 15, 1997
------------------------------
Walter Industries, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-59021 13-3429953
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1500 North Dale Mabry Highway, Tampa, FL 33607
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (813) 871-4811
------------------------------
NOT APPLICABLE
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
2
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
On October 15, 1997, Walter Industries, Inc. (the "Company") consummated the
acquisition of Applied Industrial Materials Corporation ("AIMCOR") with the
stockholders of AIMCOR pursuant to a stock purchase agreement (the "Stock
Purchase Agreement") dated as of September 19, 1997. AIMCOR is a leading
international provider of petroleum coke and related value-added services and a
supplier of ferroalloys and other metals. The purchase price, which was
determined pursuant to negotiations between the parties, is approximately $403
million, subject to adjustments and certain indemnity obligations of the parties
as required by the Stock Purchase Agreement. The transaction was financed with
proceeds from a new credit facility described below under Item 5.
The foregoing is subject to the provisions of the Stock Purchase Agreement,
which is incorporated herein by reference.
Item 5. OTHER EVENTS
On October 15, 1997, the Company completed a financing with NationsBank, N.A.
("NationsBank") whereby NationsBank is providing credit facilities consisting of
a $350 million revolving credit facility and a $450 million term loan facility
(collectively, the "$800 Million Credit Facility"). The $800 Million Credit
Facility was used to (a) finance the acquisition of AIMCOR, (b) refinance the
existing bank credit facilities, (c) pay transaction costs and (d) provide
ongoing working capital. The $350 million revolving credit facility includes a
sub-facility for trade and other standby letters of credit in an amount up to
$75 million at any time outstanding and a sub-facility for swingline advances in
an amount not in excess of $25 million at any time outstanding.
The foregoing is subject to the provisions of the $800 Million Credit Facility,
which is incorporated herein by reference.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. It is impracticable to provide
the financial statements relative to the acquired business described in
Item 2 at the time this report on Form 8-K is filed. The Registrant
intends to file the required financial statements as soon as practicable,
but no later than 60 days from the date of this filing.
(b) PRO FORMA FINANCIAL INFORMATION. It is impracticable to provide the pro
forma financial information relative to the acquired business described in
Item 2 at the time this report on Form 8-K is filed. The Registrant
intends to file the required pro forma financial information as soon as
practicable, but no later than 60 days from the date of this filing.
<PAGE>
3
(c) EXHIBITS
Exhibit Number Description
-------------- -----------
2.1 Stock Purchase Agreement dated as of September 19,
1997 by and among the Stockholders of Applied
Industrial Materials Corporation, Certain
Stockholders of AIMCOR Enterprises International,
Inc. AIMCOR (Germany) Limited Partnership, and
AIMCOR (Luxembourg) Limited Partnership, as first
parties, and Walter Industries, Inc. as second
party.
20.1 $800 Million Credit Agreement by and among Walter
Industries, Inc. as Borrower, NationsBank,
National Association, as Administrative Agent,
Documentation Agent and Syndication Agent and the
Lenders Party hereto from time to time.
99.1 Press Release Dated September 22, 1997
99.2 Press Release Dated October 16, 1997
<PAGE>
4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date October 30, 1997
---------------------------------
WALTER INDUSTRIES, INC.
By: /s/ Dean M. Fjelstul
----------------------------------
Dean M. Fjelstul
Title: Senior Vice President
and Principal Financial Officer
STOCK PURCHASE AGREEMENT
DATED AS OF SEPTEMBER 19, 1997
BY AND AMONG
THE STOCKHOLDERS OF APPLIED INDUSTRIAL MATERIALS CORPORATION,
CERTAIN STOCKHOLDERS OF AIMCOR ENTERPRISES INTERNATIONAL, INC.,
AIMCOR (GERMANY) LIMITED PARTNERSHIP, AND
AIMCOR (LUXEMBOURG) LIMITED PARTNERSHIP,
AS FIRST PARTIES,
AND
WALTER INDUSTRIES, INC.,
AS SECOND PARTY
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
Purchases and Sales of Shares; Closing and Manner of Payment
1.1 Purchases and Sales of Shares...............................2
1.2 Purchase Price..............................................3
1.3 Adjustments to the Base Purchase Price......................4
1.4 Manner of Payment of the Purchase Price.....................5
1.5 Determination of Adjustments to Base Purchase
Price. .....................................................7
1.6 Disputes Regarding the Closing Balance Sheet and
Adjusted Earnings Computation. ............................11
1.7 Manner of Delivery of Shares...............................12
1.8 Time and Place of Closing..................................13
ARTICLE 2
Representations and Warranties........................................13
2.1 General Statement..........................................13
2.2 Representations and Warranties of Purchaser................14
2.3 Joint and Several Representations and Warranties of
the Stockholders...........................................16
2.4 Individual Representations and Warranties of the
Stockholders...............................................36
2.5 Limitation on Warranties...................................37
2.6 Definition of Knowledge....................................37
ARTICLE 3
Conduct Prior to the Closing..........................................38
3.1 General....................................................38
3.2 Obligations of the Stockholders, Germany LP and
Luxembourg LP..............................................38
3.3 Purchaser's Obligations....................................45
3.4 Joint Obligations..........................................46
ARTICLE 4
Conditions to Closing.................................................47
4.1 Conditions to Obligations of the Stockholders,
Germany LP and Luxembourg LP...............................47
4.2 Conditions to Purchaser's Obligations......................48
ii
<PAGE>
ARTICLE 5
Closing...............................................................50
5.1 Form of Documents..........................................50
5.2 Purchaser's Deliveries.....................................50
5.3 Stockholders', Germany LP's and Luxembourg LP's
Deliveries.................................................51
5.4 Other Transactions Occurring at the Closing.......................54
ARTICLE 6
Post-Closing Agreements...............................................55
6.1 Post-Closing Agreements....................................55
6.2 Inspection of Records......................................55
6.3 Confidentiality............................................56
6.4 Use of Trademarks..........................................57
6.5 Third Party Claims.........................................57
6.6 Further Assurances.........................................57
6.7 Agreement to Defend and Indemnify..........................58
6.8 No Solicitation............................................60
6.9 Non-Competition............................................62
6.10 Section 338(h) (10) Election; Tax Returns..................63
6.11 Pension Plans..............................................66
6.12 Certain Collections........................................67
ARTICLE 7
Indemnification.......................................................67
7.1 General....................................................67
7.2 Certain Definitions........................................67
7.3 Stockholders' Indemnification Obligations..................68
7.4 Limitation on Stockholders' Indemnification
Obligations................................................70
7.5 Purchaser's Indemnification Covenants......................74
7.6 Cooperation................................................74
7.7 Third Party Claims.........................................75
7.8 Environmental Indemnities..................................78
7.9 Indemnification Exclusive Remedy...........................79
ARTICLE 8
Effect of Termination/Proceeding......................................79
8.1 General....................................................79
8.2 Right to Terminate.........................................79
8.3 Certain Effects of Termination.............................80
8.4 Remedies...................................................80
8.5 Right to Damages...........................................81
iii
<PAGE>
ARTICLE 9
Stockholders' Committee...............................................81
9.1 Appointment of Stockholders' Committee.....................81
9.2 Authority..................................................81
9.3 Reliance...................................................83
9.4 Actions by Stockholders....................................83
9.5 Indemnification of Purchaser and Its Affiliates............84
9.6 Indemnification of Stockholders' Committee.................84
ARTICLE 10
Miscellaneous.........................................................85
10.1 Fees.......................................................85
10.2 Publicity. ...............................................85
10.3 Notices....................................................85
10.4 Expenses; Transfer Taxes...................................86
10.5 Entire Agreement...........................................87
10.6 Non-Waiver.................................................88
10.7 Counterparts...............................................88
10.8 Severability...............................................89
10.9 Applicable Law.............................................89
10.10 Binding Effect; Benefit....................................89
10.11 Assignability..............................................89
10.12 Governmental Reporting.....................................89
10.13 Waiver of Trial by Jury....................................90
10.14 Consent to Jurisdiction....................................90
10.15 Definitions................................................90
10.16 Amendments.................................................93
10.17 Headings...................................................93
10.18 Trustee Exculpation........................................93
iv
<PAGE>
TABLE OF EXHIBITS
Exhibit A - Stockholder List
Exhibit B - Chart depicting the members and
ownership of the AIMCOR Group
Exhibit C - Allocation of Purchase Price
Exhibit D - Form of Escrow Agreement
Exhibit E - Commitment Letter
Exhibit F - Material Consents
Exhibit G - Form of Legal Opinion of
Purchaser's Counsel
Exhibit H - Form of Legal Opinion of
Stockholders' Counsel
Exhibit I - Form of License Agreement
Exhibit J - Form of Services Agreement
v
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of September 19, 1997 by and
among the individuals and trusts (the "Stockholders") executing copies of this
Agreement as stockholders of Applied Industrial Materials Corporation, a
Delaware corporation ("AIMCOR"), and as stockholders of Aimcor Enterprises
International, Inc., a Nevada corporation ("Enterprises"), Aimcor (Germany)
Limited Partnership, a Delaware Limited Partnership ("Germany LP"), and Aimcor
(Luxembourg) Limited Partnership, a Delaware limited partnership ("Luxembourg
LP"), as first parties, and Walter Industries, Inc., a Delaware corporation, as
second party ("Purchaser").
R E C I T A L S
A. The Stockholders own all of the outstanding shares of stock of AIMCOR.
AIMCOR owns approximately 79% of the outstanding shares of stock of all classes
of Enterprises, and the Stockholders own the balance of the outstanding shares
of stock of Enterprises. The Stockholders also own all of the Limited
Partnership Units of Germany LP and Luxembourg LP, and certain of the
Stockholders own all of the outstanding shares of stock of the general partners
of Germany LP and Luxembourg LP.
B. Germany LP and its general partners own all of the outstanding
participation interests of AIMCOR Mannheim GmbH, a German entity ("AIMCOR
Germany"). Luxembourg LP owns all of the outstanding shares of stock of AIMCOR
Luxembourg S.A., a Luxembourg corporation ("AIMCOR Luxembourg").
1
<PAGE>
C. Purchaser desires to purchase all of the outstanding shares of stock of
AIMCOR and AIMCOR Luxembourg, all of the outstanding shares of stock of
Enterprises which are not owned by AIMCOR, and all of the participation
interests of AIMCOR Germany.
D. The Stockholders, Germany LP and Luxembourg LP desire to sell all of
such shares and participation interests, on the terms and subject to the
conditions herein contained.
A G R E E M E N T S
Therefore, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE 1
Purchases and Sales of Shares; Closing and Manner of Payment
1.1 Purchases and Sales of Shares. On the terms and subject to the
conditions contained in this Agreement, at the Closing (as herein defined):
(a) the Stockholders shall sell and transfer to Purchaser, and
Purchaser shall purchase, all of the outstanding shares of stock of
AIMCOR;
(b) the Stockholders shall sell and transfer to Purchaser, and
Purchaser shall purchase, all of the outstanding shares of stock of
Enterprises which are not owned by AIMCOR;
(c) Germany LP shall sell and transfer to Purchaser, Charles P.
Gallagher ("Gallagher") shall cause CPG FRG, Inc. (a corporation wholly
owned by Gallagher) to sell and transfer to Purchaser, and Wayne C.
Kocourek ("Kocourek") shall cause WCK FRG, Inc. (a corporation wholly
owned by Kocourek) to sell and transfer to Purchaser, and Purchaser shall
purchase, all of the outstanding participation interests of AIMCOR
Germany; and
2
<PAGE>
(d) Luxembourg LP shall sell and transfer to Purchaser, and
Purchaser shall purchase, all of the outstanding shares of stock of AIMCOR
Luxembourg.
The shares of stock of AIMCOR, Enterprises and AIMCOR Luxembourg, and the
participation interests in AIMCOR Germany to be purchased and sold pursuant to
this Agreement are referred to herein collectively as the "Purchased Shares".
The number of Purchased Shares of each of the AIMCOR Entities (as defined below)
to be sold by the Stockholders, Germany LP and Luxembourg LP are set forth in
Exhibit A, attached hereto. AIMCOR, Enterprises, AIMCOR Germany and AIMCOR
Luxembourg are referred to herein collectively as the "AIMCOR Entities" and
individually as an "AIMCOR Entity", and AIMCOR, its Subsidiaries (as herein
defined), AIMCOR Germany and AIMCOR Luxembourg are referred to herein
collectively as the "AIMCOR Group". Attached hereto as Exhibit B is a chart
depicting the members of the AIMCOR Group and the ownership of such members.
1.2 Purchase Price. Subject to Section 1.3, the aggregate purchase price
("Purchase Price") of the Purchased Shares shall be equal to (a) plus (b) plus
(c) plus (d) plus (e) minus (f), where (a), (b), (c), (d), (e) and (f) are the
following:
(a) Four Hundred Three Million dollars ($403,000,000)(the "Base
Purchase Price"); provided, however, that if the Closing shall occur after
the date which is 30 days after the date hereof notwithstanding the
fulfillment of all conditions of Closing set forth in Section 3.4(d) and
Article IV other than Section 4.2(h), the Base Purchase Price shall be
increased by an amount determined by multiplying $403,000,000 by a
percentage equal to the per annum interest rate which would be payable by
Purchaser pursuant to the Commitment Letter (as herein defined) if the
Closing occurred on said date, and multiplying the resulting amount by a
fraction the numerator of which is the number of days in the period
commencing 31 days after the date hereof and ending on
3
<PAGE>
the Closing Date, both dates inclusive, and the denominator of which is
365;
(b) the aggregate amount of cash on hand and in banks,
cash-equivalents and marketable securities of the AIMCOR Group as
reflected on the Closing Balance Sheet (as herein defined);
(c) the aggregate principal amount of, and accrued interest with
respect to, all notes receivable and loans receivable from any of the
Stockholders to AIMCOR ("Stockholder Notes and Loans") as of the Closing
Date;
(d) the amount of the deposit made by AIMCOR with the Internal
Revenue Service pursuant to sections 444 and 7519 of the Code (as herein
defined), as reflected on the Closing Balance Sheet;
(e) the amount of interest accrued as of the Closing Date under
loans made by AIMCOR to Germany LP and Luxembourg LP which is not
reflected on the Closing Balance Sheet; and
(f) the aggregate principal amount of the indebtedness of the AIMCOR
Group for borrowed money (including all industrial revenue bonds and
pollution control bonds) as of September 30, 1997 (excluding 25% of the
principal amount of the indebtedness for borrowed money of TAC, as herein
defined), as reflected on the Closing Balance Sheet ("Indebtedness").
The items described in paragraphs (b), (c) and (d) above are referred to herein
as "Cash Equivalents". The Purchase Price shall be allocated among the
Stockholders, Germany LP and Luxembourg LP as set forth in Exhibit C attached
hereto.
1.3 Adjustments to the Base Purchase Price. There shall be the following
adjustments to the Base Purchase Price:
(a) if the Adjusted Carbon Products Group Earnings from Operations
(as herein defined), computed in accordance with Section 1.5, shall be
less than $37.9 million, then the Base Purchase Price shall be reduced for
all purposes hereof by an amount equal to eight times the amount by which
$37.9 million exceeds the Adjusted Carbon Products Group Earnings From
Operations; and
(b) the Base Purchase Price shall be:
4
<PAGE>
(i) increased by the amount by which the Adjusted Net Book
Value (as herein defined) exceeds $90,900,000; and
(ii) reduced by the amount by which $90,900,000 exceeds the
Adjusted Net Book Value.
The Adjusted Net Book Value shall be (w) the combined Stockholders' Equity
of the AIMCOR Group, as determined in accordance with Section 1.5, plus
(x) Indebtedness, minus (y) Cash Equivalents, all as reflected on the
Closing Balance Sheet.
1.4 Manner of Payment of the Purchase Price. The Purchase Price shall be
paid as follows:
(a) For the purposes of the Closing, the Stockholders' Committee (as
herein defined) shall make a good-faith estimate of the Purchase Price
(the "Estimated Cash Payment"), based upon the most recent ascertainable
financial information of the AIMCOR Group. The Stockholders' Committee
shall notify the Purchaser of the amount of the Estimated Cash Payment by
written notice (which shall be itemized to show the amounts estimated for
each of the paragraphs of Sections 1.2 and 1.3) delivered to Purchaser not
later than three (3) business days prior to the Closing Date. At the
Closing, Purchaser shall pay the Estimated Cash Payment, less amounts
(subject to the last sentence of this Section 1.4) sufficient to fund the
Escrows (as defined herein) to the Stockholders, Germany LP and Luxembourg
LP, by wire transfer to such account as the Stockholders' Committee shall
designate by written notice delivered to Purchaser not later than three
(3) business days prior to the Closing Date.
(b) At the Closing, the Stockholders' Committee, Germany LP and
Luxembourg LP, Purchaser and an escrow agent to be designated by Purchaser
and the Stockholders' Committee (the "Escrow Agent") shall execute and
deliver an Escrow Agreement (the "Escrow Agreement") dated the Closing
Date in substantially the form of Exhibit D hereto. Pursuant to the Escrow
Agreement, at the Closing, Purchaser shall deposit with the Escrow Agent,
in immediately available funds, (i) a portion of the Estimated Purchase
Price equal to $10,000,000 (the "Hold Back Fund") to secure the obligation
of the Stockholders' Committee under Section 1.4(c)(ii) and (ii) a portion
of the Estimated Purchase Price equal to $8,750,000, representing the
estimated amount for which the Stockholders shall indemnify Purchaser
pursuant to Sections 7.3(a)(vi) and (vii) (the "Tax Indemnity Escrow") and
(iii) a portion of the Estimated Purchase Price equal to $15,000,000 (the
"Indemnity Escrow", and together with the Hold Back Fund and the Tax
5
<PAGE>
Indemnity Escrow, the "Escrows") to secure the obligations of the
Stockholders, Germany LP and Luxembourg LP to indemnify Purchaser pursuant
to Section 7.3(a) (other than subparagraphs (vi) and (vii) thereof). As
provided in the Escrow Agreement:
(i) the Hold Back Fund shall terminate on the later of (x) 45
days from the date that the Closing Balance Sheet and the Adjusted
Earnings Computation are received by Purchaser and (y) the
resolution of all outstanding claims made against the Hold Back
Fund;
(ii) the Tax Indemnity Escrow shall terminate on the date on
which all Tax (as herein defined) returns with respect to the
matters for which the Stockholders shall be obligated to indemnify
Purchaser pursuant to Sections 7.3(a)(vi) and (vii) shall have been
filed; and
(iii) the Indemnity Escrow shall terminate on the later of (x)
the sixth anniversary of the Closing Date and (y) the resolution of
all outstanding claims made against the Indemnity Escrow, except
that 50% of the Indemnity Escrow shall be released 456 days after
the Closing Date; provided, however, that the amount to be released
on such 456th day shall be reduced by the amount of all claims
against the Indemnity Escrow which have theretofore been paid from
the Indemnity Escrow or are outstanding at that time; provided,
further, that if after the third anniversary of the Closing Date,
(w) there shall be no outstanding claims against the Indemnity
Escrow, (x) all contamination (if any) with respect to AIMCOR
Germany's former facility in Mannheim, Germany shall be remediated
in accordance with Environmental Laws (as herein defined), and (y)
all ponds for the disposal by TAC of silica breeze which are located
in Bridgeport, Alabama have been closed in accordance with
Environmental Laws, the Indemnity Escrow shall terminate on the date
on which all three of such events shall have occurred.
The Escrows will be governed by the terms and conditions of the Escrow
Agreement. The parties agree to make such changes in the Escrow Agreement
as may reasonably be required by the Escrow Agent. In lieu of Purchaser
depositing $15,000,000 of the Estimated Purchase Price in cash in the
Indemnity Escrow, by written notice to Purchaser, delivered not later than
three business days prior to the Closing Date, the Stockholders' Committee
may elect to deposit a letter of credit of a bank reasonably satisfactory
to Purchaser in the stated amount of $15,000,000 (the "Letter of Credit"),
which the Escrow Agent may draw upon in the event Purchaser shall make a
claim
6
<PAGE>
against the Indemnity Escrow. The Letter of Credit shall meet the
requirements set forth in the Escrow Agreement. If the Stockholders'
Committee does not elect to deposit the Letter of Credit in the Indemnity
Escrow, the form of Escrow Agreement attached hereto as Exhibit D shall be
appropriately modified to reflect a $15,000,000 cash deposit.
(c) Following the Closing, the parties shall determine the final
Purchase Price, taking into account the adjustments to the Base Purchase
Price required pursuant to Section 1.3 and the final determinations of the
amounts of Cash Equivalents and Indebtedness and employing the procedures
and criteria set forth in Sections 1.5 and 1.6. If, based on the Purchase
Price as finally determined:
(i) the Purchase Price exceeds the Estimated Cash Payment,
Purchaser shall forthwith pay the excess to the Stockholders,
Germany LP and Luxembourg LP;
(ii) the Estimated Cash Payment exceeds the Purchase Price,
the Stockholders' Committee (on behalf of the Stockholders, Germany
LP and Luxembourg LP) shall forthwith pay the excess to Purchaser;
together with interest on such excess from the Closing Date to the date of
payment, at a rate equal to the weighted average of the "prime rate" in
effect from time to time as reported in the Wall Street Journal.
(d) To the extent that the Stockholders' Committee is obligated to
make any payment to the Purchaser pursuant to Section 1.4(c), the amount
of such payment shall be paid by the Stockholders' Committee to Purchaser,
in the first instance, from the Hold Back Fund and the remainder of the
Hold Back Fund, if any, shall be distributed to the Stockholders'
Committee. If the amount payable to the Purchaser by the Stockholders'
Committee exceeds the amount in the Hold Back Fund, the amount of such
excess will be paid by the Stockholders' Committee within five business
days of the final determination of such amount by wire transfer of
immediately available funds to an account designated by Purchaser.
1.5 Determination of Adjustments to Base Purchase Price. The amounts of
Adjusted Carbon Products Group Earnings From Operations and Adjusted Net Book
Value shall be determined as follows:
7
<PAGE>
(a) Such amounts shall initially be derived from the audited
financial statements of (w) AIMCOR and its subsidiaries (including,
without limitation, Enterprises and Tennessee Alloys Company, an Alabama
general partnership ("TAC"), net of the minority interest of Allegheny
Ludlum Steel Co. in TAC) on a consolidated basis, (x) AIMCOR Germany, and
(y) AIMCOR Luxembourg, as of and for the fiscal year ended September 30,
1997 (the "1997 Financial Statements"). The 1997 Financial Statements
shall be prepared by the Stockholders' Committee and examined by AIMCOR's
accountants, Arthur Andersen & Co., LLP (the "Accountants"), at AIMCOR's
expense. The 1997 Financial Statements shall be prepared in accordance
with generally accepted accounting principles applicable in the United
States, Germany and Luxembourg, respectively, applied in a manner
consistent with the accounting principles applied in the preparation of
the Financial Statements (as herein defined) for the fiscal year ended
September 30, 1996. In connection with the preparation of the 1997
Financial Statements, inventories shall be determined pursuant to physical
counts taken not earlier than August 25, 1997 (which shall include, with
respect to all inventory in stockpiles, quantities as determined by those
independent licensed surveyors which AIMCOR has used in the past, unless
otherwise agreed by the Stockholders' Committee and Purchaser) and rolled
forward to September 30, 1997. To the extent such inventories have not
heretofore been taken, Purchaser and its representatives shall have the
right to observe the taking of the inventories.
(b) From the 1997 Financial Statements, the Accountants shall
prepare a combined balance sheet for (w) AIMCOR and its subsidiaries on a
consolidated basis, (x) AIMCOR Germany, and (y) AIMCOR Luxembourg (the
"Closing Balance Sheet"). The Closing Balance Sheet shall be prepared on
the following basis:
(i) the Closing Balance Sheet shall be prepared in accordance
with generally accepted accounting principles applicable in the
United States ("U.S. GAAP"), applied on a basis consistent with the
Financial Statements of AIMCOR and its subsidiaries (on a
consolidated basis) for the fiscal year ended September 30, 1996,
except for the method of valuation of inventories and the omission
of footnote disclosures required by U.S. GAAP, and shall include all
normal year-end adjustments;
(ii) inventories shall be valued at the lower of cost or
market value, with cost being determined on a first in-first out
basis;
8
<PAGE>
(iii) the minority interest of the Stockholders in Enterprises
shall be reflected in the combined stockholders' equity of the
AIMCOR Group;
(iv) notes receivable from Stockholders which represented a
portion of the purchase price of their Purchased Shares shall be
treated as an asset rather than as a reduction of stockholders'
equity to the extent contained in the Adjusted Net Book Value target
of $90,900,000;
(v) any Excluded Assets (as herein defined) shall be
disregarded;
(vi) if in restating the financial statements of AIMCOR
Germany and AIMCOR Luxembourg on a U.S. GAAP basis, the U.S. dollar
amount of stockholders' equity of those companies changes from what
it would be if such financial statements were stated on the basis of
German GAAP and Luxembourg GAAP, respectively, then the effect of
such changes on the Closing Balance Sheet shall be disregarded; and
(vii) without implication that the contrary would otherwise be
true, the principal of and accrued interest under loans receivable
due to AIMCOR from Germany LP and Luxembourg LP shall be reflected
as assets of AIMCOR.
The 1997 Financial Statements and the Closing Balance Sheet shall each
contain an audit opinion of the Accountants, addressed to the
Stockholders' Committee. The audit opinions with respect to the 1997
Financial Statements shall be identical in form to the opinions which the
Accountants rendered with respect to the Financial Statements for the
fiscal year ended September 30, 1996; and the opinion with regard to the
Closing Balance Sheet shall be substantially similar, except that it shall
contain a qualification to reflect the adjustments described in
subparagraphs (i) through (vii) above.
(c) Concurrently with the delivery of the 1997 Financial Statements
and the Closing Balance Sheet, the Accountants shall also deliver to the
Stockholders' Committee and Purchaser (i) a statement (the "Carbon
Products Group Statement of Earnings") setting forth the income from
operations of the carbon products segment of the AIMCOR Group (the "Carbon
Products Group") and (ii) an opinion stating that the Carbon Products
Group Statement of Earnings has been derived from the 1997 Financial
Statements and fairly reflects the operating earnings of the Carbon
Products Group. As promptly as possible after the date of delivery of the
Carbon
9
<PAGE>
Products Group Statement of Earnings, the Stockholders' Committee shall
prepare and deliver to Purchaser a computation of the Adjusted Carbon
Products Group Earnings from Operations (the "Adjusted Earnings
Computation"). The Adjusted Carbon Products Group Earnings from Operations
shall be the income from operations of the Carbon Products Group as set
forth in the Carbon Products Group Statement of Earnings, adjusted as
follows:
(i) the proceeds of the KHD arbitration settlement, in the
approximate amount of $4,452,000, shall be excluded;
(ii) all non-recurring items, other than the following, shall
be excluded:
(A) physical inventory adjustments made during or with
respect to the 1997 fiscal year;
(B) the gross margin from a certain sale in the
approximate amount of $5,943,000 which was recorded for
financial reporting purposes in the 1997 fiscal year but for
management reporting purposes in the 1996 fiscal year, which
gross margin is in the approximate amount of $731,000;
(C) the proceeds of business interruption insurance
resulting from a fire at the Torrance, California refinery of
Mobil Corporation in the amount of $1,000,000; and
(D) excise tax refunds in the approximate amount of
$505,000;
(iii) there shall be no charge or credit to earnings resulting
from the valuation for the fiscal year ended September 30, 1997 of
assets or liabilities of the Carbon Products Group which existed at
September 30, 1996, where such assets or liabilities did not create
earnings or expense from operations for the 1997 fiscal year;
(iv) no adjustments shall be made for LIFO valuation or gains
or losses on foreign currency exchange or earnings or losses from
formed products; and
(v) any expenses related to Excluded Assets shall be
disregarded.
(d) The Stockholders' Committee and Purchaser shall use their
respective reasonable efforts to cause the 1997
10
<PAGE>
Financial Statements, the Closing Balance Sheet and the Carbon Products
Group Statement of Earnings to be delivered by the Accountants, and the
Adjusted Earnings Computation to be delivered by the Stockholders'
Committee, not later than December 31, 1997 and to cause copies thereof to
be delivered to Purchaser and the Stockholders' Committee promptly upon
their availability. Purchaser and the Stockholders' Committee shall cause
the AIMCOR Group to make available to the Accountants the books, records
and personnel of the AIMCOR Group which the Stockholders' Committee and
the Accountants require in order to prepare and audit, respectively, the
1997 Financial Statements and prepare the Carbon Products Group Statement
of Earnings. The Stockholders' Committee and Purchaser shall cause the
Accountants to make available to Purchaser and the Stockholders' Committee
and their respective accountants the Accountants' work papers. The
Stockholders' Committee shall provide Purchaser and its accountants
reasonable access to all information reasonably requested by Purchaser or
its accountants regarding the Stockholders' Committee's preparation of the
Adjusted Earnings Computation.
1.6 Disputes Regarding the Closing Balance Sheet and Adjusted Earnings
Computation. Provided that it was prepared in accordance with Section 1.5,
Purchaser shall not have the right (either directly or indirectly by disputing
the Adjusted Earnings Computation) to dispute the Carbon Products Group
Statement of Earnings, which, if so prepared, shall be deemed to be final when
delivered by the Accountants and binding upon both Purchaser and the
Stockholders. Disputes with respect to the Closing Balance Sheet or the Adjusted
Earnings Computation shall be dealt with as follows:
(a) Purchaser shall have forty five (45) days after receipt of the
Closing Balance Sheet and the Adjusted Earnings Computation (the "Dispute
Period") to dispute any of the elements of or amounts reflected on the
Closing Balance Sheet or any of the adjustments set forth on the Adjusted
Earnings Computation (a "Dispute"). If Purchaser does not give written
notice of a Dispute within the Dispute Period to the Stockholders'
Committee (a "Dispute Notice"), the Closing Balance Sheet and the Adjusted
Earnings Computation shall be deemed to have been accepted and agreed to
by Purchaser in the form in which they were delivered by the Stockholders'
11
<PAGE>
Committee, and shall be final and binding upon the parties hereto. If
Purchaser has a Dispute, Purchaser shall give the Stockholders' Committee
a Dispute Notice within the Dispute Period, setting forth in reasonable
detail the elements and amounts with which it disagrees. Within thirty
(30) days after delivery of such Dispute Notice, the parties hereto shall
attempt to resolve such Dispute and agree in writing upon the final
content of the Closing Balance Sheet or Adjusted Earnings Computation (as
the case may be).
(b) If Purchaser and the Stockholders' Committee are unable to
resolve any Dispute within the thirty (30) day period after the
Stockholders' Committee's receipt of a Dispute Notice, the Stockholders'
Committee and Purchaser shall jointly engage a nationally recognized
certified public accounting firm (or, if they cannot agree on a mutually
acceptable firm, they shall cause their respective accounting firms to
select such firm) (the "Arbitrating Accountant") as arbitrator. In
connection with the resolution of any Dispute, the Arbitrating Accountant
shall have access to all documents, records, work papers, facilities and
personnel necessary to perform its function as arbitrator. The Arbitrating
Accountant's function shall be to review the Disputes and determine, based
on the requirements of Section 1.5 and, only with respect to the Disputes,
whether and to what extent the Closing Balance Sheet or the Adjusted
Earnings Computation (as the case may be) requires adjustment. The
arbitration before the Arbitrating Accountant shall be conducted in
accordance with the commercial arbitration rules of the American
Arbitration Association. The Arbitrating Accountant's award with respect
to any Dispute shall be final and binding upon the parties hereto, and
judgment may be entered on the award. The Stockholders' Committee shall
pay a portion of the fees and expenses of the Arbitrating Accountant in an
amount determined by multiplying the total amount of such fees and
expenses by a fraction the numerator of which is the amount awarded to
Purchaser by the Arbitrating Accountant and the denominator of which is
aggregate amount which is the subject matter of the Dispute, and Purchaser
shall pay the balance of such fees and expenses. Upon the resolution of
all Disputes, the Closing Balance Sheet or the Adjusted Earnings
Computation (as the case may be) shall be revised to reflect such
resolution.
1.7 Manner of Delivery of Shares. At the Closing, the Stockholders,
Germany LP and Luxembourg LP, respectively, shall deliver to Purchaser
certificates evidencing the Purchased Shares of AIMCOR, Enterprises and AIMCOR
Luxembourg, duly endorsed in
12
<PAGE>
blank, or accompanied by valid stock powers duly executed in blank, in proper
form for transfer, with all necessary stock transfer stamps affixed, and duly
executed instruments of transfer of all participation interests of AIMCOR
Germany.
1.8 Time and Place of Closing. The transaction contemplated by this
Agreement shall be consummated (the "Closing") at the offices of Altheimer &
Gray, 10 South Wacker, Suite 4000, Chicago, Illinois 60606 at 10:00 a.m., on
October 14, 1997 or on such other date, or at such other time or place, as shall
be mutually agreed upon by the Stockholders' Committee and Purchaser; provided,
however, that the date of the Closing shall be automatically extended from time
to time for so long as any of the conditions set forth in Sections 3.4(d), 4.1
and 4.2 hereof shall not be satisfied or waived, subject, however, to the
provisions of Section 8.2. The date on which the Closing occurs in accordance
with the preceding sentence is referred to in this Agreement as the "Closing
Date".
ARTICLE 2
Representations and Warranties
2.1 General Statement. The parties make the representations and warranties
to each other which are set forth in this Article 2. All such representations
and warranties shall survive the Closing (and none shall merge into any
instrument of conveyance). The representations and warranties of the
Stockholders made in a particular paragraph of Section 2.3 are made subject to
the exceptions noted in the portion of the schedule
13
<PAGE>
referred to in such paragraph delivered by the Stockholders' Committee to
Purchaser concurrently herewith and identified by the parties as the "Disclosure
Schedule". Information provided in one Schedule of the Disclosure Schedule shall
suffice, without repetition or cross-reference, as a disclosure of such
information in any other relevant Schedule of the Disclosure Schedule, if the
disclosure in respect of such one Schedule is sufficient on its face without
further inquiry reasonably to inform Purchaser of the information required to be
disclosed in respect of such other relevant Schedule in order to avoid a breach
of the representation or warranty corresponding thereto. Notwithstanding the
foregoing, the Stockholders shall use their best efforts to identify or
cross-reference in the Disclosure Schedule all applicable representations and
warranties to which a particular disclosure relates.
2.2 Representations and Warranties of Purchaser. Purchaser represents and
warrants to the Stockholders as follows:
(a) Purchaser is a corporation duly organized, existing and in good
standing, under the laws of its state of incorporation.
(b) Purchaser has full corporate power and authority to enter into
and perform this Agreement. This Agreement constitutes a valid and legally
binding obligation of Purchaser, enforceable against Purchaser in
accordance with its terms (except to the extent that enforcement may be
affected by laws relating to bankruptcy, reorganization, insolvency and
creditors' rights and by the availability of injunctive relief, specific
performance and other equitable remedies).
(c) Except for filings under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended ("HSR Act"), no consent,
authorization, order or approval of, or filing or registration with, any
governmental authority is required for or in connection with the
consummation by Purchaser of the transaction contemplated hereby.
14
<PAGE>
(d) Neither the execution and delivery of this Agreement by
Purchaser, nor the consummation by Purchaser of the transaction
contemplated hereby, will conflict with or result in a breach of any of
the terms, conditions or provisions of its Certificate of Incorporation or
by-laws, or of any statute or administrative regulation, or of any order,
writ, injunction, judgment or decree of any court or governmental
authority or of any arbitration award.
(e) Other than Purchaser's $550,000,000 Credit Agreement dated
January 22, 1996 with NationsBank, National Association (South) and other
lenders party thereto, Purchaser is not a party to any unexpired,
undischarged or unsatisfied written or oral contract, agreement,
indenture, mortgage, debenture, note or other instrument under the terms
of which performance by Purchaser according to the terms of this Agreement
will be a default or an event of acceleration, or grounds for termination,
or whereby timely performance by Purchaser according to the terms of this
Agreement may be prohibited, prevented or delayed.
(f) Except for Kohlberg Kravis Roberts & Co., L.P. or its Affiliates
(as herein defined), neither Purchaser nor any of its Affiliates has dealt
with any person or entity who is entitled to a broker's commission,
finder's fee, investment banker's fee or similar payment for arranging the
transaction contemplated hereby or introducing the parties to each other.
As used herein, an "Affiliate" is any person or entity which controls
Purchaser or any member of the AIMCOR Group, which Purchaser or a member
of the AIMCOR Group controls, or which is under common control with
Purchaser or a member of the AIMCOR Group, but the term "Affiliate" does
not include the members of the AIMCOR Group themselves. For purposes of
the preceding sentence, the term "control" means the power, direct or
indirect, to direct or cause the direction of the management and policies
of a person or entity through voting securities, contract or otherwise. In
the case of the AIMCOR Group, the term Affiliate shall include Gallagher
and Kocourek.
(g) In connection with the consummation of the transaction
contemplated hereby and the incurrence of any indebtedness therewith,
Purchaser does not intend that the AIMCOR Group would incur, and does not
believe that the AIMCOR Group will incur, debts that would be beyond the
AIMCOR Group's ability to pay as such debts mature.
(h) Purchaser is an "accredited investor" within the meaning of Rule
501(a) of Regulation D under the Securities Act of 1933, as amended (the
"Securities Act") and is acquiring the Purchased Shares for its own
account for investment and with no present intention of distributing or
15
<PAGE>
reselling such shares or any part thereof in any transaction which would
constitute a "distribution" within the meaning of the Securities Act.
Purchaser understands that the Purchased Shares have not been registered
under the Securities Act or any state securities laws and are being
transferred to Purchaser, in part, in reliance on the foregoing
representation.
(i) Attached as Exhibit E hereof is a true and complete copy of the
letter addressed to Purchaser, dated August 11, 1997, issued by
NationsBank National Association (South) in connection with the financing
of the transactions contemplated by this Agreement (the "Commitment
Letter").
2.3 Joint and Several Representations and Warranties of the Stockholders.
The Stockholders jointly and severally represent and warrant to Purchaser that,
except as set forth in the Disclosure Schedule:
CORPORATE
(a) Each of the AIMCOR Entities is a corporation duly existing and
in good standing under the laws of its jurisdiction of incorporation.
(b) Each of the AIMCOR Entities has qualified as a foreign
corporation, and is in good standing, under the laws of all jurisdictions
where the nature of its business or the nature or location of its assets
requires such qualification, except in such jurisdictions where the
failure to so qualify would not, individually or in the aggregate, have a
Material Adverse Effect (as herein defined). For the purposes of this
Agreement, "Material Adverse Effect" means a material adverse effect on
the business, assets, results of operations or financial condition of the
AIMCOR Group, taken as a whole.
(c) Each of the AIMCOR Entities has all necessary corporate power
and authority to carry on its respective business as such business is now
being conducted.
(d) Except for filings under the HSR Act, no consent, authorization,
order or approval of, or filing or registration with, any U.S. or foreign
court, administrative agency or governmental authority is required for or
in connection with the consummation by the Stockholders, Germany LP and
Luxembourg LP of the transaction contemplated hereby and the continuation
of the business of the AIMCOR Group thereafter.
16
<PAGE>
(e) Neither the execution and delivery of this Agreement by the
Stockholders, Germany LP and Luxembourg LP, nor the consummation by the
Stockholders, Germany LP and Luxembourg LP of the transactions
contemplated hereby, will conflict with or result in a breach of any of
the terms, conditions or provisions of the Certificate of Incorporation or
by-laws (or similar organizational documents) of any of the AIMCOR
Entities, or of any statute or administrative regulation, or of any order,
writ, injunction, judgment or decree of any U.S. or foreign court,
administrative agency or governmental authority or of any arbitration
award to which any member of the AIMCOR Group is a party or by which any
member of the AIMCOR Group is bound.
(f) True and complete copies of the Certificate of Incorporation and
all amendments thereto, the by-laws as amended and currently in force,
similar organizational documents (in the case of AIMCOR Germany and AIMCOR
Luxembourg), all stock records, and corporate minute books and records, of
the AIMCOR Entities, have been furnished for inspection by Purchaser.
(g) Neither AIMCOR Germany nor AIMCOR Luxembourg has any
subsidiaries. Schedule 2.3(g) of the Disclosure Schedule contains a
complete list of the direct and indirect subsidiaries of AIMCOR, including
Enterprises(collectively, the "Subsidiaries"). For the purposes of the
preceding sentence, a Subsidiary shall be an entity a majority of whose
voting securities are owned, directly or indirectly, by AIMCOR. Other than
the Subsidiaries, no member of the AIMCOR Group owns, whether beneficially
or of record, any equity interest in any other person. Each of the
Subsidiaries is duly organized, existing and in good standing under the
laws of its jurisdiction of incorporation or organization (as the case may
be), has full power to carry on its business as it is now conducted, and
is qualified as a foreign corporation or other foreign entity in all
jurisdictions where the nature of its respective businesses or the nature
and location of its respective assets requires such qualification, except
in such jurisdictions where the failure to so qualify would not,
individually or in the aggregate, have a Material Adverse Effect.
(h) The authorized capital of:
(i) AIMCOR consists of 11,000 shares of voting common stock,
$.01 par value, of which 9,325.8 shares are issued and outstanding
and 1,089,000 shares of non-voting common stock, $.01 par value, of
which 923,254.2 shares are issued and outstanding. There are no
shares of capital stock of AIMCOR of any other class authorized,
issued or outstanding. All of the issued
17
<PAGE>
and outstanding shares of stock of AIMCOR have been validly issued,
are fully paid and nonassessable, and are owned beneficially and of
record by the Stockholders. There are no outstanding subscriptions,
options, warrants, rights (including preemptive rights), calls,
convertible securities or agreements or commitments of any character
relating to the issued or unissued capital stock or other securities
of AIMCOR obligating AIMCOR to issue or sell any securities of any
kind;
(ii) Enterprises consists of 1,000,000 shares of Class A
common stock, $.01 par value, of which 461,202.3809 shares are
issued and outstanding, and 1,000,000 shares of Class B common
stock, $.01 par value, of which 461,202.3809 shares are issued and
outstanding. There are no shares of capital stock of Enterprises of
any other class authorized, issued or outstanding. All of the issued
and outstanding shares of stock of Enterprises have been validly
issued, are fully paid and nonassessable, and are owned beneficially
and of record by AIMCOR and the Stockholders. AIMCOR owns
367,944.3809 shares of Class A common stock, and 367,944.3809 shares
of Class B common stock, of Enterprises, free and clear of all
claims, equities, security interests, liens, proxies, restrictions
on transfer, voting trusts and voting agreements. There are no
outstanding subscriptions, options, warrants, rights (including
preemptive rights), calls, convertible securities or agreements or
commitments of any character relating to the issued or unissued
capital stock or other securities of Enterprises obligating
Enterprises to issue or sell any securities of any kind;
(iii) AIMCOR Germany consists of a single class of
participation interests, all of which are issued and outstanding.
There are no participation interests of AIMCOR Germany of any other
class authorized, issued or outstanding. All of the issued and
outstanding participation interests of AIMCOR Germany have been
validly issued, are fully paid and nonassessable. Germany LP is the
beneficial and of record owner of 98.8468% of the participation
interests of AIMCOR Germany, free and clear of all claims, equities,
security interests, liens, proxies, restrictions on transfer, voting
trusts and voting agreements. CPG Mannheim Inc. (a Delaware
corporation wholly owned by Gallagher) and WCK Mannheim Inc. (a
Delaware corporation wholly owned by Kocourek) are the beneficial
and of record owners of a combined total of 1.1532% of the
participation interests of AIMCOR
18
<PAGE>
Germany, free and clear of all claims, equities, security interests,
liens, proxies, restrictions on transfer, voting trusts and voting
agreements. There are no outstanding subscriptions, options,
warrants, rights (including preemptive rights), calls, convertible
securities or agreements or commitments of any character relating to
the issued or unissued securities of AIMCOR Germany obligating
AIMCOR Germany to issue or sell any securities of any kind;
(iv) AIMCOR Luxembourg consists of a class of ordinary stock,
without par value, of which 24,420 shares are issued and
outstanding, and a class of preferred stock, without par value, of
which 91,023 shares are issued and outstanding. There are no shares
of capital stock of AIMCOR Luxembourg of any other class authorized,
issued or outstanding. All of the issued and outstanding shares of
stock of AIMCOR Luxembourg have been validly issued, are fully paid
and nonassessable, and are owned beneficially and of record by
Luxembourg LP, free and clear of all claims, equities, security
interests, liens, proxies, restrictions on transfer, voting trusts
and voting agreements. There are no outstanding subscriptions,
options, warrants, rights (including preemptive rights), calls,
convertible securities or agreements or commitments of any character
relating to the issued or unissued capital stock or other securities
of AIMCOR Luxembourg obligating AIMCOR Luxembourg to issue or sell
any securities of any kind.
(v) Other than borrowings under the instruments set forth on
Schedule 2.3(h)(v) of the Disclosure Schedule, no member of the
AIMCOR Group has any outstanding indebtedness for borrowed money.
The loans and other extensions of credit under the instruments set
forth on Schedule 2.3(h)(v) of the Disclosure Schedule are each
prepayable in full in accordance with their respective terms.
FINANCIAL
(i) Copies of (a) the consolidated balance sheet, statement of
earnings, statement of shareholders' equity, statement of cash flows and
notes to financial statements (together with any supplementary information
thereto) of AIMCOR and the Subsidiaries, (b) the balance sheet, income
statement and notes to financial statements of AIMCOR Germany, and (c) the
balance sheet, statement of profit and loss, statement of cash flows and
notes to the annual accounts (together with any supplementary information
thereto)of AIMCOR Luxembourg, each as of and for the fiscal years ended
19
<PAGE>
September 30, 1996 and September 30, 1995 and each as audited by the
Accountants, are contained in Schedule 2.3(i) of the Disclosure Schedule.
The financial statements described in the preceding sentence are referred
to herein as the "Financial Statements". Copies of the respective
unaudited balance sheets and statements of income of AIMCOR and the
Subsidiaries (on a consolidated basis), AIMCOR Germany and AIMCOR
Luxembourg, each as of and for the nine month periods ended June 30, 1997
and June 30, 1996, are also contained in Schedule 2.3(i) of the Disclosure
Schedule. The financial statements described in the preceding sentence are
referred to herein as the "Interim Financial Statements". The Financial
Statements and the Interim Financial Statements present fairly, in all
material respects, the respective financial position of AIMCOR (on a
consolidated basis), AIMCOR Luxembourg and AIMCOR Germany as of the dates
thereof and the results of operations and (in the case of the Financial
Statements) cash flows of AIMCOR (on a consolidated basis), AIMCOR
Luxembourg and AIMCOR Germany for the periods covered by said statements,
in conformity with U.S. GAAP, consistently applied, except (w) as
disclosed therein, (x) in the case of the Interim Financial Statements,
for normal year-end adjustments, and (y) in the case of the Interim
Financial Statements, for the omission of footnote disclosures required by
U.S. GAAP. Schedule 2.3(i) of the Disclosure Schedule also contains pro
forma versions of the Financial Statements and the Interim Financial
Statements, which present fairly, in all material respects, the combined
financial condition of the AIMCOR Group as of the dates and for the
periods then ended, subject to the adjustments described in such pro forma
statements (including, without limitation, elimination from the Financial
Statements and the Interim Financial Statements the Excluded Assets and
the effects of the disposition of the Excluded Assets on the financial
position, results of operations and cash flows of AIMCOR for the periods
covered by the Financial Statements and the Interim Financial Statements).
As of September 30, 1996, there was no liability or obligation of any kind
required to be disclosed under U.S. GAAP, whether accrued, absolute, fixed
or contingent, of any member of the AIMCOR Group that is not disclosed,
reflected or reserved against in the Financial Statements as of that date.
No member of the AIMCOR Group has any obligation to make any "earn out" or
similar payments.
(j) The members of the AIMCOR Group (including TAC) have good title
to their respective assets (including, without limitation, the
Intellectual Property (as herein defined)), free and clear of any liens,
claims, encumbrances and security interests, except for the following: (i)
statutory liens for Taxes (as defined herein) not yet due, (ii) statutory
liens of landlords, carriers, warehousemen, mechanics and materialmen
incurred in the ordinary course of business for sums not yet
20
<PAGE>
due; (iii) liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return of money bonds and similar
obligations; and (iv) minor irregularities of title, none of which
individually or in the aggregate materially detract from the value or use
of the assets of the AIMCOR Group. The foregoing representation and
warranty shall not apply to the Real Estate (as defined herein), which is
dealt with exclusively in paragraph (u), or the Leased Premises (as
defined herein), which is dealt with exclusively in paragraph (v).
(k)
(i) As used in this Agreement, the following terms shall have
the following meanings:
(A) the term "Taxes" means all federal, state,
provincial, local, foreign and other income, sales, use, ad
valorem, value added, transfer or other taxes, fees,
assessments or charges of any kind, together with any interest
and any penalties, with respect thereto, and the term "Tax"
means any one of the foregoing Taxes;
(B) the term "Tax Return" means any return, declaration,
report, claim for refund or information return or statement
relating to Taxes, including any schedule or attachment
thereto and including any amendment thereof; and
(C) the term "Code" means the Internal Revenue Code of
1986, as amended.
(ii) All Tax Returns required to be filed by or with respect
to each member of the AIMCOR Group have been timely filed, except
where the failure to so file such Tax Returns would not,
individually or in the aggregate, have a Material Adverse Effect,
and all such Tax Returns are complete and correct in all material
respects. Each member of the AIMCOR Group has timely paid all Taxes
that are due, or that have been asserted in writing by any taxing
authority to be due, from or with respect to it for the periods
ending prior to the date hereof (including Taxes attributable to the
period ending on the Closing Date).
(iii) There are no outstanding agreements, waivers or
arrangements extending the statutory period of limitation applicable
to any claim for, or the period
21
<PAGE>
for the collection or assessment of, Taxes due from or with respect
to any member of the AIMCOR Group for any taxable period, and no
power of attorney granted by or with respect to any member of the
AIMCOR Group relating to Taxes is currently in force.
(iv) No audit or other proceeding by any governmental entity
has formally commenced and no written notification, and, to the
Stockholders' knowledge, no oral notification has been given to any
member of the AIMCOR Group that such an audit or other proceeding is
pending or threatened with respect to any Taxes due from or with
respect to any member of the AIMCOR Group or any Tax Return filed by
or with respect to any member of the AIMCOR Group. No assessment of
Tax has been proposed in writing to any member of the AIMCOR Group
against any member of the AIMCOR Group or any of its assets or
properties.
(v) As of the Closing Date, no member of the AIMCOR Group
shall be a party to, be bound by or have any obligation under, any
Tax sharing agreement, indemnification arrangement, or similar
contract or arrangement. During the ten year period ending on the
date hereof, none of members of the AIMCOR Group (A) has been a
member of an affiliated group filing a consolidated federal income
tax return (other than Enterprises and its Subsidiaries), or (B) has
any liability for the Taxes of any person under Treas. Reg. ss.
1.1502-6 (or any similar provision of state, local or foreign law),
or as a transferee or successor, by contract, or otherwise.
(vi) There is no contract or agreement, plan or arrangement by
any member of the AIMCOR Group covering any person that,
individually or collectively, would give rise to the payment of any
amount that would not be deductible by any such member of the AIMCOR
Group by reason of section 280G of the Code. No member of the AIMCOR
Group has filed a consent under section 341(f) of the Code.
(vii) Each member of the AIMCOR Group has duly and timely
withheld from employee salaries, wages and other compensation and
paid over to the appropriate taxing authorities all amounts required
to be so withheld and paid over for all periods under all applicable
laws and regulations.
(viii) Each member of the AIMCOR Group has collected
substantially all sales and use Taxes required to be collected, and
have remitted, or will
22
<PAGE>
remit on a timely basis, such amounts to the appropriate
governmental authorities, or has been furnished properly completed
exemption certificates. Each member of the AIMCOR Group (A) has in
its possession all records and supporting documents required by all
applicable sales and use Tax statutes and regulations regarding the
collection and payment of all sales and use Taxes required to be
collected and paid over and regarding all exempt transactions for
all periods open under the applicable statute of limitations as of
the Closing Date, and (B) has maintained all such records and
supporting documents, in all material respects in the manner
required by all applicable sales and use Tax statutes and
regulations.
(ix) No member of the AIMCOR Group has, for less than fair
market value, acquired property from, disposed of property to,
performed services for, or otherwise transacted business with, any
person with whom it does not deal at arm's length; provided,
however, that this subparagraph (ix) shall not apply to any of the
transactions described in subparagraphs (a)-(l) of Section
3.2(d)(v);
(x) At all times since July 1, 1989, AIMCOR has been both a
validly electing S corporation within the meaning of Code ss.ss.
1361 and 1362 and a validly electing S corporation within the
meaning of the applicable state law statutes in the states listed on
Schedule 2.3(k)(x) of the Disclosure Schedule.
(xi) Except as set forth on Schedule 2.3(k)(xi) of the
Disclosure Schedule, no member of the AIMCOR Group will be liable
for any Tax under Code ss. 1374 in connection with the deemed sale
of AIMCOR's assets (including the assets of any qualified subchapter
S subsidiary) caused by any election under Code ss. 338(h)(10) (and
any corresponding election under state, local and foreign law) with
respect to the purchase and sale of AIMCOR's stock hereunder (the
"Section 338(h)(10) Election"). Except as set forth on Schedule
2.3(k)(xi) of the Disclosure Schedule, neither AIMCOR nor any
qualified subchapter S subsidiary of AIMCOR has, in the past 10
years, (A) acquired assets from another corporation in a transaction
in which AIMCOR's Tax basis for the acquired assets was determined,
in whole or in part, by reference to the Tax basis of the acquired
assets (or any other property) in the hands of the transferor, or
(B) acquired the stock of any corporation which became a qualified
subchapter S subsidiary.
23
<PAGE>
CONDUCT OF BUSINESS
(l) Since June 30, 1997 (September 30, 1996 in the case of
subparagraph (iv)), no member of the AIMCOR Group has:
(i) sold, leased, mortgaged, pledged, encumbered or
transferred or otherwise disposed of any assets or properties which
would be material to the AIMCOR Group, taken as a whole, except for
sales of its inventory and transfers of cash in payment of trade
payables and cash dividends to the Stockholders, all in the usual
and ordinary course of business, and except as permitted by this
Agreement;
(ii) suffered any loss, or any interruption in use, of any
assets or property (whether or not covered by insurance), which
would be material to the AIMCOR Group, taken as a whole, on account
of fire, flood, riot, strike or other hazard or Act of God;
(iii) suffered any change to its business, either individually
or together with other changes to its business, which would have a
Material Adverse Effect;
(iv) incurred any liabilities or obligations (whether
absolute, accrued, contingent or otherwise) material to the AIMCOR
Group, taken as a whole (collectively, "Liabilities"), except (i)
Liabilities incurred in the ordinary course of business and (ii)
Liabilities incurred in connection with or as a result of this
Agreement and the transaction contemplated hereby;
(v) waived any right which would be material to the AIMCOR
Group, taken as a whole, other than in the ordinary course of
business;
(vi) without limitation by the enumeration of any of the
foregoing, entered into any material transaction other than in the
usual and ordinary course of business, except as permitted by this
Agreement (the foregoing representation and warranty shall not be
deemed to be breached by virtue of the entry by the Stockholders,
Germany LP and Luxembourg LP into this Agreement or their
consummation of the transaction contemplated hereby); or
(vii) taken any action which, if it had been taken after the
date hereof, would have required the consent of Purchaser under
Section 3.2(d) hereof.
24
<PAGE>
CONTRACTS
(m) Schedule 2.3(m) of the Disclosure Schedule contains a
description of the following undischarged written contracts, agreements,
leases and other instruments to which any member of the AIMCOR Group is a
party:
(i) agreements for the employment for any period of time
whatsoever, or in regard to the employment, or restricting the
employment, of any employee of any member of the AIMCOR Group;
(ii) consulting agreements;
(iii) collective bargaining agreements;
(iv) contracts or arrangements providing for bonuses, options,
deferred compensation or stock appreciation rights;
(v) leases or subleases, either as lessee or sublessee, lessor
or sublessor, of personal property, where the lease or sublease
provides for an annual rent in excess of $50,000 and has an
unexpired term as of the Closing Date in excess of one (1) year, and
leases or subleases of personal property where the lease or sublease
provides for an annual rent in excess of $100,000 and has an
unexpired term as of the Closing Date of less than one year;
(vi) agreements restricting in any manner the right of any
member of the AIMCOR Group to compete with any other person or
entity, restricting the right of any member of the AIMCOR Group to
sell to or purchase from any other person or entity, or restricting
the right of any other party to compete with any member of the
AIMCOR Group or the ability of such person or entity to employ any
of the employees of any member of the AIMCOR Group;
(vii) agreements between any member of the AIMCOR Group and
any of their respective Affiliates with respect to the purchase of
goods or the performance of services (other than employment-related
agreements in the ordinary course of business);
(viii) agreements of agency, representation, distri bution, or
franchise which cannot be canceled by the member of the AIMCOR Group
which is a party thereto without payment or penalty upon notice of
sixty (60) days or less;
25
<PAGE>
(ix) service agreements affecting any of the assets of any
member of the AIMCOR Group where the annual service charge is in
excess of $50,000 or has an unexpired term as of the Closing Date in
excess of one (1) year;
(x) guaranties, performance, bid or completion bonds, and
surety or indemnification agreements;
(xi) loan agreements, promissory notes, indentures, bonds,
security agreements or other instruments involving the borrowing of
money in an amount in excess of $50,000;
(xii) agreements, commitments or understandings to make any
gifts or sponsor any events;
(xiii) all agreements or arrangements between any member of
the AIMCOR Group, on the one hand, and any Stockholder, Germany LP
or Luxembourg LP or any of their respective Affiliates (other than
any member of the AIMCOR Group) on the other hand (such agreements
and arrangements are hereinafter referred to as "Affiliate
Transactions"); and
(xiv) any other agreements which provide for the receipt or
expenditure of more than $50,000, except agreements for the purchase
or sale of goods or rendering of services in the ordinary course of
business.
All agreements, leases, subleases and other instruments referred to in
this subsection 2.3(m) are binding upon the AIMCOR Group and, to the
Stockholders' knowledge, the other parties thereto. No default by any
member of the AIMCOR Group has occurred thereunder and, to the
Stockholders' knowledge, no default by the other contracting parties has
occurred thereunder, which default would, individually or in the
aggregate, have a Material Adverse Effect.
(n) Neither any member of the AIMCOR Group nor any of the
Stockholders is a party to, or bound by, any unexpired, undischarged or
unsatisfied written contract, agreement, indenture, mortgage, debenture,
note or other instrument under the terms of which performance by the
Stockholders, Germany LP and Luxembourg LP according to the terms of this
Agreement (i) will be a default (or an event which with notice or lapse of
time or both could become a default) or an event of acceleration, or
result in the loss of a material benefit under, or grounds for
termination, except such defaults, accelerations, losses or terminations
which would not individually or in the aggregate, have a Material Adverse
26
<PAGE>
Effect, or (ii) would be prohibited, prevented or delayed. Other than the
Material Consents (as herein defined), the execution, delivery and
performance by the Stockholders, Germany LP and Luxembourg LP of this
Agreement and the consummation by the Stockholders, Germany LP and
Luxembourg LP of the transactions contemplated hereby will not require any
consent, approval or authorization of, or notice to, any third party,
except such consents, approvals, authorizations, and notices the failure
of which to obtain or make would not, individually or in the aggregate,
have a Material Adverse Effect.
(o) The AIMCOR Group possesses all licenses, permits, registrations
and government approvals (the "Permits") (other than Environmental Permits
(as defined herein), which are exclusively provided for in Section 2.3(t))
which are required in order for them to conduct their respective
businesses as presently conducted, except where the failure to possess
such Permits would not, individually or in the aggregate, have a Material
Adverse Effect.
EMPLOYEES
(p) With respect to the AIMCOR Group and its employees:
(i) AIMCOR maintains, administers, contributes to or has any
liability with respect to only those employee pension benefit plans
(as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), whether or not excluded
from coverage under specific Titles or Subtitles of ERISA) for the
benefit of employees of AIMCOR which are listed in Schedule
2.3(p)(i) of the Disclosure Schedule (the "Pension Plans");
(ii) AIMCOR maintains, administers, contributes to or has any
liability with respect to only those employee welfare benefit plans
(as defined in Section 3(1) of ERISA, whether or not excluded from
coverage under specific Titles or Subtitles of ERISA) for the
benefit of employees of AIMCOR which are listed in Schedule
2.3(p)(ii) of the Disclosure Schedule (the "Welfare Plans");
(iii) AIMCOR maintains, administers, contributes to or has any
liability with respect to only those stock purchase, stock option,
severance, employment, change-in-control, bonus, incentive and
deferred compensation plans, agreements, programs, or policies
(whether formal or informal, written or (to the Stockholders'
knowledge) oral, and whether or not subject to ERISA)
27
<PAGE>
under which any employee or former employee of AIMCOR has any
present or future right to benefits or under which AIMCOR has any
present or future material liability, which are listed in Schedule
2.3(p)(iii) of the Disclosure Schedule. All such plans, agreements,
programs, policies and arrangements, together with the Pension Plans
and Welfare Plans, shall be collectively referred to as the "Company
Plans";
(iv) with respect to each Company Plan, AIMCOR has delivered
or made available to the Purchaser a current, accurate and complete
copy (or, to the extent no such copy exists, an accurate
description) thereof and, to the extent applicable, (a) any related
trust agreement, annuity contract or other funding instrument; (b)
the most recent determination letter; (c) any summary plan
description by AIMCOR to its employees concerning the extent of the
benefits provided under a Company Plan; and (d) for the three most
recent years (1) the Form 5500 and attached schedules; (2) audited
financial statements; (3) actuarial valuation reports; and (4)
attorney's responses to an auditor's request for information;
(v) all Company Plans and any related trust agreements or
annuity contracts (or any related trust instruments) comply in all
material respects with and are and have been operated in all
material respects in accordance with their terms and each applicable
provision of ERISA, the Code (including, without limitation, the
requirements of Code section 401(a) to the extent any Pension Plan
is intended to conform to that section) and other applicable laws,
rules and regulations (including, without limitation, state
insurance law), except where non-compliance with such terms and
laws, rules and regulations, would not, individually or in the
aggregate, have a Material Adverse Effect. AIMCOR has not received
any written notice, and none of the Stockholders has any knowledge,
of any violation of any of the foregoing by any Company Plan, which
violation has not heretofore been corrected. A favorable
determination as to the qualification under the Code of each of the
Pension Plans has been made by the Internal Revenue Service ("IRS");
(vi) there has been no "reportable event" (as defined in
Section 4043(c) of ERISA) for which the 30 day reporting requirement
is applicable and has not been waived with respect to any Company
Plan. Neither AIMCOR nor any affiliate of AIMCOR as determined under
Code Section 414(b), (c), (m) or (o) ("ERISA
28
<PAGE>
Affiliate") has incurred or permitted to exist any "accumulated
funding deficiency" (as defined in Section 302 of ERISA) whether or
not waived by the IRS, involving any Pension Plan subject to section
412 of the Code or Part 3 of Title I(B) of ERISA. No withdrawals
have occurred so as to cause any Pension Plan to become subject to
the provisions of Section 4063 of ERISA, nor has AIMCOR or any ERISA
Affiliate ceased making contributions to any employee benefit plan
subject to Section 4064(a) of ERISA to which either AIMCOR or any
ERISA Affiliate made contributions during the six (6) years prior to
the date hereof;
(vii) with respect to each Company Plan, no actions, suits or
claims (other than routine claims for benefits in the ordinary
course) are pending or, to the Stockholders' knowledge, threatened.
To the Stockholders' knowledge, no event has occurred and no
condition exists that would be reasonably expected to subject AIMCOR
or its Subsidiaries, either directly or through their ERISA
Affiliates, to any Tax, fine, lien, penalty or other liability
imposed by ERISA, the Code or other applicable laws, rules and
regulations, whether by indemnity or otherwise, which Tax, fine,
lien, penalty or liability would have a material adverse effect on
any of the Company Plans. Neither AIMCOR nor, to the Stockholders'
knowledge, any other party has engaged in a prohibited transaction
(as defined in Section 406 of ERISA and Section 4975 of the Code)
which would subject AIMCOR or the Purchaser to any Taxes, penalties
or other liabilities under ERISA or the Code with respect to any of
the Company Plans, which Taxes, penalties or liabilities would have
a material adverse effect on any of the Company Plans;
(viii) neither AIMCOR nor any ERISA Affiliate has incurred any
liability to the Pension Benefit Guaranty Corporation ("PBGC") as a
result of the voluntary or involuntary termination of any Pension
Plan subject to Title IV of ERISA; there is currently no active
filing by AIMCOR or any ERISA Affiliate with the PBGC (and no
proceeding has been commenced by the PBGC) to terminate any Pension
Plan subject to Title IV of ERISA maintained or funded, in whole or
in part, by AIMCOR or any ERISA Affiliate. None of the Company Plans
is a multiemployer plan as defined in Section 3(37) of ERISA.
Neither AIMCOR nor any ERISA affiliate sponsors, maintains,
contributes to or has any liability with respect to a multiemployer
plan;
29
<PAGE>
(ix) with respect to any plan maintained outside the United
States for the purpose of providing or otherwise making available
retirement or other benefits to employees of the members of the
AIMCOR Group other than AIMCOR (collectively, "Non-U.S. Plans"),
each Non-U.S. Plan is in compliance in all material respects with
its terms and the provisions of all material laws applicable to each
such Non-U.S. Plan, except where noncompliance with such terms or
laws would not have a Material Adverse Effect. All required employer
contributions under any such plans have been made and the applicable
pension funds have been funded in accordance with the terms of the
plan and in compliance with all laws applicable thereto except where
noncompliance with such laws would not have a Material Adverse
Effect;
(x) there are no strikes, work stoppages or disputes pending,
or, to the Stockholders' knowledge, threatened between any member of
the AIMCOR Group and any current or former employees, and there is
no request for union representation or organizational effort by any
labor union or other collective bargaining unit pending, or, to the
Stockholders' knowledge, threatened against the business of any
member of the AIMCOR Group;
(xi) there are no pending, or, to the Stockholders' knowledge,
threatened unfair labor practice charges or employee grievance
charges with respect to the business of any member of the AIMCOR
Group;
(xii) the Disclosure Schedule contains a list of all employees
of the members of the AIMCOR Group as of July 1, 1997, whose annual
salaries exceed $50,000 and said list correctly reflects their
employer, base salaries, dates of employment and positions;
(xiii) with the exception of the agreements referred to in
Section 3.2(e), no Company Plan exists that could result in the
payment to any present or former employee of the AIMCOR Group or its
Subsidiaries of any money or other property or accelerate or provide
any other rights or benefits to any present or former employee of
the AIMCOR Group or its Subsidiaries as a result of the transaction
contemplated by this Agreement, whether or not such payment would
constitute a parachute payment as defined in Section 280G of the
Code, or whether or not some other further event or condition is
required for payment or entitlement on or after the transaction.
30
<PAGE>
LITIGATION AND CLAIMS
(q) There is no litigation or proceeding, in law or in equity, and
there are no proceedings or governmental investigations before any
commission or other administrative authority, pending or, to the
Stockholders' knowledge, threatened against any member of the AIMCOR
Group, or any of their respective officers, directors or Affiliates, with
respect to or affecting the operations, assets, business, products, sales
practices or financial condition of any member of the AIMCOR Group, which
has a reasonable probability of being decided adversely to the applicable
member of the AIMCOR Group and which, if decided adversely to such member,
would have a Material Adverse Effect, or prohibit, present or delay the
consummation of the transaction contemplated hereby. No present or former
director, officer, employee or agent of the members of the AIMCOR Group is
a defendant in any litigation commenced by stockholders of any member of
the AIMCOR Group with respect to the performance of his or her duties as a
director, officer, employee or agent of a member of the AIMCOR Group under
any federal or state law (including litigation under federal and state
securities laws). With the exception of the provisions of AIMCOR's
Certificate of Incorporation, here exist no indemnification agreements
with any of the present or former directors, officers, employees or agents
of any member of the AIMCOR Group.
(r) No member of the AIMCOR Group is a party to, or bound by, any
decree, order or arbitration award (or agreement entered into in any
administrative, judicial or arbitration proceeding with any governmental
authority) with respect to or affecting the properties, assets, personnel
or business activities of any member of the AIMCOR Group, the enforcement
of which or compliance with which would have a Material Adverse Effect.
(s) Except for laws, rules and regulations relating to the
environment (which are exclusively provided for in Section 2.3(t) hereof)
each member of the AIMCOR Group is in compliance with all decrees, orders
or arbitration awards or laws, statutes, or regulations of or agreements
with, or any Permits from, any federal, foreign, state, provincial or
local governmental authority to which the property, assets, personnel or
business activities of the AIMCOR Group are subject, including, without
limitation, federal, foreign, state, provincial or local laws, statutes
and regulations relating to equal employment opportunities, fair
employment practices, occupational health and safety, wages and hours, and
discrimination, except such failures to be in compliance which would not,
individually or in the aggregate, have a Material Adverse Effect.
31
<PAGE>
ENVIRONMENTAL MATTERS
(t) Each member of the AIMCOR Group is, and has been, in compliance
with all Environmental Laws (as herein defined), except where the failure
to be in compliance would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect, and, to the
Stockholders' knowledge, there is no condition that would reasonably be
expected to prevent or materially interfere with such compliance. The
AIMCOR Group possesses all Environmental Permits which are required for
the operation of their respective businesses, where the failure to possess
such Environmental Permits would reasonably be expected to result in a
Material Adverse Effect, and is in compliance with the provisions of all
such Environmental Permits, except where the failure to so comply would
not reasonably be expected to result in a Material Adverse Effect. No
modification, revocation, reissuance, alteration, transfer or amendment of
any material Environmental Permit, or any review by, or approval of, any
third party of any material Environmental Permit is required in connection
with the execution or delivery of this Agreement or the consummation of
the transactions contemplated hereby or the continuation of the business
of the AIMCOR Group. All material Environmental Permits possessed by the
AIMCOR Group are listed in Schedule 2.3(t) of the Disclosure Schedule.
Except as would not reasonably be expected to result in a Material Adverse
Effect, none of the AIMCOR Group has received any Environmental Action (as
herein defined) which has not been fully remediated and none of the
Stockholders is aware of any threatened Environmental Action. None of the
AIMCOR Group has entered into, has agreed to, or is subject to any
judgment, decree, order or other similar requirement of any governmental
authority under any Environmental Laws. Except as would not reasonably be
expected to result in a Material Adverse Effect, Hazardous Materials (as
herein defined) have not been generated, transported, treated, stored,
disposed of, released or threatened to be released at, on, from or under
any of the properties or facilities currently or formerly owned, leased or
otherwise used by any of the AIMCOR Group, in violation of, or in a manner
or to a location that could give rise to liability to any of the AIMCOR
Group under, any Environmental Laws. Except as would not reasonably be
expected to result in a Material Adverse Effect, none of the AIMCOR Group
has contractually assumed any liabilities or obligations under any
Environmental Laws. For the purposes of this Agreement:
(i) "Environmental Laws" means all applicable federal,
foreign, state, provincial and local statutes, regulations,
ordinances, rules, regulations and policies having the force of law,
and all court orders and decrees and arbitration awards, which
pertain to environmental or
32
<PAGE>
safety matters or radiation or contamination of any type
whatsoever and are in effect as of the date hereof;
(ii) "Environmental Permits" means licenses, permits,
registrations, governmental approvals, agreements and consents which
are required under or are issued pursuant to Environmental Laws;
(iii) "Environmental Action" means any written notice, claim,
demand, action, suit, complaint, proceeding or other communication
by any person alleging liability or potential liability (including
without limitation liability or potential liability for
investigatory costs, cleanup costs, governmental response costs,
natural resource damages, property damage, personal injury, fines or
penalties) arising out of, relating to, based on or resulting from
(w) the presence, discharge, emission, release or threatened release
of any Hazardous Materials at any location, (x) circumstances
forming the basis of any violation or alleged violation of any
Environmental Laws or Environmental Permits, or (y) otherwise
relating to obligations or liabilities under any Environmental Laws;
and
(iv) "Hazardous Materials" means all hazardous, dangerous or
toxic substances, wastes, materials or chemicals, petroleum
(including crude oil or any fraction thereof) and petroleum
products, asbestos and asbestos-containing materials, pollutants,
contaminants and all other materials or substances regulated
pursuant to any Environmental Laws or that could reasonably be
expected to result in liability under any Environmental Laws.
REAL ESTATE AND LEASED PREMISES
(u) All real property owned by any member of the AIMCOR Group is
identified in Section 2.3(u) of the Disclosure Schedule, which shall for
the purposes of this Agreement include TAC's Bridgeport, Alabama facility
(together with all buildings, structures and other improvements located
thereon, the "Real Estate"). The member of the AIMCOR Group identified in
Section 2.3(u) of the Disclosure Schedule as owning particular parcels of
Real Estate holds good and marketable fee simple title to such Real
Estate, subject only to real estate taxes not delinquent and easements,
covenants, conditions and restrictions which do not materially and
adversely affect the marketability of title or the uses to which the Real
Estate is put. The Real Estate is not subject to any leases or tenancies.
(v) All real estate leased or subleased by, or subject to any other
occupancy agreement in favor of, any member of
33
<PAGE>
the AIMCOR Group is identified in the Disclosure Schedule (together with
all buildings, structures and other improvements located thereon, the
"Leased Premises"). The Leased Premises are leased to the member of the
AIMCOR Group identified in the Disclosure Schedule as leasing parcels of
the Leased Premises pursuant to written leases, true and complete copies
of which have been made available to Purchaser and such party has good
title to the leasehold estate to such Leased Premises. Each lease and
sublease which permits any member of the AIMCOR Group to occupy a Leased
Premises is in full force and effect and constitutes a legal, valid and
binding obligation of, and is legally enforceable against, the member of
the AIMCOR Group which is the lessee and, to the Stockholders' knowledge,
the lessors thereof, and grants the leasehold interest it purports to
grant free and clear of all covenants, conditions, restrictions,
easements, mortgages, liens, security interests, encumbrances, rights of
way and other similar restrictions created by or imposed upon any member
of the AIMCOR Group, or, to the Stockholders' knowledge, any other party.
Neither the member of the AIMCOR Group which is the lessee of particular
Leased Premises is in default under any agreement relating to such Leased
Premises nor, to the Stockholders' knowledge, is any other party thereto
in default thereunder, which default would have a Material Adverse Effect.
(w) To the Stockholders' knowledge, there are no violations of any
restriction, condition or agreement contained in any instrument of record
against the Real Estate or the Leased Premises. To the Stockholders'
knowledge, all buildings, structures and other improvements included
within the Real Estate and the Leased Premises, including but not limited
to the roofs and structural elements thereof, are in good working order in
all material respects and free of material structural defects. None of the
AIMCOR Group nor the Stockholders has received notice or otherwise has
knowledge of any pending, threatened or contemplated condemnation
proceeding affecting the Real Estate or the Leased Premises or any part
thereof or of any sale or other disposition of any Real Estate or Leased
Premises or any part thereof in lieu of condemnation.
INTELLECTUAL PROPERTY
(x) All material U.S. or foreign intellectual property of the AIMCOR
Group, including, without limitation, each material (i) trademark, service
mark, slogan, trade name, trade dress and the like (collectively, and
together with the associated goodwill of each, "Trademarks"), including
information regarding each registration and pending application to
register any such Trademarks; (ii) common law Trademark; (iii) patent
application; (iv) registration of and
34
<PAGE>
application to register any copyright; and (v) license of rights in
Trademarks, patents, copyrights, unpatented formulations, and know-how,
whether to or by any member of the AIMCOR Group, is listed in the
Disclosure Schedule. The scheduled rights, together with all other
intellectual property of the AIMCOR Group, including trade secrets,
technology, inventions and know-how, are referred to herein collectively
as the "Intellectual Property."
(y) The members of the AIMCOR Group own or have the right to use all
material Intellectual Property necessary for the AIMCOR Group to conduct
its business as it is currently being conducted and consistent with past
practice. Such Intellectual Property is valid, unexpired and has not been
abandoned. The members of the AIMCOR Group have taken reasonable steps to
protect, maintain and safeguard their Intellectual Property, including any
material Intellectual Property for which improper or unauthorized
disclosure would impair its value or validity, and have caused their
employees and third parties who are reasonably likely to have access
thereto to execute agreements in connection with the foregoing.
(z) The Stockholders have no knowledge: (i) that any other firm,
corporation, association or person claims the right to use in connection
with similar or closely related goods and in the same geographic area, any
mark which is identical or confusingly similar to any of the Trademarks;
(ii) of any claim that any third party (other than a licensor of
Intellectual Property to a member of the AIMCOR Group) asserts ownership
rights in any of the Intellectual Property; (iii) of any claim that the
use by any member of the AIMCOR Group of any Intellectual Property
infringes any right of any third party; and (iv) that any third party is
infringing any of the rights of any member of the AIMCOR Group in any of
the Intellectual Property.
GENERAL
(aa) With the exception of Goldman, Sachs & Co., neither the
Stockholders, nor any of their Affiliates, nor any member of the AIMCOR
Group, have dealt with any person, firm or corporation who is entitled to
a broker's commission, finder's fee, investment banker's fee or similar
payment for arranging the transaction contemplated hereby or introducing
the parties to each other.
(bb) Schedule 2.3(bb) of the Disclosure Schedule lists all insurance
policies of the members of the AIMCOR Group covering the assets, products,
employees and current and historical operations of the AIMCOR Group as of
the date hereof. All such policies are in full force and effect, all
35
<PAGE>
premiums due thereon have been paid by the AIMCOR Group and the members of
the AIMCOR Group have complied in all material respects with the
provisions of such policies and have not received any notice from any of
its insurance brokers or carriers that such broker or carrier will not be
willing or able to renew their existing coverage.
(cc) The assets of the AIMCOR Group comprise all of the assets
necessary to conduct the businesses of the AIMCOR Group in the same manner
as such businesses were being conducted on September 30, 1996; provided,
however, that no representation or warranty is made with respect to
corporate services rendered to the AIMCOR Group from AIMCOR's Denver,
Colorado headquarters.
2.4 Individual Representations and Warranties of the Stockholders. Each of
the Stockholders, individually, and each of Germany LP and Luxembourg LP,
individually, represents and warrants to Purchaser as follows:
(a) Such Stockholder, Germany LP or Luxembourg LP (as the case may
be) has full power and authority to execute and perform this Agreement.
This Agreement constitutes a valid and legally binding of such
Stockholder, Germany LP or Luxembourg LP, enforceable against such
Stockholder, Germany LP or Luxembourg LP (as the case may be) in
accordance with its terms (except to the extent that enforcement may be
affected by laws relating to bankruptcy, reorganization, insolvency and
creditors' rights and by the availability of injunctive relief, specific
performance and other equitable remedies).
(b) If such Stockholder, Germany LP or Luxembourg LP (as the case
may be) is a limited partnership, trust or entity (a "Stockholder
Entity"), such Stockholder Entity is duly organized, existing and in good
standing under the laws of its jurisdiction of formation. The execution
and delivery of this Agreement by it and the performance by it of all of
its obligations under this Agreement have been duly approved prior to the
date of this Agreement by all requisite action of its general partners,
trustees or the like, as the case may be. No other approval is required
for it to execute this Agreement or consummate the transaction
contemplated hereby. This Agreement has been duly executed and delivered
by it. Neither the execution and delivery of this Agreement by such
Stockholder Entity, nor the consummation by it of the transaction
contemplated hereby will conflict with or constitute a breach of any of
the terms, conditions or provisions of its Agreement of Limited
Partnership, trust
36
<PAGE>
agreement or declaration of trust, or other organizational
documents, as the case may be.
(c) Such Stockholder owns the numbers of Purchased Shares listed
opposite such Stockholder's name on Exhibit A, free and clear of all
claims, equities, security interests, liens, proxies, restrictions on
transfer, voting trusts and voting agreements, other than agreements
between AIMCOR and/or Enterprises and such Stockholder which will be
terminated as of the Closing.
2.5 Limitation on Warranties. Except as expressly set forth in Sections
2.3 and 2.4, the Stockholders, Germany LP and Luxembourg LP make no express or
implied warranty of any kind whatsoever, including, without limitation, any
representation as to physical condition or value of any of the assets of the
AIMCOR Group or the future profitability or future earnings performance of the
AIMCOR Group. ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE ARE EXPRESSLY EXCLUDED.
2.6 Definition of Knowledge. For the purposes of this Agreement, the
knowledge of the Stockholders shall be deemed to be limited to the actual
knowledge as of the Closing Date of Gallagher, Kocourek, William Ehmer
("Ehmer"), Jon Burns ("Burns"), Peter Scott-Hansen, Charles Kopec, Kevin Manion
and John Straka, without giving effect to imputed knowledge.
37
<PAGE>
ARTICLE 3
Conduct Prior to the Closing
3.1 General. The Stockholders, Germany LP, Luxembourg LP and Purchaser
shall have the rights and obligations with respect to the period between the
date hereof and the Closing Date which are set forth in the remainder of this
Article 3.
3.2 Obligations of the Stockholders, Germany LP and Luxembourg LP. The
following are the obligations of the Stockholders, Germany LP and Luxembourg LP:
(a) the Stockholders, Germany LP and Luxembourg LP shall and shall
use their best efforts to cause the AIMCOR Group to give to Purchaser's
officers, employees, agents, attorneys, consultants, accountants and
lenders reasonable access during normal business hours to all of the
properties, books, contracts, documents, insurance policies, records,
attorneys, consultants, accountants, advisors and personnel of or with
respect to the AIMCOR Group and shall furnish to Purchaser and such
persons as Purchaser shall designate to the Stockholders' Committee such
information as Purchaser or such persons may at any time and from time to
time reasonably request (including without limitation, all work papers and
supporting information of the Accountants). The right of inspection
granted to Purchaser under this Section 3.2(a) includes the right to make
reasonable extracts or copies. No investigation pursuant to this Section
3.2(a) shall affect any representations or warranties of the parties
herein or the conditions to the obligations of the parties hereto.
(b) The Stockholders, Germany LP and Luxembourg LP shall (and
Purchaser shall cooperate with the Stockholders, Germany LP and Luxembourg
LP to) cause the members of AIMCOR Group to use their reasonable best
efforts to obtain the consents to the consummation of the transaction
contemplated hereby under or with respect to, each contract, lease,
agreement, Permit, Environmental Permit, and other instrument, which is
enumerated in Exhibit F attached hereto (the "Material Consents") and, in
addition to the Material Consents, any consents with respect to any other
Environmental Permit for which a consent with regard to the consummation
of the transaction contemplated hereby would be required under
Environmental Laws.
38
<PAGE>
(c) The Stockholders, Germany LP and Luxembourg LP shall each use
its best efforts to (i) maintain the present business organization of the
AIMCOR Group, (ii) purchase and sell inventory, pay payables and other
accrued liabilities and collect receivables in the usual and ordinary
course of business, consistent with past practices and otherwise operate
the AIMCOR Group in the ordinary and regular course of business consistent
with past practice; (iii) maintain the AIMCOR Group's books and records in
accordance with past practices; (iv) keep available the services of the
AIMCOR Group's officers and employees (other than Gallagher, Kocourek and
employees of Consumer Products (as herein defined) and employees located
at its Denver, Colorado headquarters); (v) comply in all material respects
with all applicable laws, including, without limitation, applicable
Environmental Laws; and (vi) maintain reasonably satisfactory
relationships with licensors, suppliers, employees, creditors,
distributors, customers and others transacting business with the Company,
except as permitted by this Agreement.
(d) Without the prior written consent of Purchaser, and without
limiting the generality of any other provision of this Agreement, the
Stockholders, Germany LP and Luxembourg LP shall use their best efforts to
cause the members of the AIMCOR Group not to:
(i) amend their respective certificates or articles of
incorporation or by-laws, partnership agreements, or other
organizational documents;
(ii) make any change in the authorized capital stock of any
member of the AIMCOR Group, or issue or sell any shares of stock of
any class of stock of any member of the AIMCOR Group, or issue,
grant or become a party to any subscriptions, warrants, rights,
options, calls, convertible securities or agreements or commitments
of any character relating to the issued or unissued capital stock of
the members of the AIMCOR Group, or to other equity securities or
interest of any member of the AIMCOR Group, or grant any stock
appreciation, phantom stock or similar rights;
(iii) (x) increase the compensation or fringe benefits of any
present or former director, officer or employee of the AIMCOR Group
or its Subsidiaries (except for increases in salary or wages in the
ordinary course of business consistent with past practice), (y)
grant any severance or termination pay to any present or former
director, officer or employee of the AIMCOR Group or its
Subsidiaries or (z) establish, adopt, enter into, amend or terminate
any Company Plan or any plan, agreement, program, policy, trust,
fund or other arrangement that
39
<PAGE>
would be a Company Plan if it were in existence as of the date of
this Agreement; provided, however, that in connection with the
formation and sale of Consumer Products, AIMCOR may cause Company
Plans applicable only to Consumer Products to be established,
provided that no cost to the AIMCOR Group (other than Consumer
Products) results therefrom;
(iv) incur or commit to incur any investment or capital
expenditures not set forth in Schedule 3.2(d)(iv) of the Disclosure
Schedule in excess of $100,000 in the aggregate;
(v) subject any of the assets of the AIMCOR Group to any lien,
mortgage, security interest or encumbrance or otherwise permit or
allow the members of the AIMCOR Group to sell, transfer or otherwise
dispose of any asset or property (including sales, leases or
transfers to Affiliates), except for sales of inventory and for
transfers of cash in payment of the trade payables of the members of
the AIMCOR Group all in the usual and ordinary course of business in
accordance with past practices and payment of cash dividends to the
Stockholders to the extent permitted in Section 3.2(d)(ix), and
except for the following transactions with all or certain
Stockholders or their designees which are out of the ordinary course
of business:
a. the sale of AIMCOR Consumer Products LLC ("Consumer
Products");
b. the sale of the outstanding shares of Panoramica,
Inc. which are owned by AIMCOR;
c. the sale of the outstanding shares of Servicios
AIMCOR, A.C. which are owned by AIMCOR Inversiones S.A. de
C.V., a subsidiary of Enterprises;
d. the sale of one general aviation aircraft known as a
Westwind 1124, Serial Number 310, F.A.A. Registration Number
N78GJ, together with hangar deposits, prepaid insurance and
spare parts relating to such aircraft, and the assumption by
the purchaser of AIMCOR's obligations under that certain
Aircraft Administrative Agreement dated June 12, 1997 between
AIMCOR and Pal-Waukee Aviation, Inc.;
e. the novation of that certain lease, dated July 16,
1996 between AIMCOR and The CIT Group, Inc., relating to one
Falcon 900B aircraft, and the
40
<PAGE>
concurrent (i) sale to the person to whom such lease is
novated of all spare parts for such aircraft, all hangar
deposits, and all prepaid insurance relating thereto and (ii)
assumption by such person of all obligations of AIMCOR under
that certain Hangar Occupancy Agreement dated August 26, 1996
by and between Anschutz Corporation and AIMCOR;
f. the assignments to Gallagher, Kocourek, Burns and
Ehmer of the leases of automobiles leased by AIMCOR for their
respective benefit and the assumption by Gallagher, Kocourek,
Burns and Ehmer, respectively, of AIMCOR's obligations under
such leases;
g. the assignment of AIMCOR's rights as lessee under
that certain lease, dated March 3, 1993, between Brookfield
Republic, Inc. as lessor, and AIMCOR, as lessee, relating to
premises commonly known as Suite 5600, 370 Seventeenth Street,
Denver, Colorado, and the assumption by the assignee of all
obligations of AIMCOR thereunder;
h. the sale to Gallagher and Kocourek, respectively, or
their respective designees, of AIMCOR's rights in split dollar
insurance policies owned by AIMCOR on their respective lives;
i. the sale to Gallagher of all tangible personal
property located at Suite 5600, 370 Seventeenth Street,
Denver, Colorado;
j. the sale to Kocourek of all office furniture located
in the office which he occupies at 750 Lake Cook Road, Buffalo
Grove, Illinois;
k. the sale to Kocourek of all rights of AIMCOR in
sporting event tickets at the United Center; and
l. the sale to Gallagher of all rights of AIMCOR in
sporting event tickets at Mile High Stadium, McNichols Arena,
the Pepsi Center, the FlatIrons Club at the University of
Colorado and Coors Field.
The assets to be sold pursuant to this subparagraph (v) are referred
to herein as the "Excluded Assets". The purchase prices of the
Excluded Assets shall be represented by promissory notes of said
Stockholders or their designees, which notes shall be payable on
demand
41
<PAGE>
and bear interest, due upon demand, at the rate of 6% per annum and,
shall be included among the Stockholder Notes and Loans;
(vi) prepay any of its material obligations other than in the
ordinary course of business consistent with past practice (except
that AIMCOR may make contributions to the Pension Plans in advance
of their due dates, to the extent such contributions are reflected
on the 1997 Financial Statements and AIMCOR may repay any amounts
owed by it to any member of the AIMCOR Group and the members of the
AIMCOR Group may repay any amounts owed to them by AIMCOR);
(vii) borrow any money or incur, whether directly or by way of
guarantee or similar arrangement, any obligation for borrowed money,
other than borrowings under lines of credit described in Section
2.3(m)(xi) of the Disclosure Schedule in the ordinary course of
business and consistent with past practice;
(viii) except as permitted pursuant to subparagraph (d)(v),
directly or indirectly cause to be purchased, redeemed or otherwise
acquired or disposed of any equity securities of or interest in any
member of the AIMCOR Group;
(ix) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock or property, with respect to
any capital stock of any of the members of the AIMCOR Group (except
that cash dividends (i) may be declared and paid on or prior to
September 30, 1997 and (ii) with a payment date after September 30,
1997 and prior to the Closing Date may be declared and paid prior to
the Closing Date in order to pay Tax liabilities (other than Tax
liabilities resulting from the transactions contemplated by this
Agreement) of the Stockholders relating to AIMCOR which arose after
September 15, 1997 and are required to be paid prior to the Closing
Date), or make any other payment to any Stockholder, Germany LP or
Luxembourg LP or any of their Affiliates (in their capacities as
stockholders, directors, employees or otherwise) other than (i)
salaries and bonuses paid prior to the Closing Date in the ordinary
course of business and consistent with past practice, (ii) incentive
bonuses (including bonuses to Gallagher and Kocourek in the
estimated amount of $2,200,000) payable under the Company Plans with
respect to the 1997 fiscal year of the AIMCOR Group, and (iii)
payments required to be made prior to the Closing pursuant to the
terms of any Affiliate Transaction with such person;
42
<PAGE>
(x) assume, guarantee, or otherwise become responsible for the
obligations of, or make any loans or advances to, any other
individual, firm or corporation (other than the endorsement of
checks in the ordinary course of business);
(xi) waive or release any rights of material value, or cancel,
compromise, release or assign any material indebtedness owed to it
or any material claims held by it;
(xii) cancel or terminate any insurance policy naming it as a
beneficiary or a loss payable payee;
(xiii) enter into or amend any collective bargaining
agreements;
(xiv) except as may be required as a result of a change in law
or in U.S. GAAP, change any of the accounting practices or
principles used by any member of the AIMCOR Group;
(xv) make any material Tax election or settle or compromise
any material federal, state, local or foreign Tax liability;
(xvi) except as permitted by subparagraph (ix) or Section
3.2(d)(v), enter into any Affiliate Transactions or alter or amend
the terms of any Affiliate Transaction in existence on the date
hereof;
(xvii) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization
or other reorganization of any member of the AIMCOR Group;
(xviii) purchase the assets (other than purchases of inventory
in the ordinary course of business) or equity securities of any
entity, or merge or consolidate with any entity;
(xix) agree to take, in writing or otherwise, any of the
actions described in Sections 3.2(d)(i) through 3.2(d)(xviii) (other
than those permitted pursuant to Section 3.2(d)(v) or (ix)); or
(xx) cause or permit AIMCOR to revoke AIMCOR's election to be
taxed as an S corporation within the meaning of Code ss.ss.1361 and
1362, or take or allow to be taken any action that would result in
the termination of AIMCOR's status as a validly electing S
corporation within the meaning of Code ss.ss.1361 and 1362.
43
<PAGE>
(e) On or prior to the Closing Date, the Stockholders shall cause
AIMCOR to make payments to Edmond De Demo and Julian Storck in
consideration of the termination of phantom stock agreements between
AIMCOR, on the one hand, and those individuals, on the other hand. If such
payments are made after September 30, 1997, the effects thereof shall be
reflected on the Closing Balance Sheet;
(f) On or before the Closing Date, each Stockholder shall furnish
Purchaser with a certification of non-foreign status that satisfies the
requirements of Code ss. 1445(b) (2) and Treas. Reg. ss. 1.1445-2.
(g) Prior to the earlier of the termination of this Agreement or the
Closing, each of the Stockholders, Germany LP and Luxembourg LP will not,
and will cause the members of the AIMCOR Group and their respective
officers, directors, employees and agents not to, initiate, solicit or
encourage, directly or indirectly, any inquiries or the making of any
proposal with respect to, or engage in any negotiations concerning,
provide any confidential information or data to, have any discussions with
or enter into any agreements with, any person relating to any acquisition,
business combination, reorganization or purchase of all or any portion of
the capital stock or assets of the AIMCOR Group other than in the ordinary
course of business and in compliance with the other provisions of this
Agreement. Each of the Stockholders, Germany LP and Luxembourg LP will,
and will cause the members of the AIMCOR Group to, immediately cease and
cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any
such potential transactions involving the AIMCOR Group. Each of the
Stockholders, Germany LP and Luxembourg LP will, and will cause the
members of the AIMCOR Group to, immediately notify the Purchaser if any
inquiries are received in respect of any member of the AIMCOR Group, and
shall provide details with respect thereto. Each of the Stockholders,
Germany LP and Luxembourg LP will not pledge, encumber or dispose of the
Purchased Shares or any other securities of any member of the AIMCOR Group
beneficially owned by them prior to the Closing.
(h) Each of the Stockholders, Germany LP and Luxembourg LP agrees
that, at the request of the Purchaser, it will, and will cause the AIMCOR
Group to, call for prepayment or redemption, or to prepay, redeem and/or
renegotiate, as the case may be, any then existing indebtedness for
borrowed money of the AIMCOR Group (other than the industrial revenue
bonds and pollution control bonds owed by TAC), conditional upon the
occurrence of the Closing; provided that no such prepayment or
44
<PAGE>
redemption shall actually be made until contemporaneously with or after
the Closing Date.
(i) Each of the Stockholders, Germany LP and Luxembourg LP agrees
that it will, and will cause the AIMCOR Group to, promptly (but in no
event later than 5 business days) notify Purchaser in the event that they
or any member of the AIMCOR Group receive any written or oral
communication from the PBGC in respect of any Pension Plan subject to
Title IV of ERISA concerning the funded status of any such plan or any
transfer of assets and liabilities from any such plan in connection with
the transactions contemplated herein.
(j) The Stockholders shall cause Aimcor Formed Products Limited
Partnership, a Delaware limited partnership, to be liquidated and
dissolved or, in the alternative, for AIMCOR's interest therein to be
distributed to the Stockholders.
(k) As promptly as practicable and in any event no later than twenty
days after the end of each fiscal month ending after the date hereof and
before the Closing Date, the Stockholders will deliver to Purchaser true
and complete copies of the unaudited consolidated balance sheets and
statements of income of AIMCOR as of and for each such fiscal month and
the portion of the fiscal year then ended, together with the notes, if
any, relating thereto, which financial statements shall be prepared on a
basis consistent with the Interim Financial Statements.
(l) Notwithstanding anything to the contrary contained in this
Section 3.2, the written consent of Purchaser shall not be required in the
event any action otherwise prohibited by this Section 3.2 is taken by any
of the members of the AIMCOR Group if such action has no adverse effect on
the AIMCOR Group or Purchaser and does not result in a liability not
reflected on the Closing Balance Sheet and if such actions, taken as a
whole, involve assets the fair market value of which in the aggregate does
not exceed $100,000.00. Such assets may consist of such things as cash,
U.S. Treasury securities, equity securities, foreign currencies and
limited partnership interests, but shall not include real estate, tangible
personal property or general partnership interests.
3.3 Purchaser's Obligations. The following are Purchaser's obligations:
(a) Purchaser shall comply with its obligations under that certain
letter agreement, between AIMCOR and Kohlberg Kravis Roberts & Co., L.P.,
dated April 4, 1997 and that letter from Purchaser to AIMCOR, dated July
10, 1997 (collectively, the "Confidentiality Letter"); and
45
<PAGE>
(b) Purchaser shall use its all commercially reasonable efforts to
obtain financing for the transaction contemplated hereby in accordance
with the Commitment Letter (it being understood that (x) Purchaser shall
not consent to the lender's syndicating the loans contemplated thereby if
it would result in a delay in the Closing, and (y) Purchaser shall not be
required to agree to any loan documentation which is commercially
unreasonable in the context of loan transactions of the type and size
contemplated by the Commitment Letter). If Purchaser is unable to obtain
the financing contemplated by the Commitment Letter, Purchaser shall use
commercially reasonable efforts to obtain replacement financing, on terms
substantially similar to those contained in the Commitment Letter.
3.4 Joint Obligations. The following shall apply with equal force to the
Stockholders, Germany LP and Luxembourg LP, on the one hand, and Purchaser, on
the other hand:
(a) Each of the parties hereto shall use all reasonable best efforts
to take, or cause to be taken, all actions and to do, or cause to be done,
all things necessary, proper or advisable to consummate the transaction
contemplated hereby as soon as practicable.
(b) Each party shall promptly give the other party written notice of
the existence or occurrence of any condition which would make any
representation or warranty herein contained of either party untrue or
which might reasonably be expected to prevent the consummation of the
transaction contemplated hereby.
(c) Except as permitted by Sections 3.2(d)(v), 3.2(d)(ix) and
3.2(e), no party shall perform any act which, if performed, or
intentionally omit to perform any act which, if omitted to be performed,
would prevent or excuse the performance of this Agreement by any party
hereto or which would result in any representation or warranty herein
contained of said party being untrue.
(d) The parties shall forthwith make all filings and perform all
acts required by them respectively under the HSR Act; and, in addition to
the conditions set forth in Article 4, the obligations of each of the
parties to this Agreement shall each be conditional upon the expiration or
early termination of the waiting period set forth in the HSR Act and the
rules promulgated thereunder.
46
<PAGE>
ARTICLE 4
Conditions to Closing
4.1 Conditions to Obligations of the Stockholders, Germany LP and
Luxembourg LP. In addition to the condition set forth in Section 3.4(d), the
obligation of the Stockholders, Germany LP and Luxembourg LP to close the
transaction contemplated hereby is subject to the fulfillment of all of the
following conditions on or prior to the Closing Date, upon the non-fulfillment
of any of which this Agreement may, at the Stockholders' Committee's option, be
terminated pursuant to and with the effect set forth in Article 8:
(a) Each representation and warranty of Purchaser which is expressly
qualified by any materiality qualification shall be true and correct,
subject to such materiality qualification, and each of the remaining
representations and warranties of Purchaser shall be true and correct in
all material respects, in each case, on and as of the Closing Date as
though such representations and warranties were made on such date, except
that any representations and warranties that are made as of a specified
date shall be true as of such date; provided, however, that a breach of
any of the foregoing representations and warranties shall not constitute
the non-fulfillment of the foregoing condition unless such breach,
individually or in the aggregate with all other breaches, is material to
the AIMCOR Group as a whole.
47
<PAGE>
(b) All obligations of Purchaser to be performed hereunder through,
and including on, the Closing Date (including, without limitation, all
obligations which Purchaser would be required to perform at the Closing if
the transaction contemplated hereby was consummated) shall have been fully
performed in all material respects.
(c) On the Closing Date there shall be no suit, proceeding or
investigation pending by any governmental authority on any grounds to
restrain, enjoin or hinder the consummation of the transaction
contemplated hereby.
(d) Purchaser shall have made the deliveries to the Stockholders'
Committee specified in Sections 5.2(b) through 5.2(f).
(e) Purchaser shall have delivered to the Stockholders' Committee
the written opinion of Simpson Thacher & Bartlett, counsel for Purchaser,
dated as of the Closing Date, in substantially the form of Exhibit G
attached hereto.
4.2 Conditions to Purchaser's Obligations. In addition to the condition
set forth in Section 3.4(d), the obligation of Purchaser to close the
transaction contemplated hereby is subject to the fulfillment of all of the
following conditions on or prior to the Closing Date, upon the non-fulfillment
of any of which this
48
<PAGE>
Agreement may, at Purchaser's option, be terminated pursuant to and with the
effect set forth in Article 8:
(a) Each representation and warranty of the Stockholders, Germany LP
and Luxembourg LP which is expressly qualified by any materiality
qualification shall be true and correct, subject to such materiality
qualification, and each of the remaining representations and warranties of
the Stockholders, Germany LP and Luxembourg LP shall be true and correct
in all material respects, in each case, on and as of the Closing Date as
though such representations and warranties were made on such date, except
that any representations and warranties that are made as of a specified
date shall be true as of such date; provided, however, that a breach of
any of the foregoing representations and warranties shall not constitute
the nonfulfillment of the foregoing condition unless such breach is
material to the AIMCOR Group as a whole.
(b) All obligations of the Stockholders, Germany LP and Luxembourg
LP to be performed hereunder through, and including on, the Closing Date
(including, without limitation, all obligations which the Stockholders,
Germany LP and Luxembourg LP would be required to perform at the Closing
if the transaction contemplated hereby was consummated) shall have been
fully performed in all material respects.
(c) All of the Material Consents shall have been obtained.
(d) On the Closing Date there shall be no suit, proceeding or
investigation pending by any governmental authority on any grounds to
restrain, enjoin or hinder the consummation of the transaction
contemplated hereby.
(e) The Stockholders, Germany LP and Luxembourg LP shall have
delivered to Purchaser the written opinion of Altheimer & Gray, counsel to
Stockholders, Germany LP and Luxembourg LP, dated as of the Closing Date,
in substantially the form of Exhibit H attached hereto.
(f) The Stockholders' Committee shall have made the deliveries to
the Purchaser specified in Sections 5.3(a) through 5.3(q).
(g) Since June 30, 1997, no event shall have occurred which,
individually or together with all other events, has had or is reasonably
likely to have a Material Adverse Effect.
(h) Purchaser shall have received the proceeds of the financing
contemplated by the Commitment Letter, or the
49
<PAGE>
proceeds of substitute financing as contemplated by Section 3.3(b).
ARTICLE 5
Closing
5.1 Form of Documents. At the Closing, the parties shall deliver the
documents, and shall perform the acts, which are set forth in this Article 5.
All documents which the Stockholders' Committee shall deliver shall be in form
and substance reasonably satisfactory to Purchaser and Purchaser's counsel. All
documents which Purchaser shall deliver shall be in form and substance
reasonably satisfactory to the Stockholders' Committee and the Stockholders'
counsel.
5.2 Purchaser's Deliveries. Subject to the fulfillment or waiver of the
conditions set forth in Sections 3.4(d) and 4.2, Purchaser shall duly execute
and/or deliver to the Stockholders' Committee all of the following:
(a) the Estimated Cash Payment less the amounts, subject to the last
sentence of Section 1.4, to be deposited with the Escrow Agent to fund the
Escrows;
(b) a certified copy of Purchaser's Certificate of Incorporation and
by-laws;
(c) a certificate of good standing of Purchaser, issued not earlier
than twenty (20) days prior to the Closing Date by the Secretary of State
of Delaware;
(d) an incumbency and specimen signature certificate with respect to
the officers of Purchaser executing this Agreement, and any other document
delivered hereunder, on behalf of Purchaser;
(e) a certified copy of resolutions of Purchaser's board of
directors, authorizing the execution, delivery and
50
<PAGE>
performance of this Agreement, and any other document delivered by
Purchaser hereunder;
(f) a closing certificate executed by the President of Purchaser (or
any other officer of Purchaser specifically authorized by Purchaser's
board of directors to do so), on behalf of Purchaser, pursuant to which
Purchaser represents and warrants to the Stockholders that Purchaser's
representations and warranties to the Stockholders (i) in the case of any
thereof that are expressly qualified by any materiality qualification, are
true and correct, subject to such materiality qualification, and (ii) in
the case of each other representation and warranty, such representation
and warranty is true and correct in all material respects, in each case on
and as of the Closing Date as though such representations and warranties
were made on such date, except that any representations and warranties
that are made as of a specified date shall be true as of such date (or, if
any such representation or warranty shall fail to satisfy such standard in
any respect, specifying the respect in which the standard is failed), that
all covenants required by the terms hereof to be performed by Purchaser on
or before the Closing Date, to the extent not waived by the Stockholders'
Committee in writing, have been so performed in all material respects (or,
if any such covenant has not been so performed, indicating that such
covenant has not been performed), and that all documents to be executed
and delivered by Purchaser at the Closing have been executed and delivered
by duly authorized officers of Purchaser; and
(g) without limitation by specific enumeration of the foregoing, all
other documents reasonably required from Purchaser to consummate the
transaction contemplated hereby.
5.3 Stockholders', Germany LP's and Luxembourg LP's Deliveries. Subject to
the fulfillment or waiver of the conditions set forth in Sections 3.4(d) and
4.1, the Stockholders' Committee, Germany LP and Luxembourg LP shall duly
execute and/or deliver to Purchaser all of the following:
(a) certified copies of the Certificates of Incorporation and
by-laws of AIMCOR and Enterprises and certified copies of the limited
partnership agreements of Germany LP and Luxembourg LP;
(b) certificates of good standing of AIMCOR issued not earlier than
twenty (20) days prior to the Closing Date by the Secretaries of State of
Delaware, Illinois, Alabama,
51
<PAGE>
California, Colorado, Connecticut, Indiana, Montana, Pennsylvania and
Texas;
(c) a certificate of good standing of Enterprises issued not earlier
than twenty (20) days prior to the Closing Date by the Secretary of State
of Nevada;
(d) a certificate of good standing of Germany LP and Luxembourg LP
issued not earlier than twenty (20) days prior to the Closing Date by the
Secretary of State of the State of Delaware;
(e) certificates representing:
(i) all outstanding shares of stock of AIMCOR;
(ii) all outstanding shares of stock of Enterprises not owned
by AIMCOR; and
(iii) all outstanding shares of stock of AIMCOR Luxembourg;
in each case duly endorsed in blank or with duly executed stock powers
attached with all necessary stock transfer stamps affixed;
(f) documents effecting the transfer of all the outstanding
participation interests in AIMCOR Germany, including, without limitation,
the participation interests held by CPG FRG Inc. and WCK FRG Inc.;
(g) instruments duly executed by AIMCOR and the Stockholders,
terminating all stockholder agreements between AIMCOR and any of the
Stockholders, effective as of the Closing;
(h) instruments duly executed by Enterprises and the Stockholders,
terminating all stockholder agreements between Enterprises and any of the
Stockholders, effective as of the Closing;
(i) a closing certificate duly executed by the Stockholders'
Committee, pursuant to which the Stockholders' Committee, on behalf of the
Stockholders, Germany LP and Luxembourg LP, represents and warrants to
Purchaser that: (i) the representations and warranties of the
Stockholders, Germany LP and Luxembourg LP to Purchaser (i) in the case of
any thereof that are expressly qualified by any materiality qualification,
are true and correct, subject to such materiality qualification, and (ii)
in the case of each other representation and warranty, each such
representation and
52
<PAGE>
warranty is true and correct in all material respects, in each case on and
as of the Closing Date as though such representations and warranties were
made on such date, except that any representations and warranties that are
made as of a specified date shall be true as of such date (or if any such
representation or warranty fail to satisfy such standard in any respect,
specifying the respect in which the standard is failed) (it being
understood and agreed that with respect to the representations and
warranties of the individual Stockholders contained in Section 2.4, such
closing certificate shall be deemed to have been executed and delivered
separately by each individual Stockholder and to pertain only to the
representations and warranties in Section 2.4 made by such Stockholder);
(ii) all covenants required by the terms hereof to be performed by the
Stockholders, Germany LP or Luxembourg LP on or before the Closing Date,
to the extent not waived in writing by Purchaser, have been so performed
in all material respects (or if any such covenant has not been so
performed, indicating that such covenant has not been performed); and
(iii) all documents to be executed by the Stockholders, the Stockholders'
Committee, Germany LP, Luxembourg LP, Enterprises and AIMCOR and delivered
at the Closing have been executed and delivered by duly authorized
officers of AIMCOR;
(j) the written resignations, effective as of the Closing Date, of
Gallagher and Kocourek as directors and officers of the members of the
AIMCOR Group and written resignations, effective as of the Closing Date,
of all other directors of AIMCOR, if any;
(k) physical possession of all books, records, tangible assets,
licenses, policies, contracts, plans, leases or other instruments owned by
or pertaining to the AIMCOR Group, which are in the possession of or under
the control of any Stockholder;
(l) copies of the Material Consents;
(m) the minute books and stock records of the members of the AIMCOR
Group;
(n) legally binding documentation evidencing the termination without
liability to the Purchaser or any member of the AIMCOR Group of all
Affiliate Transactions (other than agreements with respect to the
transactions contemplated by Section 3.2(d) (v));
(o) documentation evidencing that AIMCOR, effective as of the
Closing Date, has called for redemption all existing indebtedness for
borrowed money of the AIMCOR Group (other than industrial revenue bonds
and pollution control bonds owed
53
<PAGE>
by TAC) and has terminated all other loan agreements to which any member
of the AIMCOR Group is a party;
(p) documentation evidencing that Germany LP and Luxembourg LP have
eliminated the use of the word "AIMCOR" as part of their company name;
(q) if the Stockholders' Committee shall have elected to deliver the
Letter of Credit, the Letter of Credit; and
(r) without limitation by specific enumeration of the foregoing, all
other documents reasonably required from the Stockholders, Germany LP and
Luxembourg LP to consummate the transaction contemplated hereby.
5.4 Other Transactions Occurring at the Closing. In addition to the
deliveries to be made at the Closing pursuant to Sections 5.2 and 5.3, on or
prior to the Closing Date;
(a) the Stockholders who are obligated under Stockholder Notes and
Loans shall pay, and the Stockholders whose designees are obligated under
Stockholder Loans and Notes shall cause such designees to pay, the entire
outstanding principal amount thereof and all accrued and unpaid interest
thereon in full;
(b) the Stockholders shall cause the principal and all accrued
interest under all loans made by AIMCOR to Germany LP and Luxembourg LP to
be paid in full;
(c) AIMCOR and Consumer Products shall enter into a Trademark
License Agreement in the form attached hereto as Exhibit J, pursuant to
which and subject to the terms thereof AIMCOR shall grant to Consumer
Products the perpetual, royalty-free license to use the AIMCOR(R) mark on
the terms and conditions set forth therein;
(d) AIMCOR, Consumer Products and the Stockholders Committee shall
enter into a Services Agreement in the form attached hereto as Exhibit K;
(e) the Stockholders, Germany LP and Luxembourg LP, Purchaser and
the Escrow Agent shall enter into the Escrow Agreement;
(f) Purchaser shall deposit with the Escrow Agent the monies
necessary to fund the Escrows; and
(g) the Stockholders' Committee shall cause the employment of all
employees located at AIMCOR's Denver,
54
<PAGE>
Colorado corporate office to be transferred to one or more entities
controlled by Gallagher and/or Kocourek and/or members of their respective
families, without cost to the AIMCOR Group.
ARTICLE 6
Post-Closing Agreements
6.1 Post-Closing Agreements. From and after the Closing, the parties shall
have the respective rights and obligations which are set forth in the remainder
of this Article 6.
6.2 Inspection of Records. The Stockholders, Germany LP and Luxembourg LP,
on the one hand, and Purchaser, on the other hand, shall each make their
respective books and records with respect to the AIMCOR Group (including, in the
case of Purchaser, the books and records of the members of the AIMCOR Group)
available for inspection by the other party, or by its duly accredited
representatives, for reasonable business purposes at all reasonable times during
normal business hours upon reasonable advance notice, for a five (5) year period
after the Closing Date, with respect to all transactions of the AIMCOR Group
occurring prior to and relating to the Closing, and the historical financial
condition, assets, liabilities, operations and cash flows of the AIMCOR Group.
As used in this Section 6.2, the right of inspection includes the right to make
reasonable extracts or copies, at the expense of the inspectors. The
representatives of a party inspecting the records of the other party shall be
reasonably satisfactory to the other party. During the period from the fifth
anniversary of the Closing Date to the seventh anniversary of the Closing Date,
Purchaser
55
<PAGE>
agrees not to, and to cause the members of the AIMCOR Group not to, destroy at
any time any books or records which are subject to this Section 6.2 without
giving written notice to the Stockholders' Committee, and giving the
Stockholders' Committee 30 days following receipt of such notice to request in
writing that all or a portion of the records intended to be destroyed be
delivered to the Stockholders' Committee at the Stockholders' Committee's
expense. The Stockholders' Committee acknowledges that Purchaser shall not be
liable to the Stockholders' Committee in the event of any inadvertent
destruction of such books and records.
6.3 Confidentiality. Each of the Stockholders, Germany LP and Luxembourg
LP agrees that for a period of three years after the Closing Date, such
Stockholder, Germany LP or Luxembourg LP will not, without the prior written
consent of Purchaser, use, divulge, disclose or make accessible to any other
person, firm, partnership, corporation or other entity any Confidential
Information (as defined below) pertaining to the business of the AIMCOR Group,
except when required to do so by a court of competent jurisdiction, by any
governmental agency having supervisory authority over the business of the
members of the AIMCOR Group, or by any administrative body or legislative body
(including a committee thereof) with jurisdiction to order a Stockholder,
Germany LP or Luxembourg LP to divulge, disclose or make accessible such
information. For purposes of this Section 6.3, "Confidential Information" shall
mean non-public information concerning the financial data, strategic business
plans, product development (or
56
<PAGE>
other proprietary product data), customer lists, marketing plans and other
non-public, proprietary and confidential information of the AIMCOR Group or
customers that, in any case, is not otherwise available to the public (other
than by a Stockholder's, Germany LP's, Luxembourg LP's or their respective
Affiliates' breach of the terms hereof).
6.4 Use of Trademarks. Except as provided in Section 5.4(b), the
Stockholders shall not use and shall not license or permit any third party to
use, any name, slogan, logo or trademark which is identical or confusingly
similar to any of the names, slogans, logos or trademarks used in connection
with the businesses of the AIMCOR Group.
6.5 Third Party Claims. The parties shall cooperate with each other with
respect to the defense of any Third Party Claims (as herein defined) subsequent
to the Closing Date which are not subject to the indemnification provisions
contained in Article 7, provided that the party requesting cooperation shall
reimburse the other party for the other party's reasonable out-of-pocket costs
and other expenses of furnishing such cooperation.
6.6 Further Assurances. The parties shall execute such further documents,
and perform such further acts, as may be necessary to transfer and convey the
Purchased Shares to Purchaser, on the terms herein contained, and to otherwise
comply with the terms of this Agreement and consummate the transaction
contemplated hereby. Without limiting the generality of the foregoing, (x) the
Stockholders' Committee shall cooperate with Purchaser in effecting
57
<PAGE>
the transfer of any Environmental Permits the transfer of which is required by
virtue of the transaction contemplated hereby, and (y) the Stockholders'
Committee and Purchaser shall negotiate in good faith with respect to any
transition services which the AIMCOR Group may require from the former employees
of AIMCOR's Denver, Colorado headquarters or which the Stockholders' Committee
may require from AIMCOR.
6.7 Agreement to Defend and Indemnify. Purchaser shall cause AIMCOR to
indemnify and hold harmless each of the present and former directors, officers,
employees and agents of the members of the AIMCOR Group and each present and
former director, officer, employee, agent or trustee of any employee benefit
plan for employees of any member of the AIMCOR Group (individually, an
"Indemnified Employee", and collectively, the "Indemnified Employees") against
any losses, claims, damages, liabilities, costs, expenses (including, without
limitation, reasonable attorneys' fees), judgments, fines and amounts paid in
settlement in connection with any threatened, pending or completed claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative claim ("Indemnifiable Claim"), arising by reason
of the fact that the Indemnified Employee is or was a director, officer,
employee or agent of a member of the AIMCOR Group and arising out of or
pertaining to any action or omission occurring prior to the Closing Date
(including, without limitation, any which arise out of or relate to the
transaction contemplated by this Agreement), to the full extent permitted under
58
<PAGE>
the Delaware General Corporation Law as in effect on the Closing Date (or as
such rights to indemnification may be expanded subsequent to the Closing Date
under said law). Purchaser acknowledges and accepts as contract rights (and
agrees to cause AIMCOR to honor in accordance with their terms) the provisions
of AIMCOR's Certificate of Incorporation and/or by-laws as in effect on the date
hereof with respect to indemnification of officers, directors, employees and
agents of AIMCOR (including provisions relating to contribution, advancement of
expenses and the like), and agrees that for a period of six years after the
Closing Date the Certificate of Incorporation and by-laws of AIMCOR shall not be
modified or amended in any manner that would adversely affect the rights
thereunder of individuals who on the Closing Date were the present or former
directors, officers, agents or employees of the AIMCOR Group, except as required
by law. Purchaser shall cause AIMCOR to advance reasonable expenses (including
reasonable attorneys' fees) to each such Indemnified Employee to the full extent
permitted by Delaware General Corporation Law. In the event of any Indemnifiable
Claim (whether asserted or commenced before or after the Closing Date), the
Indemnified Employees may retain counsel satisfactory to them and the Purchaser,
and Purchaser shall cause AIMCOR to pay all fees and reasonable expenses of such
counsel for the Indemnified Employees promptly as statements therefor are
received; provided that AIMCOR shall not be liable for any settlement effected
without its written consent, which consent, however, shall not unreasonably be
withheld. Any Indemnified
59
<PAGE>
Employee wishing to claim indemnification under this Section 6.7, upon learning
of any Indemnifiable Claim, shall notify AIMCOR thereof; provided, however, that
the failure of an Indemnified Employee to give such notice shall only relieve
Purchaser and AIMCOR of their indemnification obligations to the extent of
actual prejudice resulting therefrom. The Indemnified Employees as a group may
retain only one law firm to represent them with respect to any such matter
unless there is, under applicable standards of professional conduct, a conflict
on any significant issue between the positions of any two or more Indemnified
Employees, in which case such Indemnified Employees may retain such number of
additional counsel as are necessary to eliminate all conflicts of the type
referred to above; provided that AIMCOR shall be responsible for the reasonable
expenses of only one additional counsel.
6.8 No Solicitation. Each Stockholder, Germany LP and Luxembourg LP agrees
that from the Closing Date until the third anniversary of the Closing (or, in
the case of each of Gallagher, Kocourek, Ehmer and Burns, the fifth anniversary
of the Closing Date), such Stockholder, Germany LP or Luxembourg LP (as the case
may be) shall not, and shall not permit any of their respective Affiliates to,
directly or indirectly, anywhere in the world, solicit to hire or hire any
employee of any member of the AIMCOR Group who is employed by any member of the
AIMCOR Group as of the Closing Date; provided, however, that Gallagher and/or
Kocourek, or any of their respective Affiliates, may solicit to hire or hire any
60
<PAGE>
employee of AIMCOR who is based in AIMCOR's corporate office in Denver, Colorado
or any employee who is related to Gallagher, in each case without any cost or
expense (including, without limitation, severance costs) to Purchaser or the
AIMCOR Group, and Gallagher and/or Kocourek, or any of their respective
Affiliates, may hire (but may not solicit to hire) any person (w) who is an
employee of the AIMCOR Group as of the Closing Date, (y) who is not a
Stockholder, and (z) whose employment is terminated after the Closing Date by a
member of the AIMCOR Group for reasons other than cause. The parties agree that
the remedy at law for any breach of any obligation under this Section 6.8 will
be inadequate and that in addition to any other rights and remedies to which
Purchaser may be entitled hereunder, at law or in equity, Purchaser shall be
entitled to injunctive relief and reimbursement from the Stockholder breaching
this Section 6.8 for all reasonable attorney's fees and other expenses incurred
in connection with the enforcement hereof, and each party further agrees to
waive any requirement for the securing or posting of any bond in connection with
such remedy. In the event this Section 6.8 is held to be in any respect an
unreasonable restriction upon the Stockholders, Germany LP or Luxembourg LP or
their respective Affiliates by any court having competent jurisdiction, the
court so holding may reduce the territory to which this Section 6.8 pertains
and/or the period of time for which it operates, or effect any other change to
the extent necessary to render this Section 6.8 enforceable by such court. As so
modified this Section 6.8 will continue in full force
61
<PAGE>
and effect. Such decision by a court of competent jurisdiction shall not
invalidate this Agreement, but this Agreement shall be interpreted, construed
and enforced as not containing such invalidated provision.
6.9 Non-Competition. Each Stockholder, Germany LP and Luxembourg LP agrees
that:
(a) during the period ending five years from the Closing Date,
without the prior written consent of Purchaser, such Stockholder, Germany
LP or Luxembourg LP, as the case may be, will not, directly or indirectly,
either alone or in conjunction with any individual, partnership, firm,
association, syndicate, company or other entity, whether as principal,
manager, agent, consultant, officer, stockholder, partner, investor,
lender or employee or in any other capacity, carry on, be engaged in,
advise, invest, lend money to, guarantee the debts or obligations of, or
have any financial interest in, any business which is in competition with
the business of the AIMCOR Group (other than Consumer Products) anywhere
throughout the world;
(b) for the purposes of this Section 6.9, a business shall be deemed
to be in competition with the business of the AIMCOR Group if it is
involved in the purchase, sale, lease, management of or other dealing in
any property or the rendering of any service purchased, sold, leased,
managed, dealt in or rendered by Purchaser or the members of the AIMCOR
Group as a part of the business of the AIMCOR Group as conducted as of the
Closing Date (other than Consumer Products). Nothing in this Section 6.9
shall be construed so as to preclude a Stockholder, Germany LP or
Luxembourg LP from investing in any entity, provided such Stockholder's,
Germany LP's or Luxembourg LP's beneficial ownership of any class of such
entity's securities does not exceed 3% of the outstanding securities of
such class;
(c) this Section 6.9 is a reasonable covenant under the
circumstances, and if in the opinion of any court of competent
jurisdiction this Section 6.9 is not reasonable in any respect, such court
shall have the right, power and authority to modify such provision or
provisions of this covenant to the extent the court determines such
restraint is not reasonable and to enforce the covenant as so amended. Any
breach of this Section 6.9 would irreparably injure Purchaser and the
AIMCOR Group. Accordingly, Purchaser may, in addition to pursuing any
other remedies it may have in law or in equity, obtain an injunction
against such Stockholder, Germany LP or Luxembourg
62
<PAGE>
LP from any court having jurisdiction over the matter restraining any
further violation of this Agreement by such person, without any
requirement for the securing or posting of any bond in connection with
such remedy.
6.10 Section 338(h) (10) Election; Tax Returns. The Stockholders and
Purchaser agree that:
(a) AIMCOR and each of the Stockholders will join with Purchaser in
making a Section 338(h) (10) Election with respect to the purchase and
sale of the Purchased Shares of AIMCOR. Purchaser shall prepare any and
all forms necessary to effectuate the Section 338(h) (10) Election
(including, without limitation, Internal Revenue Service Form 8023 and any
similar forms under applicable state and local income tax laws (the
"Section 338 Forms")) and, to the extent possible, the Stockholders and
the Purchaser shall execute as of the Closing Date, the Section 338 Forms.
In the event, however, any Section 338 Forms are not executed by the
Closing Date, the Stockholders and the Purchaser shall complete each such
Section 338 Form no later than 15 days prior to the date such Section 338
Form is required to be filed. Each of the Stockholders shall execute the
Section 338 Forms and the Purchaser shall cause the Section 338 Forms to
be duly executed by an authorized person for the Purchaser and shall duly
and timely file the Section 338 Forms in accordance with applicable Tax
laws and the terms of this Agreement. The Stockholders will include any
income, gain, loss, deduction or other Tax item resulting from the Section
338(h) (10) Election on their Tax returns to the extent permitted by
applicable law.
(b) Purchaser, AIMCOR and the Stockholders agree that the portion of
the Purchase Price attributable pursuant to Exhibit C to the shares of
stock of AIMCOR and the liabilities of AIMCOR and its qualified subchapter
S subsidiaries (plus other relevant items) will be allocated to the
classes of assets of AIMCOR and its qualified subchapter S subsidiaries,
as enumerated in section 1060 of the Code, for all Tax purposes as shown
on an Allocation Schedule to be prepared by the Stockholders' Committee as
soon as practicable after the Closing Date. The Stockholders' Committee
shall provide Purchaser with such Allocation Schedule and the
Stockholders' Committee shall make such revisions or changes to said
Schedule as shall be requested by Purchaser and approved by the
Stockholders' Committee, each acting in good faith. In the event the
Stockholders' Committee and Purchaser are unable to agree on the
allocation of said Purchase Price in such manner, such allocation shall be
determined by the Arbitrating Accountant, whose determination shall be
final and binding on the Stockholders, AIMCOR and Purchaser. The
Stockholders'
63
<PAGE>
Committee and Purchaser shall each pay one-half of the fee charged by the
Arbitrating Accountant for determining such allocation (including any
appraisal fees). Purchaser, all members of the AIMCOR Group, and the
Stockholders will file all Tax Returns (including amended returns and
claims for refund) and information reports in a manner consistent with
such Allocation Schedule, as so revised.
(c) The Stockholders' Committee shall prepare or cause to be
prepared and signed (through a designee who shall be designated by AIMCOR
upon the recommendation of the Stockholders' Committee as an officer of
AIMCOR solely for the purpose of preparing, signing and filing income Tax
Returns for the AIMCOR Group for periods ending on or prior to the Closing
Date) all income Tax Returns for the AIMCOR Group for all periods ending
on or prior to the Closing Date (including such income Tax Returns which
amend previously filed income Tax Returns) (the "Pre-Closing Tax
Returns"). With respect to all Pre-Closing Tax Returns, Purchaser shall
have the right to review such Tax Returns and suggest changes thereto. In
the event the Stockholders' Committee and Purchaser are unable to agree as
to the necessity of any suggested changes to any Pre-Closing Tax Returns
which are Tax Returns for Enterprises, AIMCOR Germany, AIMCOR Luxembourg
and any state which does not recognize the S election of AIMCOR (the
"Specific Returns") to avoid an adverse effect on Purchaser or the AIMCOR
Group, such suggested changes shall be referred to the Arbitrating
Accountant, whose determination of the necessity of such changes shall be
final and binding. Upon the resolution of such suggested changes by the
Arbitrating Accountant, such Tax Returns shall be revised to reflect such
resolution. The Stockholders' Committee warrants that the filing of all
Pre-Closing Tax Returns will not have an adverse effect on Purchaser or
the AIMCOR Group; provided, however, that this paragraph (c) shall not
apply to the matters set forth in paragraph (b) hereof. To the extent
permitted by applicable law, the Stockholders shall include any income,
gain, loss, deduction or other tax items for such periods on their Tax
Returns in a manner consistent with the Schedule K-1s furnished by AIMCOR
to the Stockholders for such periods. Purchaser shall not amend or waive
the statute of limitations with respect to any such Pre-Closing Tax
Returns without the prior consent of the Stockholders' Committee. The
officer designee or other authorized representative designated by the
Stockholders' Committee shall be granted a general power of attorney to
deal with any taxing authority with respect to
64
<PAGE>
Taxes reflected on the Pre-Closing Tax Returns other than Specific
Returns. The Stockholders' Committee shall not, and shall cause such
designee not to, seek indemnification from AIMCOR or Purchaser by reason
of the fact that such person is or was an officer of AIMCOR whether
arising by law, contract or otherwise.
(d) Purchaser shall and shall cause the AIMCOR Group to, and the
Stockholders shall, cooperate fully, as and to the extent reasonably
requested by the other party, in connection with the filing of Tax Returns
pursuant to this Section 6.10 and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records
and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Such cooperation shall
also include, in connection with audits of any of the Pre-Closing Tax
Returns (other than Specific Returns), Purchaser's being advised of such
audits, Purchaser's being given the opportunity to comment on proposed
written submissions and oral arguments to be presented to Tax authorities
and being given the opportunity to discuss Tax audit issues with the
Stockholders' counsel or other representatives in such audits. The
Stockholders' Committee shall consider in good faith all such comments.
The Stockholders' Committee warrants that no audit of a Pre-Closing Tax
Return (other than Specific Returns) will have an adverse effect on
Purchaser or the AIMCOR Group. Purchaser, the Stockholders' Committee,
Germany LP and Luxembourg LP agree (A) to retain all books and records
with respect to Tax matters pertinent to the AIMCOR Group relating to any
taxable period beginning before the Closing Date until the expiration of
the applicable statutes of limitations (and, to the extent notified by
Purchaser or the Stockholders' Committee, any extensions thereof) of the
respective taxable periods, and to abide by all record retention
agreements entered into with any taxing authority, and (B) to give the
other party reasonable written notice prior to transferring, destroying or
discarding any such books and records and, if the other party so requests,
Purchaser or the Stockholders, as the case may be, shall allow the other
party to take possession of such books and records.
65
<PAGE>
6.11 Pension Plans. With respect to each individual who after the Closing
Date is employed by Consumer Products or by an entity formed by or for the
benefit of the respective families of either Gallagher or Kocourek and who is a
participant in the Applied Industrial Materials Corporation Salaried Employees'
Savings & Retirement Plan ("Salaried Plan"), Purchaser, within 60 days after the
later of (i) the Closing Date and (ii) the dates Consumer Products and such
entities provide written evidence reasonably satisfactory to Purchaser that
Consumer Products and/or such entities have each established a qualified plan
under Section 401(k) of the Code in order to receive a transfer of such assets
and liabilities, shall cause the Salaried Plan to transfer to a plan (or plans)
which is (are) intended to qualify under Section 401(a) of the Code and which is
(are) designated by Consumer Products and/or such entities as the transferee
plan (or plans), in-kind, the investment fund interests of the respective
participant on the date immediately preceding the date of transfer or such other
assets as Consumer Products or such entities (as the case may be) shall approve,
and which represent the entire account balance, including both the vested and
nonvested portions thereof, as determined on the date immediately preceding the
date of transfer, of each such individual. Upon such transfers of assets and
liabilities from the Salaried Plan, the transferee plan(s) shall be liable for
the benefits of each such participant for whom assets and liabilities have been
transferred. With respect to each individual who after the Closing Date is
employed by Consumer
66
<PAGE>
Products and who is a participant in the Retirement Plan for Hourly Employees of
Applied Industrial Materials Corporation ("Hourly Plan"), Purchaser shall cause
all accrued benefits of each such individual under the Hourly Plan to be fully
vested and nonforfeitable. Purchaser agrees to cooperate with Consumer Products
and the entities referred to above in all respects to accomplish the intent of
the foregoing, including, without limitation, promptly providing such
information, records and other data reasonably requested.
6.12 Certain Collections. In the event a member of the AIMCOR Group shall
receive any payments or instruments of payment on account of the accounts
receivable of Consumer Products, Purchaser shall forthwith forward them to
Consumer Products. In the case of any checks, such checks shall be endorsed,
without recourse, to Consumer Products.
ARTICLE 7
Indemnification
7.1 General. From and after the Closing, the parties shall indemnify each
other as provided in this Article 7.
7.2 Certain Definitions. As used in this Agreement, the following terms
shall have the indicated meanings:
(a) "Damages" shall mean all assessments, levies, losses, fines,
penalties, damages, Taxes, costs and expenses, including, without
limitation, reasonable attorneys', accountants', investigators', and
experts' fees and expenses;
(b) "Indemnified Party" shall mean, with respect to a particular
matter, a party hereto who is entitled to indemnification from another
party hereto pursuant to this Article 7;
67
<PAGE>
(c) "Indemnifying Party" shall mean, with respect to a particular
matter, a party hereto who is required to provide indemnification under
this Article 7 to another party hereto;
(d) "Claim" shall mean any action, suit, proceeding, investigation,
or like matter which is asserted or threatened by any person, their
successors and permitted assigns, against any Indemnified Party or to
which any Indemnified Party is subject.
7.3 Stockholders' Indemnification Obligations. Subject to the provisions
of Sections 7.4 and 7.8:
(a) the Stockholders, jointly and severally, shall indemnify, save
and keep Purchaser, the members of the AIMCOR Group and their respective
directors, officers, employees, representatives, agents and their
respective successors and permitted assigns and Affiliates (each a
"Purchaser Indemnitee" and collectively, the "Purchaser Indemnitees")
harmless against and from all Damages sustained or incurred by any
Purchaser Indemnitee, as a result of or arising out of or by virtue of:
(i) any inaccuracy in or breach of any representation and
warranty made by the Stockholders, Germany LP or Luxembourg LP to
Purchaser contained in Section 2.3 (other than representations and
warranties contained in Section 2.3(k), which are governed
exclusively by Section 7.3(a)(v)) or by Germany LP or Luxembourg LP
in Section 2.4 or in any closing document delivered to Purchaser in
connection herewith;
(ii) the breach by any Stockholder, Germany LP or Luxembourg
LP of, or failure of any Stockholder to comply with, any of the
covenants or obligations under this Agreement to be performed by the
Stockholders, Germany LP or Luxembourg LP (other than Sections 6.3,
6.8 and 6.9);
(iii) to the extent such Damages result or arise from (x)
violations of or obligations imposed under Environmental Laws, (y)
actions required under Environmental Laws, including, without
limitation, compliance with orders, decrees or similar directives
issued by any court or governmental authority pursuant to
Environmental Laws, or (z) contamination by Hazardous Materials in
condition, concentration or amount exceeding an applicable remedial
standard provided for under Environmental Laws: conditions existing,
or events occurring, on or prior to the Closing Date at or relating
to the properties located in Gloucester, Ontario, Bridgeport,
Alabama or Mannheim, Germany, including
68
<PAGE>
without limitation the use of silica breeze disposal ponds by the
Bridgeport, Alabama facility and the presence of radioactive
materials at, and ground water contamination at or about, the
Gloucester, Ontario facility;
(iv) all Liabilities related to the Excluded Assets,
regardless of whether such Liabilities arose prior to, on the date
of or after the transfer of such Excluded Assets;
(v) (i) any Taxes of any member of the AIMCOR Group with
respect to any Tax year or portion thereof ending on or before the
Closing Date (or for any Tax year beginning before and ending after
the Closing Date to the extent allocable to the portion of such
period beginning before and ending on the Closing Date), (ii) the
unpaid Taxes of any person (other than members of the AIMCOR Group)
under Treas. Reg. section 1.1502-6 (or any similar provision of
state, local or foreign law), or as a transferee or successor, by
contract, or otherwise, and (iii) any inaccuracy in or a breach of
any representation and warranty contained in Section 2.3(k);
(vi) Taxes payable by the AIMCOR Group by virtue of the
Section 338(h)(10) Election;
(vii) Taxes payable by the AIMCOR Group resulting from the
sale or transfer of the Excluded Assets; or
(viii) the manufacture, production, sale or distribution of
any asbestos or any asbestos-containing product or any silica or any
silica-containing product prior to the Closing Date by any member of
the AIMCOR Group or any of their respective predecessors or by, from
or with respect to any facility or assets which any such member or
predecessor owns, leases or operates or in the past has owned,
leased or operated;
(b) any Stockholder with respect to which (x) any representation or
warranty contained in Section 2.4 is inaccurate or was breached, or (y)
any of Sections 6.3, 6.8 or 6.9 is breached or violated, shall indemnify,
save and keep the Purchaser Indemnitees harmless against and from all
Damages resulting therefrom;
(c) to the extent that the Stockholders are obligated to make any
payment to the Purchaser pursuant to Article 7, (other than pursuant to
Section 7.3(a)(vi) or (vii)) the amount of such payment shall be paid by
the Stockholders to Purchaser, in the first instance, from the Indemnity
Escrow. To the extent that the Stockholders are obligated to make any
69
<PAGE>
payment to the Purchaser pursuant to Section 7.3(a)(vi) or (vii) the
amount of such payment shall be paid by the Stockholders to Purchaser, in
the first instance, from the Tax Indemnity Escrow. If the amount payable
to the Purchaser by the Stockholders exceeds the amount in the Indemnity
Escrow or the Tax Indemnity Escrow (as the case may be), the amount of
such excess will be paid by the Stockholders' as provided in this Article
7. Neither the existence of the Indemnity Escrow, the Tax Indemnity
Escrow, nor the amounts thereof, however, shall be deemed to limit
Purchaser's right to seek indemnification pursuant to this Article 7.
7.4 Limitation on Stockholders' Indemnification Obligations. The
Stockholders' obligations pursuant to the provisions of Section 7.3 are subject
to the following limitations:
(a) the Purchaser Indemnitees shall not be entitled to recover under
Section 7.3(a)(i) (other than for any inaccuracy in or breach of any
representation and warranty contained in Section 2.3(t)) until the total
amount which the Purchaser Indemnitees would recover under Section
7.3(a)(i), but for this Section 7.4(a), exceeds $4,000,000 (the "General
Deductible"), and then the Purchaser Indemnitees shall be entitled to
recover only for the excess over the General Deductible. The General
Deductible shall be reduced, dollar for dollar, by the amount of all
Damages suffered by the Purchaser Indemnitees which would be indemnifiable
pursuant to Section 7.3(a)(iii) but for the Environmental Deductible (as
herein defined) or pursuant to Section 7.3(a)(viii) but for the Product
Deductible (as herein defined). For sole purposes of this paragraph (a)
and paragraph (b) below, in determining whether the claims of the
Purchaser Indemnitees shall exceed the General Deductible, the
Environmental Deductible or the Product Deductible (as the case may be),
all references in Section 2.3 to materiality or Material Adverse Effect,
or words to that effect, shall be disregarded;
(b) the Purchaser Indemnitees shall not be entitled to recover under
(x) Section 7.3(a)(i) by virtue of any inaccuracy in or breach of Section
2.3(t), or (y) Section 7.3(a)(iii), until the total amount which the
Purchaser Indemnitees would recover under both Section 7.3(a)(i) by virtue
of any inaccuracy in or breach of Section 2.3(t) and Section 7.3(a)(iii),
but for this Section 7.4(b), exceeds $2,000,000 (the "Environmental
Deductible"), and then the Purchaser Indemnitees shall be entitled to
recover only for the excess over the Environmental Deductible. The
Environmental Deductible shall be reduced, dollar for dollar, by the
amount of Damages suffered by the Purchaser Indemnitees in excess of
$2,000,000 (in the aggregate) which would be
70
<PAGE>
indemnifiable pursuant to Section 7.3(a)(i) but for the General Deductible
or pursuant to Section 7.3(a)(viii) but for the Product Deductible;
(c) the Purchaser Indemnitees shall not be entitled to recover under
Section 7.3(a)(viii) until the total amount which the Purchaser
Indemnitees would recover under Section 7.3(a)(viii), but for this Section
7.4(c), would exceed the Product Deductible, and then the Purchaser
Indemnitees shall be entitled to recover only for the excess over the
Product Deductible. As used herein, the term "Product Deductible" shall
mean the sum of (x) $2,000,000 (the "Base Product Deductible") plus (y)
the product of $100,000 multiplied by the number of whole years which have
elapsed since the Closing Date as of the time the Purchaser Indemnitees
shall assert (or would have had the right to assert, but for this
paragraph (c)) a claim for indemnification under Section 7.3(a)(viii). The
Base Product Deductible shall be reduced, dollar for dollar, by the
aggregate amount of Damages suffered by the Purchaser Indemnitees which
would be indemnifiable pursuant to (x) Section 7.3(a)(i) (other than by
virtue of an inaccuracy in or breach of Section 2.3(t)) but for the
General Deductible or (y) Section 7.3(a)(i) (by virtue of an inaccuracy in
or breach of Section 2.3(t)), or Section 7.3(a)(iii) but for the
Environmental Deductible.
(d) the Purchaser Indemnitees shall not be entitled to recover under
Section 7.3(a)(i) (other than with respect to the representations and
warranties set forth in Section 2.3(k) or 2.3(t)) unless a claim has been
asserted by written notice, specifying the details of the alleged
misrepresentation or breach of warranty, delivered to the Stockholders'
Committee on or prior to the 456th day next following the Closing Date;
(e) the Purchaser Indemnitees shall not be entitled to recover under
Section 7.3(a)(i) with respect to any inaccuracy in or breach of the
representations and warranties contained in Section 2.3(t), unless a claim
has been asserted by written notice, specifying the details of the claim
for indemnification, delivered to the Stockholders' Committee on or prior
to the third anniversary of the Closing Date;
(f) the Purchaser Indemnitees shall not be entitled to recover under
Section 7.3(a)(viii) unless a claim has been asserted by written notice,
specifying the details of the claim for indemnification, delivered to the
Stockholders' Committee on or prior to the twentieth anniversary of the
Closing Date;
(g) the Purchaser Indemnitees shall not be entitled to recover under
Section 7.3(a)(iii) unless a claim has been asserted by written notice,
specifying the details of the
71
<PAGE>
claim for indemnification, delivered to the Stockholders' Committee on or
prior to the fifteenth anniversary (in the case of the property located in
Gloucester, Ontario), or the sixth anniversary (in the case of the
properties located in Bridgeport, Alabama and Mannheim, Germany), of the
Closing Date;
(h) the Purchaser Indemnitees shall not be entitled to recover under
Section 7.3:
(i) with respect to consequential damages of any kind, damages
consisting of business interruption or lost profits (regardless of
the characterization thereof), damages for lost value of the AIMCOR
Group, damages computed on a multiple of earnings or similar basis,
or, except in the case of recoveries under Section 7.3(a)(viii)
where punitive damages have been awarded against a Purchaser
Indemnitee, punitive damages;
(ii) to the extent the subject matter of the claim is covered
by insurance (including title insurance) held by any member of the
AIMCOR Group;
(iii) to the extent the matter in question, taken together
with all similar matters, does not exceed the amount of any reserves
with respect to such matters which are reflected in the Closing
Balance Sheet;
(iv) to the extent the matter in question was taken into
account in the computation of the Purchase Price pursuant to Section
1.3; or
(v) to the extent of any recovery by AIMCOR with respect to
such matter pursuant to the provisions of that certain Stock
Purchase Agreement dated October 31, 1986 (the "IMC Agreement")
between Industry Holdings, Inc., a Delaware corporation and
International Minerals & Chemical Corporation, a Delaware
corporation (now known as Mallinckrodt Group, Inc.
("Mallinckrodt")), IMC Industry Group Inc., a Delaware corporation,
and IMC Industry Group (Quartz) Inc., a Delaware corporation. Unless
Purchaser shall, in good faith, determine, on advice of counsel,
that under no reasonable circumstances would AIMCOR be entitled to
indemnification from Mallinckrodt under the terms of the IMC
Agreement with respect to the matter for which the Purchaser
Indemnitees would be entitled to indemnification from the
Stockholders pursuant to this Agreement, Purchaser shall use all
reasonable diligent efforts to recover indemnification from
Mallinckrodt under the IMC Agreement with respect to any matter
which is indemnifiable both
72
<PAGE>
under the IMC Agreement and this Agreement, including the
commencement and diligent prosecution of litigation or arbitration
proceedings. In such event, Purchaser shall delay enforcement of any
claim for indemnification against the Stockholders under this
Agreement until the expiration of the earlier to occur of (i) a
judicial or arbitral determination that AIMCOR is not entitled to
indemnification from Mallinckrodt under the IMC Agreement and (ii)
the second anniversary of the date of commencement of proceedings
under, or with respect to, the IMC Agreement. In the event that
after such time the Stockholders shall make an indemnity payment to
Purchaser with respect to such matter, Purchaser shall cause the
Stockholders to be subrogated to AIMCOR's rights under the IMC
Agreement to the extent of such indemnity payment. In the event a
court or arbitral panel shall award damages to AIMCOR, or AIMCOR
shall reach a settlement, with respect to a matter as to which
Purchaser has a right to indemnification from the Stockholders under
this Agreement which is identical in all respects relevant to such
matter with AIMCOR's right to indemnification under the IMC
Agreement, Purchaser shall not be entitled to recover any additional
sum from the Stockholders with respect to such matter except to the
extent that recovery from Mallinckrodt under the IMC Agreement was
restricted or prevented by virtue of the application of Section
8.3(d) of the IMC Agreement;
(i) the Purchaser Indemnitees shall not be entitled to recover under
Section 7.3(a) (other than subparagraphs (ii), (iv), (v), (vi), (vii) and
(viii), to the extent the aggregate amount which they would be entitled to
recover pursuant to Section 7.3(a) (other than subparagraphs (ii), (iv),
(v), (vi), (vii) and (viii)), but for this paragraph (i), would exceed
$50,000,000;
(j) the Purchaser Indemnitees shall not be entitled to recover under
Section 7.3(a)(viii), to the extent the aggregate amount which they would
be entitled to recover under Section 7.3(a), but for this paragraph (i),
would exceed $125,000,000 (which sum shall be reduced by the amount of all
recoveries by the Purchaser Indemnitees pursuant to Sections 7.3(a)(i) and
7.3(a)(iii));
(k) the Purchaser Indemnitees shall not be entitled to recover under
Section 7.3(b) to the extent the aggregate amount they would be entitled
to recover under Section 7.3(b), but for this paragraph (k), would exceed
the Base Purchase Price of the Purchased Shares attributable to the
Stockholder having an obligation of indemnification pursuant to Section
7.3(b); and the Purchaser Indemnitees shall not be entitled to recover
from any Stockholder under Section 7.3(a) (other than
73
<PAGE>
subparagraph 7.3(a)(iv)) in an aggregate amount in excess of the Base
Purchase Price of the Purchased Shares attributable to such Stockholder;
(l) the amount of any recovery by the Purchaser Indemnitees pursuant
to Section 7.3 shall be net of any foreign, federal, state and/or local
income tax benefits inuring to the Purchaser Indemnitees as a result of
the state of facts which entitled the Purchaser Indemnitees to recover
from the Stockholders pursuant to Section 7.3;
(m) the Purchaser Indemnitees shall not be entitled to recover under
Section 7.3(a)(v), to the extent the aggregate of the reserves (including
both specific reserves and general reserves) with respect to Tax matters
reflected on the Closing Balance Sheet shall not have been exceeded;
(n) if without regard to this paragraph (o) a state of facts could
allow a Purchaser Indemnitee to recover under both Section 7.3(a)(i) and
Section 7.3(a)(ii), the Purchaser Indemnitee may recover only under
Section 7.3(a)(i);
(o) if without regard to this paragraph (p) a state of facts could
allow a Purchaser Indemnitee to recover under both Section 7.3(a)(iv) and
7.3(a)(vii), the Purchaser Indemnitee may recover only under Section
7.3(a)(vii).
7.5 Purchaser's Indemnification Covenants. Purchaser shall indemnify, save
and keep the Stockholders and their respective successors and assigns (the
"Stockholder Indemnitees"), harmless against and from all Damages sustained or
incurred by any Stockholder Indemnitee, as a result of or arising out of or by
virtue of:
(a) any inaccuracy in or breach of any representation and warranty
made by Purchaser to the Stockholders herein or in any closing document
delivered to the Stockholders in connection herewith; or
(b) any breach by Purchaser of, or failure by Purchaser to comply
with, any of the covenants or obligations under this Agreement to be
performed by Purchaser.
7.6 Cooperation. Subject to the provisions of Section 7.7, the
Indemnifying Party shall have the right, at its own expense, to
74
<PAGE>
participate in the defense of any Claim by a party other than the parties hereto
(a "Third Party Claim"), and if said right is exercised, the parties shall
cooperate in the investigation and defense of said Third Party Claim.
7.7 Third Party Claims. Except as otherwise provided in Section 7.8,
forthwith following the receipt of notice of a Third Party Claim, the party
receiving the notice of the Third Party Claim shall (i) notify the other party
of its existence, setting forth with reasonable specificity the facts and
circumstances of which such party has received notice, and (ii) if the party
giving such notice is an Indemnified Party, specifying the basis hereunder upon
which the Indemnified Party's claim for indemnification is asserted. The
Indemnified Party may, upon reasonable notice, tender the defense of a Third
Party Claim to the Indemnifying Party. If:
(a) the defense of a Third Party Claim is so tendered and within
thirty (30) days thereafter such tender is accepted without qualification
by the Indemnifying Party; or
(b) within thirty (30) days after the date on which written notice
of a Third Party Claim has been given pursuant to this Section 7.7, the
Indemnifying Party shall acknowledge without qualification its
indemnification obligations as provided in this Article 7 in writing to
the Indemnified Party and accept the defense thereof;
then, except as hereinafter provided, the Indemnified Party shall not, and the
Indemnifying Party shall, have the right to contest, defend, litigate or settle
such Third Party Claim. The Indemnified Party shall have the right to be
represented by counsel at its own expense in any such contest, defense,
litigation or settlement conducted by the Indemnifying Party, provided that the
Indemnified
75
<PAGE>
Party shall be entitled to reimbursement therefor if the Indemnifying Party
shall lose its right to contest, defend, litigate and settle the Third Party
Claim as herein provided. The Indemnifying Party shall lose its right to
contest, defend, litigate and settle the Third Party Claim if it shall fail to
diligently contest the Third Party Claim. So long as the Indemnifying Party has
not lost its right and/or obligation to contest, defend, litigate and settle as
herein provided, the Indemnifying Party shall have the exclusive right to
contest, defend and litigate the Third Party Claim and shall have the exclusive
right, in its discretion exercised in good faith, and upon the advice of
counsel, to settle any such matter, either before or after the initiation of
litigation, at such time and upon such terms as it deems fair and reasonable,
provided that at least ten (10) days prior to any such settlement, written
notice of its intention to settle shall be given to the Indemnified Party;
provided that no such settlement shall be agreed to by the Indemnifying Party
without the Indemnified Parties' prior written consent if such settlement
provides for injunctive relief against the Indemnified Party or does not include
an unconditional release of such Indemnified Party from all liability on any
claims that are the subject matter of such action. All expenses (including
without limitation attorneys' fees) incurred by the Indemnifying Party in
connection with the foregoing shall be paid by the Indemnifying Party. No
failure by an Indemnifying Party to acknowledge in writing its indemnification
obligations under this Article 7 shall
76
<PAGE>
relieve it of such obligations to the extent they exist. If an Indemnified Party
is entitled to indemnification against a Third Party Claim, and the Indemnifying
Party fails to accept a tender of, or assume, the defense of a Third Party Claim
pursuant to this Section 7.7, or if, in accordance with the foregoing, the
Indemnifying Party shall lose its right to contest, defend, litigate and settle
such a Third Party Claim, the Indemnified Party shall have the right, without
prejudice to its right of indemnification hereunder, in its discretion exercised
in good faith and upon the advice of counsel, to contest, defend and litigate
such Third Party Claim, and may settle such Third Party Claim, either before or
after the initiation of litigation, at such time and upon such terms as the
Indemnified Party deems fair and reasonable, provided that at least ten (10)
days prior to any such settlement, written notice of its intention to settle is
given to the Indemnifying Party. If, pursuant to this Section 7.7, the
Indemnified Party so contests, defends, litigates or settles a Third Party Claim
for which it is entitled to indemnification hereunder as hereinabove provided,
the Indemnified Party shall be reimbursed by the Indemnifying Party for the
reasonable attorneys' fees and other expenses of contesting, defending,
litigating and/or settling the Third Party Claim which are incurred from time to
time, forthwith following the presentation to the Indemnifying Party of itemized
bills for said attorneys' fees and other expenses.
77
<PAGE>
7.8 Environmental Indemnities. Upon any Purchaser Indemnitee becoming
aware of the occurrence of any event or the existence of any state of facts in
respect of which the Purchaser Indemnitee will seek indemnification with respect
to a claim for inaccuracy in or breach of any of the representations and
warranties contained in Section 2.3(t) or a claim for indemnification pursuant
to Section 7.3(a)(iii) (an "Environmental Claim"), and thereafter:
(a) Purchaser will give to the Stockholders' Committee prompt notice
specifying in reasonable detail the basis for the Environmental Claim;
(b) Purchaser will promptly deliver to the Stockholders' Committee
copies of all final environmental reports, studies, surveys, test data and
reports, assessments, cost estimates and all other information available
to it or AIMCOR relating to or supporting the Environmental Claim;
(c) Purchaser will permit and will cause AIMCOR to permit
representatives of the Stockholders' Committee (including advisors and
consultants) to visit and inspect from time to time any of the properties
to which the Environmental Claim relates, and to enter on such properties
from time to time for the purpose of conducting such environmental tests
as the Stockholders' Committee may reasonably desire with respect to the
Environmental Claim, all during normal business hours and at the
Stockholders' expense; and
(d) When taking remedial action in connection with an Environmental
Claim in respect of which a Purchaser Indemnitee will seek indemnification
hereunder, the Purchaser Indemnitee will take such action as is
cost-effective and otherwise reasonable under the circumstances, in the
good faith business judgment of AIMCOR.
(e) With respect to Environmental Claims relating to breaches in or
inaccuracies of any representation or warranty contained in Section 2.3(t)
only, Purchaser shall disclose such Environmental Claims to a governmental
authority only to the extent required by Environmental Law or if such
disclosure would be consistent with Purchaser's reasonable business
practices.
Notwithstanding the foregoing, if in order for the AIMCOR Group to obtain
indemnification with respect to an Environmental Claim as to
78
<PAGE>
which AIMCOR would be entitled to indemnity under the IMC Agreement AIMCOR would
be required to comply with Section 6.7 of the IMC Agreement, Purchaser shall
cause AIMCOR to comply with such provisions.
7.9 Indemnification Exclusive Remedy. Indemnification pursuant to the
provisions of this Article 7 shall be the exclusive remedy of the parties for
any misrepresentation or breach of any warranty or covenant contained herein or
in any closing document executed and delivered pursuant to the provisions
hereof; provided, however, that nothing contained herein shall relieve any party
hereto from liability for its fraudulent actions or misrepresentations. Without
limiting the generality of the preceding sentence, no legal action sounding in
strict liability or tort (other than fraudulent misrepresentation) may be
maintained by any party.
ARTICLE 8
Effect of Termination/Proceeding
8.1 General. The parties shall have the rights and remedies with respect
to the termination and/or enforcement of this Agreement which are set forth in
this Article 8.
8.2 Right to Terminate. Anything to the contrary herein notwithstanding,
this Agreement and the transaction contemplated hereby may be terminated at any
time prior to the Closing:
(a) by the mutual written consent of Purchaser and the Stockholders'
Committee; or
(b) by prompt notice given in accordance with Section 10.3, by
either of such parties if the Closing shall not have occurred at or before
11:59 p.m. on November 30,
79
<PAGE>
1997; provided, however, that the right to terminate this Agreement under
this Section 8.2(b) shall not be available to any party whose failure to
fulfill any of its obligations under this Agreement has been the cause of
or resulted in the failure of the Closing to occur on or prior to the
aforesaid date.
8.3 Certain Effects of Termination. In the event of the termination of
this Agreement by either the Stockholders' Committee or Purchaser as provided in
Section 8.2:
(a) each party, if so requested by the other party, will return
promptly every document furnished to it by the other party (or any
subsidiary, division, associate or Affiliate of such other party) in
connection with the transaction contemplated hereby, whether so obtained
before or after the execution of this Agreement, and any copies thereof
(except for copies of documents publicly available) which may have been
made, and will use reasonable efforts to cause its representatives and any
representatives of financial institutions and investors and others to whom
such documents were furnished promptly to return such documents and any
copies thereof any of them may have made; and
(b) the Confidentiality Letter shall remain in effect.
This Section 8.3 shall survive any termination of this Agreement.
8.4 Remedies. Notwithstanding any termination right granted in Section
8.2, in the event of the nonfulfillment of any condition to a party's closing
obligations, in the alternative, such party may elect to do one of the
following:
(a) proceed to close despite the nonfulfillment of any closing
condition, it being understood that consummation of the Closing shall not
be deemed a waiver of a breach of any representation, warranty or covenant
and of such party's rights and remedies with respect thereto;
(b) decline to close, terminate this Agreement as provided in
Section 8.2, and thereafter seek damages to the extent permitted in
Section 8.5; or
(c) seek specific performance of the obligations of the other party.
Each party hereby agrees that in the event of any breach by such party of
this Agreement, the remedies available to the other party at law may be
inadequate and that
80
<PAGE>
such party's obligations under this Agreement may be specifically
enforced.
8.5 Right to Damages. If this Agreement is terminated pursuant to Section
8.2, neither party hereto shall have any claim against the other except if the
circumstances giving rise to such termination were caused by the other party's
willful failure to comply with a material covenant set forth herein, in which
event termination shall not be deemed or construed as limiting or denying any
legal or equitable right or remedy of said party.
ARTICLE 9
Stockholders' Committee
9.1 Appointment of Stockholders' Committee. Each of the Stockholders
hereby irrevocably constitutes and appoints Gallagher and Kocourek
(collectively, the "Stockholders' Committee"), as such Stockholder's
attorneys-in-fact and agents in connection with the execution and performance of
this Agreement. This power is irrevocable and coupled with an interest, and
shall not be affected by the death, incapacity, illness, dissolution or other
inability to act of any of Stockholders.
9.2 Authority. Each of the Stockholders hereby irrevocably grants the
Stockholders' Committee full power and authority:
(a) to execute and deliver, on behalf of such Stockholder, and to
accept delivery of, on behalf of such Stockholder, such documents as may
be deemed by the Stockholders' Committee, in their sole discretion, to be
appropriate to consummate this Agreement, including without limitation a
Contribution Agreement among the Stockholders;
(b) to endorse and to deliver on behalf of such Stockholder,
certificates representing the shares of stock of
81
<PAGE>
AIMCOR or Enterprises to be sold by such Stockholder at the Closing;
(c) to acknowledge receipt at the Closing of the Estimated Purchase
Price, less the amounts required to fund the Escrows, for each share of
stock of AIMCOR or Enterprises sold by such Stockholder at the Closing, as
payment in full for such shares, to designate the manner of payment of
such amount, and to certify, on behalf of such Stockholder, as to the
accuracy of the representations and warranties of such Stockholder under,
or pursuant to the terms of, this Agreement;
(d) to make disbursements from time to time from the account to
which the Purchase Price has been paid pursuant to Section 1.4 (including
disbursements to the Stockholders on account of the Purchase Price payable
to them and disbursements in respect of expenses payable by the
Stockholders pursuant to Sections 10.1 and 10.4), and to retain in such
account such sum as the Stockholders' Committee shall deem appropriate to
cover contingencies for such period of time as the Stockholders' Committee
shall deem appropriate;
(e) to (x) dispute or refrain from disputing, on behalf of such
Stockholder, any claim made by any Purchaser Indemnitee under this
Agreement; (y) negotiate and compromise, on behalf of such Stockholder,
any dispute that may arise under, and to exercise or refrain from
exercising any remedies available under, this Agreement, and (z) execute,
on behalf of such Stockholder, any settlement agreement, release or other
document with respect to such dispute or remedy;
(f) to waive, on behalf of such Stockholder, any closing condition
contained in Article 4 of this Agreement and to give or agree to, on
behalf of such Stockholder, any and all consents, waivers, amendments or
modifications, deemed by the Stockholders' Committee, in their sole
discretion, to be necessary or appropriate, under this Agreement, and, in
each case, to execute and deliver any documents that may be necessary or
appropriate in connection therewith;
(g) to enforce, on behalf of such Stockholder, any claim against
Purchaser arising under this Agreement;
(h) to engage attorneys, accountants and agents, and to employ
personnel for the purpose of winding up the affairs of the Stockholders as
they pertain to AIMCOR, at the expense of the Stockholders;
(i) to amend this Agreement (other than this Article 9) or any of
the instruments to be delivered to Purchaser by such Stockholder pursuant
to this Agreement; and
82
<PAGE>
(j) to give such instructions and to take such action or refrain
from taking such action, on behalf of such Stockholder, as the
Stockholders' Committee deems, in their sole discretion, necessary or
appropriate to carry out the provisions of this Agreement.
9.3 Reliance. Each Stockholder hereby agrees that:
(a) in all matters in which action by the Stockholders' Committee is
required or permitted, the members of the Stockholders' Committee, acting
jointly, are authorized to act on behalf of such Stockholder,
notwithstanding any dispute or disagreement among the Stockholders or
between any Stockholder and the Stockholders' Committee. The members of
the Stockholders' Committee may, as between them, agree as to particular
matters or actions which may be taken by either member, or by one
particular member, of the Stockholders' Committee without the necessity
for action by both members of the Stockholders' Committee. Purchaser shall
be entitled to rely on any and all action taken by the Stockholders'
Committee under this Agreement without any liability to, or obligation to
inquire of, any of the Stockholders or the other members of the
Stockholders' Committee, notwithstanding any knowledge on the part of the
Purchaser of any such dispute or disagreement;
(b) notice to either member of the Stockholders' Committee,
delivered in the manner provided in Section 10.3, shall be deemed to be
notice to both of the members of the Stockholders' Committee and to all
Stockholders for the purposes of this Agreement;
(c) the power and authority of the Stockholders' Committee, as
described in this Agreement, shall continue in force until all rights and
obligations of the Stockholders under this Agreement shall have
terminated, expired or been fully performed;
(d) if either member of the Stockholders' Committee resigns or
otherwise ceases to function in his capacity as such for any reason
whatsoever, the remaining member of the Stockholders' Committee shall act
on behalf of the Stockholders as provided in this Article 9.
9.4 Actions by Stockholders. Each Stockholder agrees that, notwithstanding
the foregoing, at the request of Purchaser, such Stockholder shall take all
actions necessary or appropriate to consummate the transaction contemplated
hereby (including, without
83
<PAGE>
limitation, delivery of such Stockholder's Purchased Shares and acceptance of
the Purchase Price therefor) individually on such Stockholder's own behalf, and
delivery of any other documents required of the Stockholders pursuant to the
terms hereof.
9.5 Indemnification of Purchaser and Its Affiliates. The Stockholders,
jointly and severally, shall indemnify the Purchaser Indemnitees against, and
agree to hold the Purchaser Indemnitees harmless from, any and all Damages
incurred or suffered by any Purchaser Indemnitee arising out of, with respect to
or incident to the operation of, or any breach of any covenant or agreement
pursuant to, this Article 9, or the designation, appointment and actions of the
Stockholders' Committee pursuant to the provisions hereof, including without
limitation, with respect to (x) actions taken by the Stockholders' Committee or
any member thereof, and (y) reliance by any Purchaser Indemnitee on, and actions
taken by any Purchaser Indemnitee in response to or in reliance on, the
instructions of, notice given by or any other action taken by the Stockholders'
Committee.
9.6 Indemnification of Stockholders' Committee. Each Stockholder shall
severally indemnify each member of the Stockholders' Committee against any
Damages (except such Damages as result from such member's gross negligence or
willful misconduct) that such member may suffer or incur in connection with any
action or omission of such member as a member of the Stockholders' Committee.
Each Stockholder shall bear its pro-rata portion of such Damages. No member of
the Stockholders' Committee shall be
84
<PAGE>
liable to any Stockholder with respect to any action or omission taken or
omitted to be taken by the Stockholders' Committee pursuant to this Article 9,
except for such member's gross negligence or willful misconduct.
ARTICLE 10
Miscellaneous
10.1 Fees. The Stockholders shall pay all fees and expenses charged by
Goldman, Sachs & Co.
10.2 Publicity. Except as otherwise required by law or applicable stock
exchange rules, press releases and other publicity concerning this transaction
shall be made only with the prior agreement of the Stockholders' Committee and
Purchaser (and in any event, the Stockholders' Committee shall use all
reasonable efforts to consult and agree with each other with respect to the
content of any such required press release or other publicity).
10.3 Notices. All notices required or permitted to be given hereunder
shall be in writing and may be delivered by hand, by facsimile, by nationally
recognized private courier, or by United States mail. Notices delivered by mail
shall be deemed given three (3) business days after being deposited in the
United States mail, postage prepaid, registered or certified mail, return
receipt requested. Notices delivered by hand, by facsimile, or by nationally
recognized private courier shall be deemed given on the first business day
following receipt; provided, however, that a notice delivered by facsimile shall
only be effective if such notice is also delivered by hand, or deposited in the
United States
85
<PAGE>
mail, postage prepaid, registered or certified mail, on or before two (2)
business days after its delivery by facsimile. All notices shall be addressed as
follows:
If to Stockholders:
c/o Applied Industrial Materials Corporation
750 Lake Cook Road
Buffalo Grove, Illinois 60089
Attention: Wayne C. Kocourek
Fax: (847) 215-3421
with a copy to:
Altheimer & Gray
10 South Wacker Drive
Suite 4000
Chicago, Illinois 60606
Attention: David W. Schoenberg, Esq.
Fax: (312) 715-4800
If to Purchaser:
Walter Industries, Inc.
1500 N. Dale Mabry Highway
Tampa, FL 33607
Attention: Dean M. Fjelstul
Fax: (813) 871-4430
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: Peter J. Gordon, Esq.
Fax: (212) 455-2502
and/or to such other respective addresses and/or addressees as may be designated
by notice given in accordance with the provisions of this Section 10.3.
10.4 Expenses; Transfer Taxes. Except as provided in Section 8.5, each
party hereto shall bear all fees and expenses incurred by such party in
connection with, relating to or arising out of the
86
<PAGE>
negotiation, preparation, execution, delivery and performance of this Agreement
and the consummation of the transaction contemplated hereby, including, without
limitation, financial advisors', attorneys', accountants' and other professional
fees and expenses. Purchaser and the Stockholders shall equally split the cost
of all sales, use, stamp, documentary, excise and transfer Taxes which may be
payable in connection with the transaction contemplated hereby, and the party
legally required to file them shall file all necessary Tax Returns and other
documentation with respect to all such sales, use, stamp, documentary, excise
and transfer Taxes.
10.5 Entire Agreement. This Agreement, the agreements and instruments to
be delivered by the parties pursuant to the provisions hereof, and the
Confidentiality Letter constitute the entire agreement between the parties and
shall be binding upon and inure to the benefit of the parties hereto and their
respective legal representatives, successors and permitted assigns. Each
Exhibit, schedule and the Disclosure Schedule, shall be considered incorporated
into this Agreement. Any amendments, or alternative or supplementary provisions,
to this Agreement, must be made in writing and duly executed by an authorized
representative or agent of each of the parties hereto. The inclusion of any item
in the Disclosure Schedule is not evidence of the materiality of such item for
the purposes of this Agreement. The parties make no representations or
warranties to each other, except as contained in this Agreement, and any and all
prior representations and warranties made by any party or its representatives,
whether
87
<PAGE>
verbally or in writing, are deemed to have been merged into this Agreement, it
being intended that no such prior representations or warranties shall survive
the execution and delivery of this Agreement. Purchaser acknowledges that it has
conducted an independent investigation of the financial condition, assets,
liabilities, properties and projected operations of the AIMCOR Group in making
its determination as to the propriety of the transaction contemplated by this
Agreement, and in entering into this Agreement, has relied solely on the results
of said investigation and on the representations and warranties of the
Stockholders expressly contained in this Agreement.
10.6 Non-Waiver. The failure in any one or more instances of a party to
insist upon performance of any of the terms, covenants or conditions of this
Agreement, to exercise any right or privilege in this Agreement conferred, or
the waiver by said party of any breach of any of the terms, covenants or
conditions of this Agreement, shall not be construed as a subsequent waiver of
any such terms, covenants, conditions, rights or privileges, but the same shall
continue and remain in full force and effect as if no such forbearance or waiver
had occurred. No waiver shall be effective unless it is in writing and signed by
an authorized representative of the waiving party.
10.7 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original, and all such
counterparts shall constitute but one instrument.
88
<PAGE>
10.8 Severability. The invalidity of any provision of this Agreement or
portion of a provision shall not affect the validity of any other provision of
this Agreement or the remaining portion of the applicable provision.
10.9 Applicable Law. This Agreement shall be governed and controlled as to
validity, enforcement, interpretation, construction, effect and in all other
respects by the internal laws of the State of Illinois applicable to contracts
made in that State.
10.10 Binding Effect; Benefit. This Agreement shall inure to the benefit
of and be binding upon the parties hereto, and their successors and permitted
assigns. Nothing in this Agreement, express or implied, shall confer on any
person other than the parties hereto, and their respective successors and
permitted assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, including, without limitation, third party beneficiary
rights, except that Consumer Products shall be a third party beneficiary of
Section 6.12.
10.11 Assignability. This Agreement shall not be assignable by (x) any
Stockholder, Germany LP or Luxembourg LP without the prior written consent of
Purchaser, or (y) Purchaser without the prior written consent of the
Stockholders' Committee.
10.12 Governmental Reporting. Anything to the contrary in this Agreement
notwithstanding, nothing in this Agreement shall be construed to mean that a
party hereto or other person must make or file, or cooperate in the making or
filing of, any return or report
89
<PAGE>
to any governmental authority in any manner that such person or such party
reasonably believes or reasonably is advised is not in accordance with law.
10.13 Waiver of Trial by Jury. Each of the parties hereto waives the right
to a jury trial in connection with any suit, action or proceeding seeking
enforcement of such party's rights under this Agreement.
10.14 Consent to Jurisdiction. This Agreement has been executed and
delivered in and shall be deemed to have been made in Chicago, Illinois. The
Stockholders, Germany LP, Luxembourg LP and Purchaser each agrees to the
exclusive jurisdiction of any state or Federal court within the City of Chicago,
with respect to any claim or cause of action arising under or relating to this
Agreement, and waives personal service of any and all process upon it, and
consents that all services of process be made by registered or certified mail,
return receipt requested, directed to it at its address as set forth in Section
10.3, and service so made shall be deemed to be completed when received. The
Stockholders Germany LP, Luxembourg LP and Purchaser each waive any objection
based on forum non conveniens and waive any objection to venue of any action
instituted hereunder. Nothing in this paragraph shall affect the right of the
Stockholders or Purchaser to serve legal process in any other manner permitted
by law.
10.15 Definitions. The following terms are defined in the following
sections of this Agreement:
90
<PAGE>
Defined Term Where Found
- ------------ -----------
Accountants 1.5
Adjusted Book Value 1.3
Adjusted Earnings Computation 1.4(c)
Affiliate 2.2(f)
Affiliate Transactions 2.3(l)(xiii)
AIMCOR Preamble
AIMCOR Entity 1.1
AIMCOR Group 1.1
AIMCOR Germany Recital B
AIMCOR Luxembourg Recital B
Arbitrating Accountant 1.6(b)
Base Purchase Price 1.2(a)
Base Product Deductible 7.4(c)
Burns 2.6
Carbon Products Group 1.4(c)
Carbon Products Group Statement of
Earnings 1.4(c)
Cash Equivalents 1.2
Closing 1.8
Closing Balance Sheet 1.5(b)
Closing Date 1.8
Code 2.3(k)(i)(C)
Commitment Letter 2.2(i)
Company Plans 2.3(p)(iii)
Confidential Information 6.3
Confidentiality Letter 3.3
Consumer Products 3.2(d)(v)a
Control 2.2(f)
Damages 7.2(a)
Disclosure Schedule 2.1
Dispute 1.6(a)
Dispute Notice 1.6(a)
Dispute Period 1.6(a)
Ehmer 2.6
Enterprises Preamble
Environmental Claim 7.8
Environmental Action 2.3(t)(iii)
Environmental Deductible 7.4(b)
Environmental Laws 2.3(t)(i)
Environmental Permits 2.3(t)(ii)
ERISA 2.3(p)(i)
ERISA Affiliate 2.3(p)(iv)
Escrow Agent 1.4(b)
Escrow Agreement 1.4(b)
Escrows 1.4(b)
Estimated Cash Payment 1.4
Excluded Assets 3.2(d)(v)
Financial Statements 2.3(i)
GAAP 1.5
Gallagher 1.1(c)
91
<PAGE>
General Deductible 7.4(a)
Germany LP Preamble
Hazardous Materials 2.3(t)(iv)
HSR Act 2.2(c)
Holdback Fund 1.4(b)
Hourly Plan 6.11
IMC Agreement 7.4(g)(v)
Indebtedness 1.2(e)
Indemnifiable Claim 6.7
Indemnified Employee(s) 6.7
Indemnified Party 7.2(b)
Indemnifying Party 7.2(c)
Indemnity Escrow 1.4(b)
Intellectual Property 2.3(x)
Interim Financial Statements 2.3(i)
IRS 2.3(p)(iii)
Kocourek 1.1(c)
Leased Premises 2.3(v)
Liabilities 2.3(l)(iv)
Letter of Credit 1.4(b)
Luxembourg LP Preamble
Mallinckrodt 7.4(h)(v)
Material Adverse Effect 2.3(b)
Material Consents 3.2(b)
1997 Financial Statements 1.5(a)
Non-U.S. Plan 2.3(p)(vi)
PBGC 2.3(p)(v)
Pension Plans 2.3(p)(i)
Permits 2.3(o)
Pre-Closing Tax Returns 6.10(c)
Product Deductible 7.4(c)
Purchased Shares 1.1
Purchase Price 1.2
Purchaser Preamble
Purchaser Indemnitees 7.3
Real Estate 2.3(u)
Salaried Plan 6.11
Section 338(h)(10) Election 2.3(k)(xi)
Section 338 Forms 6.10(a)
Securities Act 2.2(h)
Specific Returns 6.10(c)
Stockholders Preamble
Stockholder Preamble
Stockholder Entity 2.4(b)
Stockholder Indemnitees 7.5
Stockholder Notes and Loans 1.2(c)
Stockholders' Committee 9.1
Subsidiaries 2.3(g)
TAC 1.5(a)
Tax 2.3(k)(i)(A)
Tax Indemnity Escrow 1.4(b)
Tax Return 2.3(k)(i)(B)
92
<PAGE>
Taxes 2.3(k)(i)(A)
Third Party Claim 7.2(d)
Trademarks 2.3(x)
U.S. GAAP 1.5(b)(i)
Welfare Plans 2.3(p)(ii)
10.16 Amendments. This Agreement shall not be modified or amended except
pursuant to an instrument in writing executed and delivered on behalf of each of
the parties hereto.
10.17 Headings. The headings contained in this Agreement are for
convenience of reference only and shall not affect the meaning or interpretation
of this Agreement.
10.18 Trustee Exculpation. Anything to the contrary herein contained
notwithstanding, any individual identified on the signature page as signing "as
trustee" who signs this Agreement does so, not personally, but solely as
trustee, as aforesaid, in the exercise of the power and authority conferred upon
and vested in him, as such trustee. It is expressly understood and agreed that
nothing herein shall be construed as creating any liability in such trustee,
personally, to perform any covenant either express or implied, or by virtue of
any representation and warranty, or any other matter herein contained, all such
liability, if any, being expressly waived by all other parties to the Agreement,
and by every other person now or hereafter claiming any right hereunder. So far
as such trustee and his successor(s), personally, are concerned, every other
person now or hereafter claiming any right hereunder shall look to the trust
assets from time to time held by such trustee and not to the personal assets of
the trustee, for the performance of such covenants or with respect to any
inaccuracy in
93
<PAGE>
or breach of any such representation and warranty or with respect to any such
other matter.
94
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first written above.
WALTER INDUSTRIES, INC., a Delaware
corporation
By: /s/ Kenneth E. Hyatt
--------------------------------------
Its: Chairman, President & CEO
----------------------------------
95
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
GALLAGHER 1994 FAMILY TRUST, DATED
DECEMBER 31, 1994
By: /s/ Myron Lieberman
--------------------------------------
MYRON LIEBERMAN, Trustee
/s/ Charles P. Gallagher
-----------------------------------------
CHARLES P. GALLAGHER
KOCOUREK 1994 FAMILY TRUST, DATED
DECEMBER 31, 1994
By: /s/ David W. Schoenberg
--------------------------------------
DAVID W. SCHOENBERG, Trustee
/s/ Wayne C. Kocourek
-----------------------------------------
WAYNE C. KOCOUREK
SHAUN P. GALLAGHER TRUST
By: /s/ Myron Lieberman
--------------------------------------
MYRON LIEBERMAN, Trustee
96
<PAGE>
KELLY A. GALLAGHER TRUST
By: /s/ Myron Lieberman
--------------------------------------
MYRON LIEBERMAN, Trustee
KEVIN C. GALLAGHER TRUST
By: /s/ Myron Lieberman
--------------------------------------
MYRON LIEBERMAN, Trustee
MICHAEL A. GALLAGHER TRUST
By: /s/ Myron Lieberman
--------------------------------------
MYRON LIEBERMAN, Trustee
PAMELA A. KOCOUREK TRUST
By: /s/ David W. Schoenberg
--------------------------------------
DAVID W. SCHOENBERG, Trustee
MICHAEL A. KOCOUREK TRUST
By: /s/ David W. Schoenberg
--------------------------------------
DAVID W. SCHOENBERG, Trustee
CPG LUX, INC.
By: /s/ Charles P. Gallagher
--------------------------------------
CHARLES P. GALLAGHER,President
97
<PAGE>
WCK LUX, INC.
By: /s/ Wayne C. Kocourek
--------------------------------------
WAYNE C. KOCOUREK, President
CPG FRG, INC.
By: /s/ Charles P. Gallagher
--------------------------------------
CHARLES P. GALLAGHER,President
WCK FRG, INC.
By: /s/ Wayne C. Kocourek
--------------------------------------
WAYNE C. KOCOUREK, President
/s/ Jon M. Burns
-----------------------------------------
JON M. BURNS
/s/ William H. Ehmer
-----------------------------------------
WILLIAM H. EHMER
DOUGLAS E. KATT TRUST, DATED OCTOBER
15, 1996
By: /s/ Douglas E. Katt
--------------------------------------
DOUGLAS E. KATT, Trustee
/s/ Vincent P. Kennedy
-----------------------------------------
VINCENT P. KENNEDY
/s/ Charles W. Kopec
-----------------------------------------
CHARLES W. KOPEC
/s/ Alan S. Kornstein
-----------------------------------------
ALAN S. KORNSTEIN
98
<PAGE>
/s/ Karen E. Lundstrom
-----------------------------------------
KAREN E. LUNDSTROM
/s/ Kevin P. Marion
-----------------------------------------
KEVIN P. MANION
/s/ J. Peter Scott-Hansen
-----------------------------------------
J. PETER SCOTT-HANSEN
/s/ Frank G. Zweerts
-----------------------------------------
FRANK G. ZWEERTS
99
================================================================================
$800,000,000
CREDIT AGREEMENT
by and among
WALTER INDUSTRIES, INC.
as Borrower,
NATIONSBANK, NATIONAL ASSOCIATION,
as Administrative Agent, Documentation
Agent and Syndication Agent
and
THE LENDERS PARTY HERETO FROM TIME TO TIME
October 15, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
Definitions and Terms
1.1. Definitions............................................................3
1.2. Rules of Interpretation...............................................32
1.3. Accounting Principles.................................................33
ARTICLE II
The Term Loan
2.1. Term Loan.............................................................34
2.2. Term Loan Advance.....................................................34
2.3. Payment of Principal..................................................34
2.4. Payment of Interest...................................................35
2.5. Manner of Payment.....................................................35
2.6. Optional Prepayments..................................................36
2.7. Mandatory Prepayments.................................................36
2.8. Term Notes............................................................37
2.9. Use of Proceeds.......................................................37
2.10. Interest Periods......................................................37
2.11. Conversions and Elections of Subsequent Interest Periods..............37
2.12. Non-Conforming Payments...............................................38
2.13. Pro Rata Payments.....................................................38
ARTICLE III
The Revolving Credit Facility
3.1. Revolving Loans.......................................................40
3.2. Payment of Interest...................................................42
3.3. Payment of Principal..................................................43
3.4. Non-Conforming Payments...............................................43
3.5. Revolving Notes.......................................................44
3.6. Pro Rata Payments.....................................................44
3.7. Reductions............................................................44
3.8. Conversions and Elections of Subsequent Interest Periods..............44
3.9. Increase and Decrease in Amounts......................................45
3.10. Unused Fee............................................................45
3.11. Deficiency Advances...................................................45
3.12. Use of Proceeds.......................................................46
i
<PAGE>
3.13. Swing Line............................................................46
ARTICLE IV
Letters of Credit
4.1. Letters of Credit.....................................................48
4.2. Reimbursement.........................................................49
4.3. Letter of Credit Facility Fees........................................53
4.4. Administrative and Other Fees.........................................53
ARTICLE V
Security
5.1. Security..............................................................54
5.2. Further Assurances....................................................54
ARTICLE VI
Yield Protection and Illegality
6.1. Additional Costs......................................................55
6.2. Suspension of Loans...................................................56
6.3. Illegality............................................................57
6.4. Compensation..........................................................57
6.5. Alternate Loan and Lender.............................................58
6.6. Taxes.................................................................58
6.7. Replacement Banks.....................................................59
ARTICLE VII
Conditions to Making Loans and Issuing Letters of Credit
7.1. Conditions of Term Loans and Initial Advance..........................61
7.2. Conditions of Revolving Loans and Letters of Credit...................63
ii
<PAGE>
ARTICLE VIII
Representations and Warranties
8.1. Organization and Authority............................................65
8.2. Loan Documents........................................................65
8.3. Solvency..............................................................66
8.4. Subsidiaries and Stockholders.........................................66
8.5. Investments...........................................................66
8.6. Financial Condition...................................................67
8.7. Title to Properties...................................................67
8.8. Taxes.................................................................67
8.9. Other Agreements......................................................68
8.10. Litigation............................................................68
8.11. Margin Stock..........................................................68
8.12. Investment Company....................................................68
8.13. Patents, Etc..........................................................69
8.14. No Untrue Statement...................................................69
8.15. No Consents, Etc......................................................69
8.16. Employee Benefit Plans................................................69
8.17. No Default............................................................70
8.18. Hazardous Materials...................................................71
8.19. Employment Matters....................................................71
8.20. RICO..................................................................72
8.21. Related Acquisition...................................................72
8.22. Representations and Warranties from the Related Acquisition
Transaction Documents...............................................72
ARTICLE IX
Affirmative Covenants
9.1. Financial Reports, Etc................................................73
9.2. Maintain Properties...................................................75
9.3. Existence, Qualification, Etc.........................................75
9.4. Regulations and Taxes.................................................75
9.5. Insurance.............................................................75
9.6. True Books............................................................76
9.7. Right of Inspection...................................................76
9.8. Observe all Laws......................................................76
9.9. Governmental Licenses.................................................76
9.10. Covenants Extending to Other Persons..................................76
9.11. Officer's Knowledge of Default........................................76
9.12. Suits or Other Proceedings............................................76
iii
<PAGE>
9.13. Notice of Discharge of Hazardous Material or Environmental Complaint..77
9.14. Environmental Compliance..............................................77
9.15. Indemnification.......................................................77
9.16. Further Assurances....................................................78
9.17. Employee Benefit Plans................................................78
9.18. Continued Operations..................................................79
9.19. New Domestic Subsidiaries and Material Foreign Subsidiaries...........79
9.20. Mortgage Warehousing Facility.........................................80
9.21. Transactions with Affiliates..........................................80
9.22. Permitted Receivables Securitization..................................81
ARTICLE X
Negative Covenants
10.1. Financial Covenants..................................................82
10.2. Acquisitions.........................................................82
10.3. Liens................................................................83
10.4. Indebtedness.........................................................85
10.5. Transfer of Assets...................................................87
10.6. Investments..........................................................88
10.7. Merger or Consolidation..............................................89
10.8. Restricted Payments..................................................89
10.9. Compliance with ERISA................................................90
10.10. Fiscal Year..........................................................91
10.11. Negative Pledge Clauses..............................................91
10.12. Prepayments, Etc. of Indebtedness....................................91
10.13. Creation of New Subsidiaries.........................................92
10.14. Mid-State Rights in Mortgage Accounts................................92
10.15. Sale of Mid-State....................................................92
10.16. Sales of Mortgage Accounts to Mid-State..............................92
ARTICLE XI
Events of Default and Acceleration
11.1. Events of Default....................................................93
11.2. Agent to Act.........................................................96
11.3. Cumulative Rights....................................................96
11.4. No Waiver............................................................96
11.5. Allocation of Proceeds...............................................96
iv
<PAGE>
ARTICLE XII
The Agent
12.1. Appointment..........................................................98
12.2. Attorneys-in-fact....................................................98
12.3. Limitation on Liability..............................................98
12.4. Reliance.............................................................98
12.5. Notice of Default....................................................99
12.6. No Representations...................................................99
12.7. Indemnification......................................................99
12.8. Lender..............................................................100
12.9. Resignation.........................................................100
12.10. Sharing of Payments, etc............................................101
12.11. Fees................................................................101
ARTICLE XIII
Miscellaneous
13.1. Assignments and Participations......................................102
13.2. Notices.............................................................104
13.3. Setoff..............................................................105
13.4. Survival............................................................105
13.5. Expenses............................................................106
13.6. Amendments..........................................................106
13.7. Counterparts........................................................108
13.8. Termination.........................................................108
13.9. Indemnification; Limitation of Liability............................108
13.10. Severability........................................................109
13.11. Entire Agreement....................................................109
13.12. Agreement Controls..................................................109
13.13. Usury Savings Clause................................................109
13.14. Governing Law; Waiver of Jury Trial.................................110
EXHIBIT A Applicable Commitment Percentages............................A-1
EXHIBIT B-1 Form of Assignment and Acceptance..........................B-1-1
EXHIBIT B-2 Form of Assignment and Acceptance..........................B-2-1
EXHIBIT C Notice of Appointment (or Revocation) of Authorized
Representative ............................................C-1
EXHIBIT D-1 Form of Borrowing Notice...................................D-1-1
EXHIBIT D-2 Form of Borrowing Notice--Swing Line Loans.................D-2-1
EXHIBIT E Form of Interest Rate Selection Notice.......................E-1
EXHIBIT F-1 Form of Revolving Note.......................................F-1
EXHIBIT F-2 Form of Term Note..........................................F-2-1
v
<PAGE>
EXHIBIT G Form(s) of Opinion(s) of Counsel to Credit Parties...........G-1
EXHIBIT H Compliance Certificate.......................................H-1
EXHIBIT I Form of Facility Guaranty for Subsidiaries...................I-1
Schedule 1.1A Existing Letters of Credit
Schedule 1.1B Employee Stock Purchase Plan
Schedule 1.1C Excluded Subsidiaries
Schedule 8.4 Subsidiaries and Intercompany Advances
Schedule 8.5 Investments in Other Persons
Schedule 8.6 Indebtedness
Schedule 8.8 Tax Matters
Schedule 8.10 Disclosed Litigation
Schedule 8.16A Employee Benefit Plans Funding Matters
Schedule 8.16B Employee Benefit Plans
Schedule 8.18A Environmental Matters
Schedule 8.18B Environmental Listings on NPL and CERCLIS
Schedule 8.19 Collective Bargaining Agreements
Schedule 9.5 Insurance
Schedule 10.3 Liens
vi
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of October 15, 1997 (the "Agreement"), is
made by and among WALTER INDUSTRIES, INC., a Delaware corporation having its
principal place of business in Tampa, Hillsborough County, Florida (the
"Borrower"), NATIONSBANK, NATIONAL ASSOCIATION, a national banking association
organized and existing under the laws of the United States, in its capacity as a
Lender ("NationsBank"), and each other financial institution executing and
delivering a signature page hereto and each other financial institution which
may hereafter execute and deliver an instrument of assignment with respect to
this Agreement pursuant to Section 13.1 (hereinafter such financial institutions
may be referred to individually as a "Lender" or collectively as the "Lenders"),
and NATIONSBANK, NATIONAL ASSOCIATION, a national banking association organized
and existing under the laws of the United States, in its capacity as
administrative agent, documentation agent and syndication agent for the Lenders
(in such capacity, and together with any successor agent appointed in accordance
with the terms of Section 12.9, the "Administrative Agent" or the "Agent");
W I T N E S S E T H:
WHEREAS, the Borrower, NationsBank, National Association, as agent and
certain lenders (the "Existing Lenders") have entered into a Credit Agreement
dated January 22, 1996 (the "Existing Agreement") pursuant to which the Existing
Lenders have made available to the Borrower a term loan facility of $185,000,000
and a revolving credit facility of up to $365,000,000 and issued letters of
credit for the benefit of the Borrower; and
WHEREAS, the Borrower has entered into a Stock Purchase Agreement dated
September 19, 1997 to purchase all outstanding stock of Applied Industrial
Materials Corporation, AIMCOR Enterprises International, Inc., AIMCOR (Germany)
Limited Partnership and AIMCOR (Luxembourg) Limited Partnership (collectively,
the "AIMCOR Group") and has requested that the amount of the term loan facility
be increased to $450,000,00 and that the revolving credit facility be reduced to
$350,000,000 and that this Agreement be entered into in replacement of the
Existing Agreement; and
WHEREAS, the Lenders are willing to make available to the Borrower a
revolving credit facility of up to $350,000,000, including a sublimit for
issuance of standby letters of credit in an amount of up to $75,000,000 and a
swing line facility in an amount of up to $25,000,000, the proceeds of which are
to be used (i) to acquire the AIMCOR Group, (ii) repay the indebtedness arising
under the Existing Agreement, (iii) for working capital needs and (iv) for
general corporate purposes, including the making of acquisitions permitted
hereunder; and
WHEREAS, the Lenders are willing to make such term loan facility and
revolving credit facility available to the Borrower upon the terms and
conditions set forth herein;
<PAGE>
NOW, THEREFORE, the Borrower, the Lenders and the Agent hereby agree as
follows:
2
<PAGE>
ARTICLE I
Definitions and Terms
1.1. Definitions. For the purposes of this Agreement, in addition to the
definitions set forth above, the following terms shall have the respective
meanings set forth below:
"Acquisition" means the acquisition of (i) a controlling equity
interest in another Person (including the purchase of an option, warrant
or convertible or similar type security to acquire such a controlling
interest at the time it becomes exercisable by the holder thereof),
whether by purchase of such equity interest or upon exercise of an option
or warrant for, or conversion of securities into, such equity interest, or
(ii) assets of another Person which constitute all or substantially all of
the assets of such Person or of a business unit of or a line or lines of
business conducted by such Person; provided that the term "Acquisition"
shall not include Investments by Mid-State in one or more special purpose
Subsidiaries in connection with the issuance by such Subsidiaries of
securities described in Section 10.4(d)(iii).
"Advance" means any of (i) the borrowing under the Term Loan
Facility or (ii) a borrowing under the Revolving Credit Facility
consisting, in any case, of a Base Rate Loan or a Eurodollar Rate Loan.
"Affiliate" means any Person (i) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is
under common control with the Borrower; or (ii) which beneficially owns or
holds 5% or more of any class of the outstanding voting stock (or in the
case of a Person which is not a corporation, 5% or more of the equity
interest) of the Borrower; or 5% or more of any class of the outstanding
voting stock (or in the case of a Person which is not a corporation, 5% or
more of the equity interest) of which is beneficially owned or held by the
Borrower. The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting stock, by
contract or otherwise.
"AIMCOR" means Applied Industrial Materials Corporation, a
corporation organized under the laws of Delaware.
"Alternative Currency" means, with the prior written consent of the
Agent, any lawful currency other than Dollars which is freely transferable
and convertible into Dollars in the United States currency market.
"Applicable Commitment Percentage" means, as to each Lender at any
time (i) with respect to the Revolving Credit Facility and the
Participations, a fraction, the numerator of which shall be such Lender's
Revolving Credit Commitment and the denominator of which shall be the
Total Revolving Credit Commitment, and (ii) with
3
<PAGE>
respect to the Term Loan Facility, a fraction, the numerator of which
shall be such Lender's Term Loan Commitment and the denominator of which
shall be the Total Term Loan Commitment, which Applicable Commitment
Percentage in each case for each Lender as of the Closing Date is as set
forth in Exhibit A; provided that each Applicable Commitment Percentage of
each Lender shall be increased or decreased to reflect any assignments to
or by such Lender effected in accordance with Section 13.1.
"Applicable Margin" means, with respect to Eurodollar Rate Loans and
Eurodollar Rate Segments, for Revolving Loans and for Term Loans, that
percent per annum set forth below, which shall be based upon the
Consolidated Leverage Ratio for the Four-Quarter Period most recently
ended as specified below:
Consolidated Applicable Margin for
TIER Leverage Ratio Eurodollar Rate Loans
---- -------------- ---------------------
1 Equal to or Greater than 1.25%
3.50 to 1.00
2 Less than 3.5 to 1.00 1.00%
and equal to or Greater
than 3.25 to 1.00
3 Less than 3.25 to 1.00 .75%
and equal to or Greater
than 2.75 to 1.00
4 Less than 2.75 to 1.00 .625%
and equal to or Greater
than 2.25 to 1.00
5 Less than 2.25 to 1.00 .50%
The Applicable Margin shall be established at the end of each fiscal
quarter of the Borrower (each, a "Determination Date"). Any change in the
Applicable Margin following each Determination Date shall be determined
based upon the computations set forth in the certificate furnished to the
Agent pursuant to Section 9.1(a)(ii) and Section 9.1(b)(ii), and shall be
effective commencing on the date following the date such certificate is
received (or, if earlier, the date such certificate was required to be
delivered), and in each case, until the date following the date on which a
new certificate is delivered or is required to be delivered, whichever
shall first occur; provided however, if the Borrower shall fail to deliver
any such certificate within the time period required by Section 9.1, then
the Applicable Margin with respect to Revolving Loans and Segments under
the Term Loan shall be 1.25% until the appropriate certificate is so
delivered. From the Closing Date to the day following the receipt of
certificate described above for the period ending
4
<PAGE>
February 28, 1998, the Applicable Margin shall be not less than 1% for
Revolving Loans and Segments under the Term Loan.
"Applicable Margin (L/C)" means, as of any date, the Applicable
Margin then in effect with respect to Eurodollar Rate Loans under the
Revolving Credit Facility, minus .125%.
"Applicable Unused Fee" means that percent per annum set forth
below, which shall be based upon the Consolidated Leverage Ratio for the
Four-Quarter Period most recently ended as specified below:
Consolidated Applicable
TIER Leverage Ratio Unused Fee
---- -------------- ----------
1 Equal to or Greater than
3.50 to 1.00 .30%
2 Less than 3.50 to 1.00
and equal to or Greater than
3.25 to 1.00 .25%
3 Less than 2.25 to 1.00
and equal to or Greater than
2.75 to 1.00 .25%
4 Less than 2.75 to 1.00
and equal to or Greater than
2.25 to 1.00 .20%
5 Less than 2.25 to 1.00 .175%
The Applicable Unused Fee shall be established at the end of each fiscal
quarter of the Borrower (the "Determination Date"). Any change in the
Applicable Unused Fee following each Determination Date shall be
determined based upon the computations set forth in the certificate
furnished to the Agent pursuant to Section 9.1(a)(ii) and Section
9.1(b)(ii), and shall be effective commencing on the date following the
date such certificate is received (or, if earlier, the date such
certificate was required to be delivered) until the date a new certificate
is delivered or is required to be delivered, whichever shall first occur,
and continuing until the date following the next date on which such
certificate is delivered or required to be delivered; provided however, if
the Borrower shall fail to deliver any such certificate within the time
period required by Section 9.1, then the Applicable Unused Fee shall be
.30% until the appropriate certificate is so delivered. From the Closing
Date to the day following the receipt of certificate described above for
5
<PAGE>
the period ending February 28, 1998, the Applicable Unused Fee shall be
not less than .25%.
"Applications and Agreements for Letters of Credit" means,
collectively, the Applications and Agreements for Letters of Credit, or
similar documentation, executed by the Borrower, or by the Borrower and a
Restricted Subsidiary, as applicable, from time to time and delivered to
the Issuing Bank to support the issuance of Letters of Credit.
"Assignment and Acceptance" shall mean (i) with respect to the
Revolving Credit Facility and the Participations, an Assignment and
Acceptance in the form of Exhibit B-1 (with blanks appropriately filled
in) and (ii) with respect to the Term Loan Facility, an Assignment and
Acceptance in the form of Exhibit B-2 (with blanks appropriately filled
in) in each case delivered to the Agent in connection with an assignment
of a Lender's interest under this Agreement pursuant to Section 13.1.
"Authorized Representative" means any of the President, any Vice
President or any Assistant Treasurer of the Borrower or, with respect to
financial matters, the chief financial officer, treasurer, controller or
chief accounting officer of the Borrower, or any other Person expressly
designated by the Board of Directors of the Borrower (or the appropriate
committee thereof) as an Authorized Representative of the Borrower, as set
forth from time to time in a certificate in the form of Exhibit C.
"Base Rate" means the per annum rate of interest equal to the
greater of (i) the Prime Rate or (ii) the Federal Funds Effective Rate
plus one-half of one percent (1/2%). Any change in the Base Rate resulting
from a change in the Prime Rate or the Federal Funds Effective Rate shall
become effective as of 12:01 A.M. of the Business Day on which each such
change occurs. The Base Rate is a reference rate used by the Agent in
determining interest rates on certain loans and is not intended to be the
lowest rate of interest charged on any extension of credit to any debtor.
"Base Rate Loan" means a Revolving Loan or a Segment of any Term
Loan for which the rate of interest is determined by reference to the Base
Rate.
"Base Rate Segment" means a Segment bearing interest or to bear
interest at the Base Rate.
"Base Rate Refunding Loan" means a Base Rate Loan which is a
Revolving Loan or Swing Line Loan made either to (i) satisfy Reimbursement
Obligations arising from a drawing under a Letter of Credit or (ii) pay
NationsBank in respect of Swing Line Outstandings.
"Board" means the Board of Governors of the Federal Reserve System
(or any successor body).
6
<PAGE>
"Borrower's Account" means a demand deposit account number
3750658039 or any successor account with the Agent, which may be
maintained at one or more offices of the Agent or an agent of the Agent.
"Borrowing Notice" means the notice delivered by an Authorized
Representative in connection with an Advance under the Revolving Credit
Facility or a Swing Line Loan, in the forms of Exhibits D-1 and D-2,
respectively.
"Business Day" means, (i) with respect to any Base Rate Loan, any
day which is not a Saturday, Sunday or a day on which banks in the States
of New York and North Carolina are authorized or obligated by law,
executive order or governmental decree to be closed and, (ii) with respect
to any Eurodollar Rate Loan, any day which is a Business Day, as described
above, and on which the relevant international financial markets are open
for the transaction of business contemplated by this Agreement in London,
England, New York, New York and Charlotte, North Carolina.
"Capital Leases" means all leases which have been or should be
capitalized in accordance with GAAP as in effect from time to time
including Statement No. 13 of the Financial Accounting Standards Board and
any successor thereof.
"Cardem" means Cardem Insurance Co., Ltd., a Bermuda corporation and
a wholly owned Subsidiary of the Borrower.
"Cash Equivalents" means any of the following types of property, to
the extent owned by the Borrower or any of its Subsidiaries free and clear
of all Liens (other than Liens created under the Security Instruments) and
having a maturity of not greater than 12 months from the date of
acquisition thereof:
(a) cash, denominated in U.S. Dollars or in a currency other
than U.S. Dollars that is freely transferable or convertible into
U.S. Dollars.
(b) readily marketable direct obligations of the Government of
the United States or any agency or instrumentality thereof or
obligations unconditionally guaranteed by the full faith and credit
of the Government of the United States, or of any state or
municipality if such obligations have an investment grade rating;
(c) insured certificates of deposit or bankers' acceptances
of, or time deposits with any Lender or with any commercial bank
that (i) is a member of the Federal Reserve System, (ii) issues (or
the parent of which issues) commercial paper rated as described in
clause (c) below, (iii) is organized under the laws of the United
States or any state thereof and (iv) has combined capital and
surplus of at least $250,000,000;
(d) commercial paper rated at least "Prime-1" (or the then
equivalent grade) by Moody's or "A-1" (or the then equivalent grade)
by S&P, or carrying
7
<PAGE>
an equivalent rating by a nationally recognized rating agency
acceptable to the Agent if both Moody's and S&P cease publishing
ratings of investments; or
(e) shares of investment companies investing solely in the
foregoing.
"Cash Income Taxes" means, with respect to the Borrower and its
Restricted Subsidiaries for any period, the aggregate amount of all
payments in respect of income taxes made in cash by the Borrower and its
Restricted Subsidiaries to any applicable Government Authority during such
period, after giving effect, to the extent available, to the application
of net operating losses available to the Borrower and its Restricted
Subsidiaries (and excluding Cash Income Taxes paid on behalf of
Unrestricted Subsidiaries).
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time.
"CERCLIS" means the Comprehensive Environmental Response,
Compensation and Liability Information System maintained by the U.S.
Environmental Protection Agency.
"Change of Control" means, at any time:
(i) any "person" or "group" (each as used in Sections 13(d)(3)
and 14(d)(2) of the Exchange Act) either (A) becomes the "beneficial
owner" (as defined in Rule 13d-3 of the Exchange Act ), directly or
indirectly, of Voting Stock of the Borrower (or securities
convertible into or exchangeable for such Voting Stock) representing
33-1/3% or more of the combined voting power of all Voting Stock of
the Borrower (on a fully diluted basis) or (B) otherwise acquires
the ability, directly or indirectly, to elect a majority of the
board of directors of the Borrower;
(ii) during any period of up to 24 consecutive months,
commencing on the Closing Date, individuals who at the beginning of
such 24-month period were directors of the Borrower shall cease for
any reason (other than the death, disability or retirement of an
officer of the Borrower that is serving as a director at such time
so long as another officer of the Borrower replaces such Person as a
director) to constitute a majority of the board of directors of the
Borrower (excluding the exercise by the Equity Investors of rights
in existence as of the date hereof under the Stockholders Agreement
to designate or replace individual members of the board of directors
of the Borrower);
(iii) any Person or two or more Persons acting in concert
shall have acquired by contract or otherwise, or shall have entered
into a contract or arrangement that, upon consummation thereof, will
result in its or their acquisition of the power to
8
<PAGE>
exercise, directly or indirectly, a controlling influence on the
management or policies of the Borrower; or
(iv) with respect to any pledge or other security agreement
covering all or any portion of the shares of capital stock of the
Borrower that are owned beneficially and of record by any of the
Equity Investors or their nominees, any secured party or pledgee
thereunder shall become the holder of record of more than fifty
percent (50%) of the shares owned by any such Equity Investor or
shall receive dividends or other cash or cash equivalent
distributions (including, without limitation, stock repurchases) in
respect thereof, or shall proceed to exercise voting or other
consensual rights in respect thereof (whether by proxy, voting or
other similar arrangement or otherwise), or shall otherwise commence
to realize upon such shares.
"Closing Date" means the date as of which this Agreement is executed
by the Borrower, the Lenders, the Agent and the Managing Agents and on
which the conditions set forth in Section 7.1 have been satisfied.
"Code" means the Internal Revenue Code of 1986, as amended, and any
regulations promulgated and rulings issued thereunder.
"Collateral" means, collectively, all property of the Borrower, any
Subsidiary or any other Person in which the Agent or any Lender is granted
a Lien as security for all or any portion of the Obligations under any
Security Instrument.
"Consistent Basis" in reference to the application of GAAP means the
accounting principles observed in the period referred to are comparable in
all material respects to those applied in the preparation of the audited
financial statements of the Borrower referred to in Section 8.6(a).
"Consolidated Capital Expenditures" means, with respect to the
Borrower and its Restricted Subsidiaries on a consolidated basis, for any
period the sum of (without duplication) (i) all expenditures (whether paid
in cash or accrued as liabilities) by the Borrower or any Restricted
Subsidiary during such period for items that would be classified as
"property, plant or equipment" or comparable items on the consolidated
balance sheet of the Borrower and its Restricted Subsidiaries, including
without limitation all transactional costs incurred in connection with
such expenditures provided the same have been capitalized, excluding,
however, (A) the amount of any Consolidated Capital Expenditures paid for
with proceeds of casualty insurance as evidenced in writing and submitted
to the Agent together with any compliance certificate delivered pursuant
to Section 9.1(a) or (b), (B) non-cash capitalized depreciation arising in
connection with mining operations, and (ii) with respect to any Capital
Lease entered into by the Borrower or its Restricted Subsidiaries during
such period, the present value of the lease payments due under such
Capital Lease over the term of such Capital Lease applying a discount rate
9
<PAGE>
equal to the interest rate provided in such lease (or in the absence of a
stated interest rate, that rate used in the preparation of the financial
statements described in Section 9.1(a)), and (C) any portion of the
purchase price of an Acquisition which is accounted for as a Capital
Expenditure, all the foregoing in accordance with GAAP applied on a
Consistent Basis.
"Consolidated EBITDA" means, with respect to the Borrower and its
Restricted Subsidiaries for any Four-Quarter Period ending on the date of
computation thereof, the sum of, without duplication, (i) Consolidated Net
Income, (ii) Consolidated Interest Expense, (iii) taxes on income, (iv)
noncash liabilities otherwise deducted in calculating net income resulting
from FASB No. 106 Changes, (v) extraordinary and unusual losses deducted
in calculating net income less extraordinary and unusual gains added in
calculating net income, (vi) amortization, (vii) depreciation and
depletion, (viii) non-cash liabilities otherwise deducted in calculating
net income resulting from FASB No. 121 Changes, (ix) non-cash charges, (x)
non-recurring charges, (xi) transaction expenses and charges incurred in
connection with the Related Acquisition net of any income tax effect and
not to exceed in any event $1,000,000, and (xii) with respect to any
entity acquired by the Borrower or a Subsidiary during any Four-Quarter
Period, the pro forma Consolidated EBITDA of such entity for the period
from the first day of such period to the date of such Acquisition, all
determined on a consolidated basis in accordance with GAAP applied on a
Consistent Basis; provided, however that with respect to an Acquisition
which is accounted for as a "purchase", the computation of Consolidated
EBITDA shall include the results of operations of the Person or assets so
acquired which amounts shall be determined on an historical pro forma
basis for the Four-Quarter Period preceding or including the date of such
Acquisition as if such Acquisition had been consummated as a "pooling of
interest".
"Consolidated Fixed Charge Coverage Ratio" means, with respect to
the Borrower and its Restricted Subsidiaries for any Four-Quarter Period
ending on the date of computation thereof, the ratio of (i) Consolidated
EBITDA for such period less (without duplication) Consolidated Capital
Expenditures for such period, to (ii) Consolidated Fixed Charges for such
period.
"Consolidated Fixed Charges" means, with respect to the Borrower and
its Restricted Subsidiaries for any Four-Quarter Period ending on the date
of computation thereof, the sum of, without duplication, (i) Consolidated
Interest Expense, (ii) the aggregate amount of Required Principal Payments
made or required to be made during such period, and (iii) all dividends
paid during such period (regardless of when declared) on any shares of
capital stock of the Borrower then outstanding, all determined on a
consolidated basis in accordance with GAAP applied on a Consistent Basis.
"Consolidated Indebtedness" means, with respect to any Person, all
Indebtedness for Money Borrowed of such Person and its Subsidiaries, all
determined on a consolidated basis, including in the case of the Borrower
and its Restricted Subsidiaries amounts
10
<PAGE>
outstanding under Permitted Receivables Securitizations but excluding as
Indebtedness, any Indebtedness which is secured by Liens on life insurance
policies permitted by Section 10.4(n).
"Consolidated Interest Expense" means, with respect to any period of
computation thereof, the interest expense (net of interest income) of the
Borrower and its Restricted Subsidiaries, including without limitation (i)
the current amortized portion of debt discounts to the extent included in
interest expense, (ii) the current amortized portion of all fees
(including fees payable in respect of any Swap Agreement) payable in
connection with the incurrence of Indebtedness to the extent included in
interest expense, (iii) the portion of any payments made in connection
with Capital Leases allocable to interest expense, and (iv) all fees,
charges, discounts and other costs incurred in connection with any
Permitted Receivables Securitization, all determined on a consolidated
basis in accordance with GAAP applied on a Consistent Basis; provided,
however, in the case of the occurrence of an Acquisition, there shall be
included in Consolidated Interest Expense for the first four consecutive
fiscal quarters ending after the date of such Acquisition an amount which
shall be determined by multiplying that portion of the cost of Acquisition
which represents Indebtedness, whether incurred, assumed or acquired,
times the interest rate applicable to such Indebtedness which is in effect
on the date of determination (i) for the fiscal quarter during which such
Acquisition occurs by four, (ii) for the two full fiscal quarters
following the date of such Acquisition by two, and (iii) for the three
full fiscal quarters following the date of such Acquisition by 4/3's.
"Consolidated Leverage Ratio" means, as of the date of computation
thereof, the ratio of (i) Consolidated Indebtedness of the Borrower and
its Restricted Subsidiaries (determined as at such date) to (ii)
Consolidated EBITDA (for the Four-Quarter Period ending on (or most
recently ended prior to) such date).
"Consolidated Net Income" means, for any period of computation
thereof, the gross revenues from operations of the Borrower and its
Restricted Subsidiaries, excluding any minority interest of any Person in
any Restricted Subsidiary (including payments received by the Borrower and
its Restricted Subsidiaries of (i) interest income, and (ii) dividends and
distributions made in the ordinary course of their businesses by Persons
in which investment is permitted pursuant to this Agreement and not
related to an extraordinary event), less all operating and non-operating
expenses of the Borrower and its Restricted Subsidiaries, including taxes
on income, all determined on a consolidated basis in accordance with GAAP
applied on a Consistent Basis. Consolidated Net Income will not include,
in any event, non cash income recognized from Unrestricted Subsidiaries.
"Consolidated Total Assets" means, as of any date on which the
amount thereof is to be determined, the net book value of all assets of
the Borrower and its Restricted Subsidiaries as determined on a
consolidated basis in accordance with GAAP applied on a Consistent Basis.
11
<PAGE>
"Contingent Obligation" of any Person means all contingent
liabilities required (or which, upon the creation or incurring thereof,
would be required) to be included in the financial statements (including
footnotes) of such Person in accordance with GAAP applied on a Consistent
Basis, including Statement No. 5 of the Financial Accounting Standards
Board, all Rate Hedging Obligations and any obligation of such Person
guaranteeing or in effect guaranteeing any Indebtedness, dividend or other
obligation of any other Person (the "primary obligor") in any manner,
whether directly or indirectly, including obligations of such Person
however incurred:
(1) to purchase such Indebtedness or other obligation or any
property or assets constituting security therefor;
(2) to advance or supply funds in any manner (i) for the
purchase or payment of such Indebtedness or other obligation, or
(ii) to maintain a minimum working capital, net worth or other
balance sheet condition or any income statement condition of the
primary obligor;
(3) to grant or convey any lien, security interest, pledge,
charge or other encumbrance on any property or assets of such Person
to secure payment of such Indebtedness or other obligation;
(4) to lease property or to purchase securities or other
property or services primarily for the purpose of assuring the owner
or holder of such Indebtedness or obligation of the ability of the
primary obligor to make payment of such Indebtedness or other
obligation; or
(5) otherwise to assure the owner of the Indebtedness or such
obligation of the primary obligor against loss in respect thereof.
"Cost of Acquisition" means, with respect to any Acquisition, as at
the date of entering into any agreement therefor, the sum of the following
(without duplication): (i) the value of the capital stock, warrants or
options to acquire capital stock of Borrower or any Subsidiary to be
transferred in connection therewith, (ii) the amount of any cash and fair
market value of other property (excluding property described in clause (i)
and the unpaid principal amount of any debt instrument) given as
consideration, (iii) the amount (determined by using the face amount or
the amount payable at maturity, whichever is greater) of any Indebtedness
incurred, assumed or acquired by the Borrower or any Subsidiary in
connection with such Acquisition, (iv) all additional purchase price
amounts in the form of earnouts and other contingent obligations that
should be recorded on the financial statements of the Borrower and its
Subsidiaries in accordance with GAAP, (v) all amounts paid or payable in
respect of covenants not to compete, consulting agreements that should be
recorded on financial statements of the Borrower and its Subsidiaries in
accordance with GAAP, and other affiliated contracts in connection with
such Acquisition which would constitute additional consideration by the
Borrower or any Subsidiary, (vi)
12
<PAGE>
the aggregate fair market value of all other consideration given by the
Borrower or any Subsidiary in connection with such Acquisition, and (vii)
out of pocket transaction costs for the services and expenses of
attorneys, accountants and other consultants incurred in effecting such
transaction, and other similar transaction costs so incurred. For purposes
of determining the Cost of Acquisition for any transaction, (A) the
capital stock of the Borrower shall be valued (I) in the case of capital
stock that is then designated as a national market system security by the
National Association of Securities Dealers, Inc. ("NASDAQ") or is listed
on a national securities exchange, the average of the last reported bid
and ask quotations or the last prices reported thereon, and (II) with
respect to shares that are not freely tradeable, as determined by a
committee composed of the disinterested members of the Board of Directors
of the Borrower and, if requested by the Agent, determined to be a
reasonable valuation by the independent public accountants referred to in
Section 9.1(a), (B) the capital stock of any Subsidiary shall be valued as
determined by a committee composed of the disinterested members of the
Board of Directors of the Borrower and, if requested by the Agent,
determined to be a reasonable valuation by the independent public
accountants referred to in Section 9.1(a), and (C) with respect to any
Acquisition accomplished pursuant to the exercise of options or warrants
or the conversion of securities, the Cost of Acquisition shall include
both the cost of acquiring such option, warrant or convertible security as
well as the cost of exercise or conversion.
"Credit Parties" means, collectively, the Borrower and the
Guarantors.
"Default" means any event or condition which, with the giving or
receipt of notice or lapse of time or both, would constitute an Event of
Default hereunder.
"Default Rate" means (i) with respect to each Eurodollar Rate Loan
and Eurodollar Rate Segment, until the end of the Interest Period
applicable thereto, a rate of two percent (2%) above the Eurodollar Rate
applicable to such Loan or Segment, and thereafter at a rate of interest
per annum which shall be two percent (2%) above the Base Rate, (ii) with
respect to Base Rate Loans and Base Rate Segments, at a rate of interest
per annum which shall be two percent (2%) above the Base Rate and (iii) in
any case, the maximum rate permitted by applicable law, if lower.
"Deficiency Advance" has the meaning specified in Section 3.11.
"Depositor Account Transfer Agreement" means the agreement dated as
of March 3, 1995 between Jim Walter Homes and Mid-State entered into in
connection with the Mortgage Warehousing Facility, as amended, modified or
supplemented.
"Direct Foreign Subsidiary" means any Foreign Subsidiary of the
Borrower a majority of whose outstanding Voting Stock is owned directly by
the Borrower or a Subsidiary that is not a Foreign Subsidiary.
13
<PAGE>
"Disclosed Litigation" has the meaning provided for such term in
Section 8.10.
"Disclosure Date" means August 31, 1997.
"Documentary Letter of Credit" means a Letter of Credit issued under
the Letter of Credit Facility for the benefit of a supplier of inventory
to the Borrower or any Restricted Subsidiary to effect payment for such
inventory, the conditions to drawing under which include the presentation
to the Issuing Bank of negotiable bills of lading, invoices and related
documents sufficient, in the judgment of the Issuing Bank, to create a
valid and perfected Lien in such inventory and presented documents in
favor of the Issuing Bank.
"Dollars" and the symbol "$" means dollars constituting legal tender
for the payment of public and private debts in the United States of
America.
"Dollar Value" of a Letter of Credit issued in an Alternative
Currency means the equivalent amount in Dollars based upon the Spot Rate
of Exchange (i) as of two Business Days prior to the issuance of such a
Letter of Credit or (ii) on the date of a drawing under a Letter of Credit
issued in an Alternative Currency.
"Employee Benefit Plan" means any employee benefit plan within the
meaning of Section 3(3) of ERISA which (i) is maintained for employees of
the Borrower or any of its ERISA Affiliates or is assumed by the Borrower
or any of its ERISA Affiliates in connection with any Acquisition or (ii)
has at any time been maintained for the employees of the Borrower or any
current or former ERISA Affiliate and, with respect to employee benefit
plans of any former ERISA Affiliate, the Borrower or any Restricted
Subsidiary has or retains any obligations or liability, absolute or
contingent, for funding or other performance obligations imposed by ERISA
or other applicable law.
"Environmental Action" means any action, suit, demand, demand
letter, claim, notice of noncompliance or violation, notice of liability
or potential liability, investigation, proceeding, consent order or
consent agreement relating in any way to any Environmental Law or any
Hazardous Material.
"Environmental Laws" means, collectively, CERCLA, the Superfund
Amendments and Reauthorization Act of 1986, the Resource Conservation and
Recovery Act, the Toxic Substances Control Act, as amended, the Clean Air
Act, as amended, the Clean Water Act, as amended, any other "Superfund" or
"Superlien" law or any other federal, or applicable state or local
statute, law, ordinance, code, rule, regulation, order or decree
regulating, relating to, or imposing liability or standards of conduct
concerning, any Hazardous Material.
14
<PAGE>
"Equity Investors" means Lehman Brothers, Inc., Kohlberg Kravis
Roberts & Co., KKR Associates, KKR Partners II, L.P., JWC Associates,
L.P., JWC Associates II, L.P., Channel One Associates, L.P. and their
respective Affiliates.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any successor statute and all rules and
regulations promulgated thereunder.
"ERISA Affiliate", as applied to the Borrower, means any Person or
trade or business which is a member of a group which is under common
control with the Borrower, who together with the Borrower, is treated as a
single employer within the meaning of Section 414(b) and (c) of the Code.
"Eurodollar Rate Loan" means a Loan or Segment for which the rate of
interest is determined by reference to the Eurodollar Rate.
"Eurodollar Rate" means the interest rate per annum calculated
according to the following formula:
Eurodollar = Interbank Offered Rate + Applicable
Rate 1-Eurodollar Reserve Percentage Margin
"Eurodollar Rate Segment" means a Segment bearing interest or to
bear interest at the Eurodollar Rate.
"Eurodollar Reserve Percentage" means, for any day, that percentage
(expressed as a decimal) which is in effect from time to time under
Regulation D or any successor regulation, as the reserve requirement
(including any basic, supplemental, emergency, special, or marginal
reserves) applicable with respect to Eurocurrency liabilities as that term
is defined in Regulation D (or against any other category of liabilities
that includes deposits by reference to which the interest rate of
Eurodollar Rate Loans is determined), whether or not the Agent or any
Lender has any Eurocurrency liabilities subject to such requirements,
without benefits of credits or proration, exceptions or offsets that may
be available from time to time to the Agent or any Lender. The Eurodollar
Rate shall be adjusted automatically on and as of the effective date of
any change in the Eurodollar Reserve Percentage.
"Event of Default" means any of the occurrences set forth as such in
Section 11.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
through the date hereof, and the regulations promulgated and the rulings
issued thereunder.
"Existing Letters of Credit" means, collectively, the irrevocable
letters of credit issued for the benefit of the Borrower or one of its
Restricted Subsidiaries under the
15
<PAGE>
Existing Agreement prior to the Closing Date and remaining outstanding as
of and after the Closing Date, all as more particularly described on
Schedule 1.1A.
"Existing Agreement" has the meaning set forth in the preamble to
this Agreement.
"Facility Guaranty" means each Guaranty and Suretyship Agreement
between one or more Guarantors and the Agent for the benefit of the
Lenders, delivered as of the Closing Date and each Guaranty and Suretyship
Agreement otherwise delivered to the Agent pursuant to Section 9.19, as
the same may be amended, modified or supplemented.
"Facility Termination Date" means the date on which both the
Revolving Credit Termination Date and the Term Loan Termination Date shall
have occurred, no Letters of Credit shall remain outstanding and the
Borrower shall have fully paid and satisfied all Obligations.
"FASB No. 106 Changes" means adjustments to income (or loss) less
actual cash payments resulting from "retirement benefits other than
pensions" (as defined in the Statement of Financial Accounting Standards
No. 106).
"FASB No. 121 Changes" means adjustments charged to income (or loss)
resulting from impairment of long-lived assets (as defined in the
Statement of Financial Accounting Standards No. 121).
"Federal Funds Effective Rate" means, for any day, the rate per
annum (rounded upward to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business
Day next succeeding such day, provided that (a) if such day is not a
Business Day, the Federal Funds Rate for such day shall be such rate on
such transactions on the next preceding Business Day, and (b) if no such
rate is so published on such next preceding Business Day, the Federal
Funds Rate for such day shall be the average rate quoted to the Agent on
such day on such transaction as determined by the Agent.
"Fiscal Year" means the twelve month fiscal period of the Borrower
and its Subsidiaries commencing on June 1 of each calendar year and ending
on May 31 of the next following calendar year.
"Foreign Benefit Law" means any applicable statute, law, ordinance,
code, rule, regulation, order or decree of any foreign nation or any
province, state, territory, protectorate or other political subdivision
thereof regulating, relating to, or imposing liability or standards of
conduct concerning, any Employee Benefit Plan or similar type plan.
16
<PAGE>
"Foreign Subsidiary" means any Subsidiary that is not organized
under the laws of the United States of America or a state, province or
territory thereof.
"Four-Quarter Period" means a period of four full consecutive fiscal
quarters (such fiscal quarters to end on the last day of each February,
May, August and November of each year) of the Borrower and its
Subsidiaries, taken together as one accounting period.
"GAAP" or "Generally Accepted Accounting Principles" means generally
accepted accounting principles, being those principles of accounting set
forth in pronouncements of the Financial Accounting Standards Board, the
American Institute of Certified Public Accountants or which have other
substantial authoritative support and are applicable in the circumstances
as of the date of a report.
"Governmental Authority" shall mean any Federal, state, municipal,
national or other governmental department, commission, board, bureau,
court, agency or instrumentality or political subdivision thereof or any
entity or officer exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to any government or any
court, in each case whether associated with a state of the United States,
the United States, or a foreign entity or government.
"Guaranties" means all obligations of the Borrower or any Subsidiary
directly or indirectly guaranteeing, or in effect guaranteeing (including
any arrangement described clauses (1) through (5) of the definition of
"Contingent Obligation"), any Indebtedness or other obligation of any
other Person.
"Guarantors" means, at any date, the Restricted Subsidiaries (other
than inactive Subsidiaries, Foreign Subsidiaries and Subsidiaries listed
on Schedule 1.1(c)).
"Hazardous Material" means and includes any hazardous, toxic or
dangerous waste, substance or material, the generation, handling, storage,
disposal, treatment or emission of which is subject to any Environmental
Law.
"Holdback Reserve" means, with respect to any Person for any sale,
lease, transfer or other disposition of any property or assets, an amount
equal to any amount required to be reserved (and properly reserved for) by
such Person in accordance with GAAP against any contingent liabilities
that (a) are associated with the property and assets of such Person being
sold, leased, transferred or otherwise disposed of in such transaction in
accordance with the terms of the Loan Documents (including, without
limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities resulting
from indemnification obligations for other similar contingent liabilities)
and (b) are required to be retained or indemnified by such Person under
the documentation evidencing the terms and conditions of such transaction;
provided that the amount of each Holdback Reserve shall be (i) reduced on
each Business Day that the Borrower shall give notice to the Agent that
the contingent liabilities giving rise to such Holdback Reserve
17
<PAGE>
have been paid, satisfied or extinguished in an amount specified in such
notice, by such amount, and (ii) permanently reduced to zero on the
earlier to occur of (X) the date that is 24 months after the date on which
the Borrower or any of its Subsidiaries received Net Cash Proceeds from
the transaction for which the Holdback Reserve was established and (Y) the
date on which the contingent liabilities for which such Holdback Reserve
was established are no longer required to be reserved against in
accordance with GAAP.
"Indebtedness" means with respect to any Person, without
duplication, all Indebtedness for Money Borrowed, all indebtedness of such
Person for the acquisition of property, all indebtedness secured by any
Lien on the property of such Person whether or not such indebtedness is
assumed, all liability of such Person by way of endorsements (other than
for collection or deposit in the ordinary course of business), all
Guaranties, that portion of obligations with respect to Capital Leases and
other items which in accordance with GAAP is required to be classified as
a liability on a balance sheet; but excluding all accounts payable in the
ordinary course of business so long as payment therefor is due within one
year; provided that in no event shall the term Indebtedness include
surplus and retained earnings, lease obligations (other than pursuant to
Capital Leases), reserves for deferred income taxes and other taxes not
due and payable, and investment credits, other deferred credits or
reserves, or deferred compensation obligations.
"Indebtedness for Money Borrowed" means with respect to any Person,
without duplication, all indebtedness in respect of money borrowed,
including without limitation all Capital Leases and the deferred purchase
price of any property or asset, evidenced by a promissory note, bond,
debenture or similar written obligation for the payment of money
(including conditional sales or similar title retention agreements), other
than trade payables incurred in the ordinary course of business.
"Indirect Foreign Subsidiary" means any Foreign Subsidiary a
majority of whose Voting Stock is owned directly by a Foreign Subsidiary.
"Interbank Offered Rate" means, for any Eurodollar Rate Loan for any
Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or
any successor page) as the London interbank offered rate for deposits in
Dollars at approximately 11:00 A.M. (London time) two Business Days prior
to the first day of such Interest Period for a term comparable to such
Interest Period. If, for any reason, such rate is not available, the term
"Interbank Offered Rate" shall mean, with respect to any Eurodollar Rate
Loan for any Interest Period therefor, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters
Screen LIBOR Page as the London interbank offered rate for deposits in
Dollars at approximately 11:00 a.m. (London time) two Business Days prior
to the first day of such Interest Period for a term comparable to such
Interest Period; provided, however, if more than one rate is specified on
Reuters Screen LIBOR Page, the applicable rate shall be the arithmetic
mean of all such rates
18
<PAGE>
"Interest Period" means, for each Eurodollar Rate Loan or Eurodollar
Rate Segment, a period commencing on the date such Eurodollar Rate Loan or
Eurodollar Rate Segment is made or converted and ending, at the Borrower's
option, on the date one, two, three or six months thereafter as notified
to the Agent by the Authorized Representative three (3) Business Days
prior to the beginning of such Interest Period; provided, that,
(i) if the Authorized Representative fails to notify the Agent
of the length of an Interest Period three (3) Business Days prior to
the first day of such Interest Period, the Loan or Segment for which
such Interest Period was to be determined shall be deemed to be a
Base Rate Loan or Base Rate Segment as of the first day thereof;
(ii) if an Interest Period for a Eurodollar Rate Loan or
Eurodollar Rate Segment would end on a day which is not a Business
Day, such Interest Period shall be extended to the next Business Day
(unless such extension would cause the applicable Interest Period to
end in the succeeding calendar month, in which case such Interest
Period shall end on the next preceding Business Day);
(iii) any Interest Period which begins on the last Business
Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last Business Day of a
calendar month;
(iv) no Interest Period shall extend past the Stated Revolving
Credit Termination Date for Revolving Credit Loans or past the Term
Loan Termination Date for any Segment; and
(v) there shall not be more than ten (10) Interest Periods in
effect on any day.
"Interest Rate Selection Notice" means the written notice delivered
by an Authorized Representative in connection with the election of a
subsequent Interest Period for any Eurodollar Rate Loan or Eurodollar Rate
Segment or the conversion of any Eurodollar Rate Loan or Eurodollar Rate
Segment into a Base Rate Loan or Base Rate Segment or the conversion of
any Base Rate Loan or Base Rate Segment into a Eurodollar Rate Loan or
Eurodollar Rate Segment, in the form of Exhibit E.
"Investment" means, with respect to any Person, any loan or advance
(including any Intercompany Advance) to such Person, any purchase or other
acquisition of any shares of capital stock of or other ownership or profit
interest in such Person, any warrants, rights, options, obligations or
other securities of such Person, any capital contribution to such Person
or any other investment in such Person, including, without limitation, any
Guaranty in respect of Indebtedness or other obligations of such Person.
19
<PAGE>
"Issuing Bank" means NationsBank as issuer of Existing Letters of
Credit and Letters of Credit under Article IV.
"Jim Walter Homes" means Jim Walter Homes, Inc., a Florida
corporation and a Subsidiary of the Borrower.
"LC Account Agreement" means the LC Account Agreement dated as of
the date hereof between the Borrower and the Agent, as amended, modified
or supplemented from time to time.
"Lending Office" means, as to each Lender, the Lending Office of
such Lender designated on the signature pages hereof or in an Assignment
and Acceptance or such other office of such Lender (or of an affiliate of
such Lender) as such Lender may from time to time specify to the
Authorized Representative and the Agent as the office by which its Loans
are to be made and maintained.
"Letters of Credit" means, collectively, (i) the Standby Letters of
Credit and (ii) the Documentary Letters of Credit, and shall include the
Existing Letters of Credit.
"Letter of Credit Commitment" means, with respect to each Lender,
the obligation of such Lender to acquire Participations in respect of
Letters of Credit and Reimbursement Obligations up to an aggregate amount
at any one time outstanding equal to such Lender's Applicable Commitment
Percentage of the Total Letter of Credit Commitment as the same may be
increased or decreased from time to time pursuant to this Agreement.
"Letter of Credit Facility" means the facility described in Article
IV hereof providing for the issuance by the Issuing Bank upon application
of the Borrower for the account of the Borrower or the Borrower and a
Restricted Subsidiary of Letters of Credit in an aggregate stated amount
at any time outstanding not exceeding the Total Letter of Credit
Commitment.
"Letter of Credit Outstandings" means, as of any date of
determination, the aggregate amount remaining undrawn under all Letters of
Credit (including for this purpose Existing Letters of Credit) plus
Reimbursement Obligations then outstanding.
"Lien" means any interest in property securing any obligation owed
to, or a claim by, a Person other than the owner of the property, whether
such interest is based on the common law, statute or contract, and
including but not limited to the lien or security interest arising from a
mortgage, encumbrance, pledge, security agreement, conditional sale or
trust receipt or a lease, consignment or bailment for security purposes.
For the purposes of this Agreement, the Borrower and any Subsidiary shall
be deemed to be the owner of any property which it has acquired or holds
subject to a conditional sale agreement, financing lease, or other
arrangement pursuant to which title to the property has been retained by
or vested in some other Person for security purposes.
20
<PAGE>
"Loan" or "Loans" means any of the Revolving Loans or the Term Loans
made under the Revolving Credit Facility or the Term Loan Facility,
respectively.
"Loan Documents" means this Agreement, the Notes, the Security
Instruments, the Facility Guaranties, the LC Account Agreement, the
Unrestricted Subsidiary Subordination Agreement, the Applications and
Agreements for Letter of Credit, and all other instruments and documents
heretofore or hereafter executed or delivered to or in favor of any Lender
or the Agent in connection with the Loans made and transactions
contemplated under this Agreement, as the same may be amended,
supplemented or replaced from the time to time.
"Material Adverse Change" means any change in the business,
condition (financial or otherwise), operations, performance, properties or
prospects of, or actions, suits, proceedings or investigations affecting
the Borrower or any of its Subsidiaries which has or could reasonably be
expected to have a Material Adverse Effect.
"Material Adverse Effect" means a material adverse effect on (a) the
business, condition (financial or otherwise), operations, performance, or
properties of the Borrower and its Subsidiaries, taken as a whole, (b) the
rights and remedies of the Agent or any Lender under any Loan Document or
the validity or enforceability thereof, in each case taken as a whole, or
(c) the ability of the Borrower or any Subsidiary to pay any amounts owing
under or in respect of the Loan Documents when the same shall be due and
payable.
"Material Foreign Subsidiary" means any Direct Foreign Subsidiary
which (i) has total assets equal to or greater than 5% of Consolidated
Total Assets (calculated as of the most recent fiscal period with respect
to which the Agent shall have received financial statements required to be
delivered pursuant to Sections 9.1(a)(ii) or (b)(ii) (or if prior to
delivery of any financial statements pursuant to such Sections, then
calculated with respect to the Fiscal Year end financial statements
referenced in Section 8.6(a) (the "Required Financial Information")) or
(ii) has net income equal to or greater than 5% of Consolidated Net Income
(calculated for the most recent period for which the Agent has received
the Required Financial Information); provided, however, that
notwithstanding the foregoing, the term "Material Foreign Subsidiaries"
shall mean Direct Foreign Subsidiaries of the Borrower that together have
assets equal to not less than 15% of Consolidated Total Assets (calculated
as described above) and net income of not less than 85% of Consolidated
Net Income (calculated as described above); provided further that if more
than one combination of Direct Foreign Subsidiaries satisfies such
threshold, then those Direct Foreign Subsidiaries so determined by the
Borrower to be "Material Foreign Subsidiaries" shall be specified by the
Borrower;
"Mid-State" means Mid-State Homes, Inc., a Florida corporation and a
wholly owned Subsidiary of the Borrower.
21
<PAGE>
"Mid-State Holdings" means Mid-State Holdings Corporation, a
Delaware corporation and a wholly-owned Subsidiary of the Borrower.
"Moody's" means Moody's Investors Service, Inc.
"Mortgage Accounts" means certain building and installment contracts
and related mortgages and instruments originated by Jim Walter Homes.
"Mortgage-Backed Securities" means, collectively, (i) the Class A3
and Class A4 Mortgage-Backed Notes issued by Mid-State Trust II, a
Delaware business trust established by Mid-State, having an aggregate
principal amount outstanding as of October 1, 1997 of approximately
$366,500,000, (ii) the Asset Backed Notes issued by Mid-State Trust III, a
Delaware business trust established by Mid-State, having an aggregate
principal amount outstanding as of October 1, 1997 of approximately
$102,039,000, (iii) the Asset Backed Notes issued by Mid-State Trust IV, a
Delaware business trust established by Mid-State, having an aggregate
principal amount outstanding as of October 1, 1997 of approximately
$809,078,000 and (iv) the Asset Backed Notes issued by Mid-State Trust VI,
a Delaware business trust established by Mid-State, having an aggregate
principal amount outstanding as of October 1, 1997 of approximately
$424,506,000.
"Mortgage Warehousing Facility" means, collectively, (i) the
mortgage warehousing facility established on or about March 3, 1995 by
Mid-State with Enterprise Funding Corporation, as amended, in an aggregate
amount of up to $400,000,000 (subject to certain availability criteria set
forth therein), pursuant to which Mid-State obtains limited recourse
financing secured by Mortgage Accounts, and (ii) any other mortgage
warehousing facility entered into by Mid-State having substantially the
same terms as the facility described in clause (i) of this definition.
"MSH Trusts" means, collectively, each of the Mid-State Trust II,
Mid-State Trust III, Mid-State Trust IV and Mid-State Trust VI entities
referred to in the definition of "Mortgage-Backed Securities" and
Mid-State Trust V, and any other special purpose entity in which Mid-State
shall own the sole equity or residual beneficial interest created and
operated solely for the purpose of issuing asset-backed securities
permitted by Section 10.4(d)(iii).
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate
is making, or is accruing an obligation to make, contributions or has
made, or been obligated to make, contributions within the preceding six
(6) Fiscal Years.
"NMSI" means NationsBanc Montgomery Securities, Inc. and its
successors.
"Net Cash Advances to Unrestricted Subsidiaries" means, as of any
date of determination thereof, (A) the aggregate outstanding principal
amount of loans and
22
<PAGE>
advances made after the Closing Date by the Borrower or any Restricted
Subsidiary to any of the Unrestricted Subsidiaries less (B) the aggregate
outstanding principal amount of Subordinated Payables arising after the
Closing Date.
"Net Cash Proceeds" means, with respect to any sale, lease, transfer
or other disposition of any property or assets, the aggregate amount of
cash received from time to time (whether as initial consideration or
through payment or disposition of deferred consideration) by or on behalf
of such Person in connection with such transaction after deducting
therefrom only:
(a) brokerage commissions, underwriting fees and discounts,
legal fees, finder's fees and other similar fees and commissions;
(b) the amount of taxes payable in connection with or as a
result of such transaction; provided, however, that, in the case of
taxes that are deductible under this clause (b) but for the fact
that they would not be paid at the time of receipt of such cash,
such Person may deduct an amount equal to the necessary Tax Reserve,
if any, for such transaction;
(c) the amount of the required Holdback Reserve, if any, for
such transaction: and
(d) the amount of any Indebtedness secured by a Lien on such
property or assets that, by the terms of such transaction, is
required to be repaid upon such disposition, in each case to the
extent, but only to the extent, that the amounts so deducted are,
properly attributable to such transaction or to the property and
assets that are the subject thereof.
"Net Issuance Proceeds" means, with respect to any Permitted
Receivables Securitization or the issuance of any permitted Consolidated
Indebtedness, cash payments received therefrom as and when received, net
of all legal, accounting, printing, rating agency, banking, underwriting,
title and recording fees and expenses, commissions, discounts and other
issuance expenses incurred in connection therewith and all taxes required
to be paid or accrued as a consequence of such transaction.
"Notes" means, collectively, the Term Notes and the Revolving Notes.
"Obligations" means the obligations, liabilities and Indebtedness of
the Borrower with respect to (i) the principal and interest on the Loans
as evidenced by the Notes, (ii) the Reimbursement Obligations and
otherwise in respect of the Letters of Credit, (iii) all liabilities of
Borrower to any Lender which arise under a Swap Agreement, and (iii) the
payment and performance of all other monetary obligations, liabilities and
Indebtedness of the Borrower to the Lenders, the Agent or NMSI hereunder,
under any one or more of the other Loan Documents or with respect to the
Loans.
23
<PAGE>
"Outstandings" means, collectively, at any date, the Letter of
Credit Outstandings, Swing Line Outstandings, Term Loan Outstandings and
Revolving Credit Outstandings on such date.
"Participation" means, (i) with respect to any Lender with a
Revolving Credit Commitment (other than the Issuing Bank) and a Letter of
Credit, the extension of credit represented by the participation of such
Lender hereunder in the liability of the Issuing Bank in respect of a
Letter of Credit issued by the Issuing Bank in accordance with the terms
hereof and (ii) with respect to any Lender (other than NationsBank) and a
Swing Line Loan, the extension of credit represented by the participation
of such Lender hereunder in the liability of NationsBank in respect of a
Swing Line Loan made by NationsBank in accordance with the terms hereof.
"PBGC" means the Pension Benefit Guaranty Corporation and any
successor thereto.
"Pension Plan" means any employee pension benefit plan within the
meaning of Section 3(2) of ERISA, other than a Multiemployer Plan, which
is subject to the provisions of Title IV of ERISA or Section 412 of the
Code and which (i) is maintained for employees of the Borrower or any of
its ERISA Affiliates or is assumed by the Borrower or any of its ERISA
Affiliates in connection with any Acquisition or (ii) has at any time been
maintained for the employees of the Borrower or any current or former
ERISA Affiliate and, with respect to employee pension benefit plans of any
former ERISA Affiliate, the Borrower or any Restricted Subsidiary has or
retains any obligations or liability, absolute or contingent, for funding
or other performance obligations imposed by ERISA or other applicable law.
"Permitted Receivables Securitization" means limited recourse sales
and assignments of accounts receivable of the Borrower or its Restricted
Subsidiaries to one or more special purpose entities, in connection with
the issuance of obligations by such special purpose entities secured by
such accounts, the proceeds of the issuance of which obligations shall be
made available to the Borrower or its Restricted Subsidiaries at such
rates of advance, and the obligations issued by such special purpose
entities shall be in such amount or amounts, bear such rate or rates of
interest, and be subject to such other terms and conditions, all as shall
be acceptable to the Agent and the Required Lenders.
"Person" means an individual, partnership, corporation, trust,
unincorporated organization, association, joint venture or a government or
agency or political subdivision thereof.
"Pledged Stock" has the meaning given to such term in the Stock
Pledge Agreements.
24
<PAGE>
"Pro Forma Financial Statements" means (i) the consolidated balance
sheet and income statement as at May 31, 1997 in the case of the Borrower
and its Restricted Subsidiaries, and September 30, 1996, in the case of
AIMCOR and its subsidiaries as of such date, and (ii) the combined
projected balance sheets and income statements of the Borrower and its
Restricted Subsidiaries, including AIMCOR and its subsidiaries as of such
date, for Fiscal Years ended May 31, 1998 through 2002, which shall be
furnished to the Agent and the Lenders prior to the Closing Date.
"Prime Rate" means the rate of interest per annum announced publicly
by the Agent as its prime rate from time to time. The Prime Rate is not
necessarily the best or the lowest rate of interest offered by the Agent.
"Principal Office" means the office of the Agent at NationsBank,
National Association, Independence Center, 15th Floor, NC1 001-15-04,
Charlotte, North Carolina 28255, Attention: Agency Services, or such other
office and address as the Agent may from time to time designate.
"Ratable Reduction of Term Loan Facility" means the application of
amounts to Term Loan Outstandings in respect of the Term Loan pro rata
among the Lenders holding such Obligations.
"Rate Hedging Obligations" means any and all obligations of the
Borrower or any Subsidiary, whether absolute or contingent and howsoever
and whensoever created, arising, evidenced or acquired (including all
renewals, extensions and modifications thereof and substitutions
therefor), under (i) any and all agreements, devices or arrangements
designed to protect at least one of the parties thereto from the
fluctuations of interest rates, exchange rates or forward rates applicable
to such party's assets, liabilities or exchange transactions, including,
but not limited to, Dollar-denominated or cross-currency interest rate
exchange agreements, forward currency exchange agreements, interest rate
cap or collar protection agreements, forward rate currency or interest
rate options, puts, warrants, commodity options or future contracts or
similar transactions, and those commonly known as interest rate "swap"
agreements; and (ii) any and all cancellations, buybacks, reversals,
terminations or assignments of any of the foregoing.
"Related Acquisition' means the acquisition by the Borrower of
AIMCOR in accordance with the terms of the Related Acquisition Agreement.
"Related Acquisition Agreement" means that certain Stock Purchase
Agreement dated as of September 19, 1997 by the among the stockholders of
AIMCOR, certain stockholders of AIMCOR Enterprises International, Inc.,
AIMCOR (Germany) Limited Partnership, AIMCOR (Luxembourg) Limited
Partnership, the Borrower and all schedules, annexes and exhibits thereto,
as the same may be amended or supplemented from time to time.
25
<PAGE>
"Regulation D" means Regulation D of the Board as the same may be
amended or supplemented from time to time.
"Regulatory Change" means any change effective after the Closing
Date in United States federal or state laws or regulations (including
Regulation D and capital adequacy regulations) or foreign laws or
regulations or the adoption or making after such date of any
interpretations, directives or requests applying to a class of banks,
which includes any of the Lenders, under any United States federal or
state or foreign laws or regulations (whether or not having the force of
law) by any court or governmental or monetary authority charged with the
interpretation or administration thereof or compliance by any Lender with
any request or directive regarding capital adequacy, including those
relating to "highly leveraged transactions," whether or not having the
force of law, and whether or not failure to comply therewith would be
unlawful and whether or not published or proposed prior to the date
hereof.
"Reimbursement Obligation" shall mean at any time, the obligation of
the Borrower with respect to any Letter of Credit to reimburse the Issuing
Bank and the Lenders to the extent of their respective Participations
(including by the receipt by the Issuing Bank of proceeds of Loans
pursuant to Section 4.2) for amounts theretofore paid by the Issuing Bank
pursuant to a drawing under such Letter of Credit.
"Required Lenders" means, as of any date, Lenders on such date
having Credit Exposures (as defined below) aggregating in excess of 50% of
the aggregate Credit Exposures of all the Lenders on such date. For
purposes of the preceding sentence, the amount of the "Credit Exposure" of
each Lender shall be equal to the aggregate principal amount of the
Revolving Loans owing to such Lender plus the aggregate unutilized amounts
of such Lender's Revolving Credit Commitment (without regard to any Swing
Line Outstandings) plus the amount of such Lender's Applicable Commitment
Percentage of Letter of Credit Outstandings plus the amount of such
Lender's Applicable Commitment Percentage of the Term Loan Outstandings;
provided that, (i) if any Lender with a Revolving Credit Commitment shall
have failed to pay to the Issuing Bank its Applicable Commitment
Percentage of any drawing under any Letter of Credit resulting in an
outstanding Reimbursement Obligation, such Lender's Credit Exposure
attributable to Letters of Credit and Reimbursement Obligations shall be
deemed to be held by the Issuing Bank for purposes of this definition and
(ii) if any Lender with a Revolving Credit Commitment shall have failed to
pay to NationsBank its Applicable Commitment Percentage of any Swing Line
Loan, such Lender's Credit Exposure equal to its Applicable Commitment
Percentage of all Swing Line Outstandings shall be deemed to be held by
NationsBank for purposes of this definition.
"Required Principal Payments" means, for any period, any regularly
scheduled principal payment or any required prepayment or redemption of
Consolidated Indebtedness, excluding Mandatory Prepayments pursuant to
Section 2.7, of the Borrower
26
<PAGE>
and its Restricted Subsidiaries during such period, but excluding any such
payments to the extent refinanced through the incurrence of additional
Indebtedness under Section 10.4(m).
"Reserve Amount" means, at any date, the aggregate amount of
Holdback Reserves and Tax Reserves at such date.
"Reserve Reduction Amount" means the amount of each reduction in any
Holdback Reserve or any Tax Reserve in accordance with the respective
provisos in the definitions of "Holdback Reserve" and "Tax Reserve".
"Restricted Payment" means (a) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of
Borrower or any of its Subsidiaries (other than those payable or
distributable solely to the Borrower or to a Subsidiary of the Borrower by
its Subsidiary) now or hereafter outstanding, except a dividend payable
solely in shares of a class of stock to the holders of that class; (b) any
redemption, conversion, exchange, retirement or similar payment, purchase
or other acquisition for value, direct or indirect, of any shares of any
class of stock of Borrower or any of its Subsidiaries (other than those
payable or distributable to the Borrower (or to a Subsidiary by its
Subsidiary) pro rata with any other shareholders of the applicable
Subsidiary) now or hereafter outstanding; and (c) any payment made to
retire, or to obtain the surrender of, any outstanding warrants, options
or other rights to acquire shares of any class of stock of Borrower or any
of its Subsidiaries now or hereafter outstanding; provided, however,
"Restricted Payments" shall not include (i) amounts contributed (and
accounted for as compensation expense) by the Credit Parties for the
purchase in the open market for the account of participating employees of
capital stock of the Borrower pursuant to an employee stock purchase plan
more particularly described on Schedule 1.1B, and (ii) capital stock of
the Borrower purchased in the open market for the benefit of directors of
the Borrower in payment of directors' fees that the directors elected to
have deferred and invested in capital stock of the Borrower in lieu of
cash.
"Restricted Subsidiaries" means all Subsidiaries of the Borrower
other than Mid-State Holdings, Mid-State, Cardem, MSH Trusts and Walter
International Sales, Inc.
"Revolving Credit Commitment" means, with respect to each Lender,
the obligation of such Lender to make Revolving Loans to the Borrower and
to purchase Participations up to an aggregate principal amount at any one
time outstanding equal to such Lender's Applicable Commitment Percentage
of the Total Revolving Credit Commitment.
"Revolving Credit Facility" means the facility described in Article
III hereof providing for Loans to the Borrower by the Lenders and Swing
Line Loans to the Borrower by NationsBank in the aggregate principal
amount of the Total Revolving Credit Commitment.
27
<PAGE>
"Revolving Credit Outstandings" means, as of any date of
determination, the aggregate principal amount of all Revolving Loans then
outstanding.
"Revolving Credit Termination Date" means (i) the Stated Revolving
Credit Termination Date or (ii) such earlier date of termination of
Lenders' obligations pursuant to Section 11.1 upon the occurrence of an
Event of Default, or (iii) such date as the Borrower may voluntarily and
permanently terminate the Revolving Credit Facility by payment in full of
all Revolving Credit Outstandings, Swing Line Outstandings and Letter of
Credit Outstandings and cancellation of all Letters of Credit.
"Revolving Loan" means any borrowing pursuant to an Advance under
the Revolving Credit Facility in accordance with Article III.
"Revolving Notes" means, collectively, the promissory notes of the
Borrower evidencing Revolving Loans executed and delivered to the Lenders
as provided in Section 3.4 substantially in the form of Exhibit E-1, with
appropriate insertions as to amounts, dates and names of Lenders.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill Companies, Inc.
"Security Instruments" means, collectively, the Stock Pledge
Agreements, and all other agreements, instruments and other documents,
whether now existing or hereafter in effect, pursuant to which the
Borrower or any Subsidiary shall grant or convey to the Agent or the
Lenders a Lien in property as security for all or any portion of the
Obligations, as any of them may be amended, modified or supplemented.
"Segment" means a portion of a Term Loan (or all thereof) with
respect to which a particular interest rate is (or is proposed to be)
applicable.
"Single Employer Plan" means any employee pension benefit plan
covered by Title IV of ERISA in respect of which the Borrower or any
Subsidiary is an "employer" as described in Section 4001(b) of ERISA and
which is not a Multiemployer Plan.
"Solvent" means, when used with respect to any Person, that at the
time of determination:
(i) the fair value of its assets (both at fair valuation and
at present fair saleable value on an orderly basis) is in excess of
the total amount of its liabilities, including Contingent
Obligations;
(ii) it is then able and expects to be able to pay its debts
as they mature; and
28
<PAGE>
(iii) it has capital sufficient to carry on its business as
conducted and as proposed to be conducted.
"Spot Rate of Exchange" means, in determining the Dollar Value of a
specified Alternative Currency amount as of any date, the spot exchange
rate determined by the Agent in accordance with its usual procedures for
the purchase by the Agent of Dollars with such Alternative Currency at
approximately 10:00 A.M., Charlotte Time on the Business Day that is two
(2) Business Days prior to such date.
"Standby Letters of Credit" means, collectively, the standby letters
of credit issued by the Issuing Bank under the Letter of Credit Facility
for the account of the Borrower in favor of a Person advancing credit or
securing an obligation on behalf of the Borrower or a Restricted
Subsidiary.
"Stated Revolving Credit Termination Date" means October 15, 2003.
"Stock Pledge Agreement" means, collectively (or individually as the
context may indicate), (i) each of the Stock Pledge Agreements dated as of
the date hereof between the Borrower and the Agent or between any
Restricted Subsidiary and the Agent for the benefit of the Agent and the
Lenders, and (ii) any additional Stock Pledge Agreement delivered to the
Agent pursuant to Section 9.19, as hereafter amended, modified or
supplemented.
"Stockholders Agreement" means the Stockholders Agreement dated on
or about February 27, 1995 among the Borrower, the Equity Investors and
the other holders of the common stock of the Borrower from time to time,
as such agreement may be amended, supplemented or otherwise modified
hereafter from time to time in accordance with the terms hereof and
thereof.
"Subordinated Payables" means amounts payable by the Borrower or any
Restricted Subsidiary to either of the Unrestricted Subsidiaries
representing advances to the Borrower or its Restricted Subsidiaries, the
repayment of which is subordinated to the payment of the Obligations
pursuant to the Unrestricted Subsidiary Subordination Agreement.
"Subsidiary" means any corporation or other entity in which more
than 50% of its outstanding voting stock or more than 50% of all equity
interests is owned directly or indirectly by the Borrower and/or by one or
more of the Borrower's Subsidiaries.
"Swap Agreement" means one or more agreements between the Borrower
and any Lender with respect to Indebtedness evidenced by any or all of the
Notes, on terms mutually acceptable to Borrower and such Lender, which
agreements create Rate Hedging Obligations.
29
<PAGE>
"Swing Line" means the revolving line of credit established by
NationsBank in favor of the Borrower pursuant to Section 3.13.
"Swing Line Loans" means loans made by NationsBank to the Borrower
pursuant to Section 3.13.
"Swing Line Outstandings" means, as of any date of determination,
the aggregate principal amount of all Swing Line Loans then outstanding,
not to exceed $25,000,000.
"Tax Reserve" means, with respect to any Person for any sale, lease,
transfer or other disposition of any property or assets, an amount equal
to the amount properly reserved by such Person in accordance with GAAP as
such Person's reasonable estimate of taxes to be paid by such Person
solely as a result of such sale, lease, transfer or disposition (computed
on the basis of statutory rates in effect at the time of such sale, lease,
transfer or disposition after giving effect to deductions, credit
carryforwards, carrybacks and similar items of such Person or such other
amount as such Person estimates in good faith and with the concurrence of
the Agent) other than any taxes for which such Person or any of its
Subsidiaries is indemnified; provided that the amount of each Tax Reserve
shall be (i) reduced on each Business Day that the Borrower shall give
notice to the Agent that the tax liabilities giving rise to such Tax
Reserve have been paid, satisfied or extinguished in an amount specified
in such notice, by such amount, and (ii) permanently reduced to zero on
the date on which the tax return covering the transaction giving rise to
the Tax Reserve is required to be filed.
"Term Loan" means the loan made pursuant to the Term Loan Facility
in accordance with Section 2.1(a).
"Term Loan Commitment" means, with respect to each Lender, the
obligation of such Lender to make the Term Loan to the Borrower in a
principal amount equal to such Lender's Applicable Commitment Percentage
of the Total Term Loan Commitment as set forth on Exhibit A.
"Term Loan Facility" means the facility described in Article II
providing for the Term Loan to the Borrower by the Lenders in the original
principal amount of $450,000,000.
"Term Loan Maturity Date" means October 15, 2003.
"Term Loan Outstandings" means, as of any date of determination, the
aggregate principal amount of the Term Loans then outstanding and all
interest accrued thereon.
"Term Loan Termination Date" means, with respect to the Term Loan,
(i) the Term Loan Maturity Date, or (ii) such earlier date of termination
of Lenders' obligations pursuant to Section 11.1 upon the occurrence of an
Event of Default, or (iii) such date as
30
<PAGE>
the Borrower may voluntarily and permanently terminate the Term Loan
Facility by payment in full of all Obligations incurred in connection with
such Term Loan.
"Term Notes" means, collectively, the promissory notes of the
Borrower evidencing Term Loan executed and delivered to the Lenders as
provided in Section 2.8 substantially in the form of Exhibit F-2, with
appropriate insertions as to amounts, dates and names of Lenders.
"Termination Event" means: (i) a "Reportable Event" described in
Section 4043 of ERISA and the regulations issued thereunder (unless the
notice requirement has been waived by applicable regulation); or (ii) the
withdrawal of the Borrower or any ERISA Affiliate from a Pension Plan
during a plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA or was deemed such under Section 4068(f) of
ERISA; or (iii) the termination of a Pension Plan, the filing of a notice
of intent to terminate a Pension Plan or the treatment of a Pension Plan
amendment as a termination under Section 4041 of ERISA; or (iv) the
institution of proceedings to terminate a Pension Plan by the PBGC; or (v)
any other event or condition which would constitute grounds under Section
4042(a) of ERISA for the termination of, or the appointment of a trustee
to administer, any Pension Plan; or (vi) the partial or complete
withdrawal of the Borrower or any ERISA Affiliate from a Multiemployer
Plan; or (vii) the imposition of a Lien pursuant to Section 412 of the
Code or Section 302 of ERISA; or (viii) any event or condition which
results in the reorganization or insolvency of a Multiemployer Plan under
Section 4241 or Section 4245 of ERISA, respectively; or (ix) any event or
condition which results in the termination of a Multiemployer Plan under
Section 4041A of ERISA or the institution by the PBGC of proceedings to
terminate a Multiemployer Plan under Section 4042 of ERISA.
"Total Letter of Credit Commitment" means an amount not to exceed
$75,000,000.
"Total Revolving Credit Commitment" means a principal amount equal
to $350,000,000, as reduced from time to time in accordance with Section
3.7.
"Total Term Loan Commitment" means a principal amount equal to
$450,000,000.
"Unrestricted Subsidiaries" means Cardem, Mid-State Holdings,
Mid-State and the MSH Trusts.
"Unrestricted Subsidiary Subordination Agreement" means the
Subordination Agreement of even date herewith among the Unrestricted
Subsidiaries and the Agent, as the same may be amended, modified or
supplemented.
"Voting Stock" means shares of capital stock issued by a
corporation, or equivalent interests in any other Person, the holders of
which are ordinarily, in the absence of
31
<PAGE>
contingencies, entitled to vote for the election of directors (or persons
performing similar functions) of such Person, even if the right so to vote
has been suspended by the happening of such a contingency.
1.2. Rules of Interpretation.
(a) Each term defined in Article 1 or 9 of the Florida Uniform
Commercial Code shall have the meaning given therein unless otherwise
defined herein, except to the extent that the Uniform Commercial Code of
another jurisdiction is controlling, in which case such terms shall have
the meaning given in the Uniform Commercial Code of the applicable
jurisdiction.
(b) The headings, subheadings and table of contents used herein or
in any other Loan Document are solely for convenience of reference and
shall not constitute a part of any such document or affect the meaning,
construction or effect of any provision thereof.
(c) Except as otherwise expressly provided, references herein to
articles, sections, paragraphs, clauses, annexes, appendices, exhibits and
schedules are references to articles, sections, paragraphs, clauses,
annexes, appendices, exhibits and schedules in or to this Agreement.
(d) All definitions set forth herein or in any other Loan Document
shall apply to the singular as well as the plural form of such defined
term, and all references to the masculine gender shall include reference
to the feminine or neuter gender, and vice versa, as the context may
require.
(e) When used herein or in any other Loan Document, words such as
"hereunder", "hereto", "hereof" and "herein" and other words of like
import shall, unless the context clearly indicates to the contrary, refer
to the whole of the applicable document and not to any particular article,
section, subsection, paragraph or clause thereof.
(f) References to "including" means including without limiting the
generality of any description preceding such term, and for purposes hereof
the rule of ejusdem generis shall not be applicable to limit a general
statement, followed by or referable to an enumeration of specific matters,
to matters similar to those specifically mentioned.
(g) All dates and times of day specified herein shall refer to such
dates and times at Charlotte, North Carolina.
(h) Each of the parties to the Loan Documents and their counsel have
reviewed and revised, or requested (or had the opportunity to request)
revisions to, the Loan Documents, and any rule of construction that
ambiguities are to be resolved against the drafting party shall be
inapplicable in the construing and interpretation of the Loan Documents
and all exhibits, schedules and appendices thereto.
32
<PAGE>
(i) All reference to any agreement or document as amended, modified
or supplemented, or words of similar effect, shall mean such document or
agreement, as the case may be, as amended, modified or supplemented from
time to time only as and to the extent permitted therein and in the Loan
Documents.
1.3. Accounting Principles.
(a) Except as otherwise provided in this Agreement, all computations
and determinations as to accounting or financial matters and all financial
statements to be delivered pursuant to this Agreement shall be made and
prepared in accordance with GAAP (including principles of consolidation
where appropriate applied on a Consistent Basis), and all accounting or
financial terms shall have the meanings ascribed to such terms by GAAP.
(b) If there shall occur any change in GAAP after the Closing Date,
the Borrower shall give written notice thereof to the Agent and the
Lenders promptly, and in any event within fifteen (15) days after the
effective date of any such change in GAAP, which notice shall be effective
upon receipt and shall (i) describe in detail the nature of such required
change and its impact on (X) the financial statements required to be
delivered pursuant to Section 9.1 hereof, and (Y) the effect on
calculation of any financial covenants contained herein or determination
of compliance with any other terms or conditions hereof insofar as they
relate to financial or accounting matters, and (ii) be accompanied by a
covenant compliance certificate in the form of Exhibit J signed by an
Authorized Representative and showing the computations therein provided,
after giving effect to the required change in GAAP, for the same fiscal
period of the Borrower and its Subsidiaries for which a compliance
certificate required under Section 9.1(a)(ii) or 9.1(b)(ii), as the case
may be, has most recently theretofore been delivered.
(c) In the event that, in the judgment of the Agent, the change in
GAAP shall materially affect the calculation of any financial covenant or
other determination of compliance with any term or condition contained
herein insofar as it relates to financial or accounting matters so as to
distort the intended economic effect of any such covenant, term or
condition, then the provisions of GAAP without giving effect to such
change shall continue to be utilized for all purposes of such covenants,
terms and provisions unless the Required Lenders shall otherwise consent.
33
<PAGE>
ARTICLE II
The Term Loan
2.1. Term Loan. (a) Subject to the terms and conditions of this Agreement,
each Lender severally agrees to make (i) an Advance of the Term Loan to the
Borrower on the Closing Date in an amount equal to its Applicable Commitment
Percentage of the Total Term Loan Commitment. The principal amount of each
Segment of the Term Loans outstanding hereunder from time to time shall bear
interest, at the Borrower's election, at an interest rate per annum equal to the
Base Rate or the Eurodollar Rate; provided, however, that (x) no Eurodollar Rate
Segment shall have an Interest Period that extends beyond the Term Loan Maturity
Date, (y) each Eurodollar Rate Segment of each Term Loan shall be in the minimum
amount of $5,000,000 and if greater, in an integral multiple of $1,000,000, and
(z) each Eurodollar Rate Segment may, subject to the provisions of Sections 2.4,
2.6 and 2.7 and Article XI, be repaid only on the last day of the Interest
Period with respect thereto. No amount of any Term Loan repaid or prepaid by the
Borrower may be reborrowed hereunder, and no subsequent Advances of Term Loan
amounts shall be made by any Lender after the initial such Advance.
(b) Interest relating to the Base Rate Loan shall be computed on the
basis of a year of 365/6 days and interest for the Eurodollar Rate Loan and all
fees shall be computed on the basis of a year of 360 days, all calculated for
the actual number of days elapsed.
2.2. Term Loan Advance. Not later than 10:00 A.M. on the Closing Date,
each Lender shall, pursuant to the terms and subject to the conditions of this
Agreement, make the amount of the Term Loan Advances to be made by it on such
day available by wire transfer to the Agent in the amount of its Term Loan
Commitment. Such wire transfer shall be directed to the Agent at the Principal
Office and shall be in the form of immediately available, freely transferable
Dollars. The amount so received by the Agent shall, subject to the terms and
conditions of this Agreement, be made available to the Borrower by delivery of
the proceeds thereof to the Borrower's Account or otherwise as shall be directed
by the Authorized Representative and reasonably acceptable to the Agent.
2.3. Payment of Principal. (a) The principal amount of the Term Loan shall
be repaid in six (6) consecutive annual installments on the dates and in the
amounts (subject to the provisions of Section 2.6 and 2.7) set forth below:
Date Amount
---- ------
October 15, 1998 $ 25,000,000
October 15, 1999 $ 50,000,000
October 15, 2000 $ 75,000,000
October 15, 2001 $ 75,000,000
October 15, 2002 $100,000,000
October 15, 2003 $125,000,000
34
<PAGE>
(b) Notwithstanding the foregoing, the entire amount of Term Loan
Outstandings shall be due and payable in full on the Term Loan Termination Date.
2.4. Payment of Interest. The Borrower shall pay interest on the
outstanding and unpaid principal amount of each Segment of the Term Loan
commencing on the date of determination of the interest rate applicable to such
Segment until such Segment shall be due at the applicable Base Rate or
Eurodollar Rate, as the case may be, as designated by the Borrower in the
applicable Interest Rate Selection Notice or as otherwise provided hereunder.
Interest for the Base Rate Loan shall be computed on the basis of a year of
365/6 days and interest for Eurodollar Rate Loan shall be computed on the basis
of a year of 360 days, all calculated for actual days elapsed. Interest on each
Segment of the Term Loan shall be paid on the earlier of (a) in the case of any
Base Rate Segment, quarterly in arrears on the last Business Day of each April,
July, October and January, commencing on October 31, 1997, until the Term Loan
Maturity Date, or if earlier the Term Loan Termination Date, on which date the
entire principal amount of and all accrued interest on the Term Loan shall be
paid in full, (b) in the case of any Eurodollar Rate Segment, on the last day of
the applicable Interest Period for such Segment and if such Interest Period
extends for more than three (3) months, at intervals of three (3) months after
the first day of such Interest Period, and (c) upon payment in full of the Term
Loan; provided, however, that if any amount due under this Agreement shall not
be paid when due (at maturity, by acceleration or otherwise), all amounts
outstanding hereunder shall bear interest thereafter at the Default Rate.
2.5. Manner of Payment. (a) Each payment of principal (including any
prepayment) and payment of interest and fees, and any other amount required to
be paid to the Lenders with respect to the Term Loan, shall be made to the Agent
at the Principal Office for the account of each Lender in Dollars in immediately
available funds on or before 3:00 P.M. on the date such payment is due. The
Agent may, upon the request of the Borrower, but shall not be obligated to,
debit the amount of such payment from any one or more ordinary deposit accounts
of the Borrower with the Agent. The Borrower shall give the Agent telefacsimile
notice of any intended payment of principal or interest prior to 12:00 Noon on
the date of such payment.
(b) The Agent shall deem any payment made by or on behalf of the Borrower
that is not made both in Dollars in immediately available funds and prior to
3:00 P.M. on the date such payment is to be made to be a non-conforming payment.
Any such non-conforming payment shall not be deemed to be received by the Agent
until the later of (i) the time such funds become available funds and (ii) the
next Business Day. Any non-conforming payment may, at the election of the Agent,
constitute or become a Default or Event of Default. Interest shall continue to
accrue on any principal as to which a non-conforming payment is made until the
later of (i) the date such funds become available funds or (ii) the next
Business Day at the Default Rate, from the date such amount was due and payable.
(c) In the event that any payment hereunder or under the Term Notes
becomes due and payable on a day other than a Business Day, then such due date
shall be extended to the next succeeding Business Day unless provided otherwise
under the definition of "Interest Period"; provided, however, that interest
shall continue to accrue during the period of any such extension;
35
<PAGE>
and provided further, however, that in no event shall any such due date be
extended beyond the Term Loan Termination Date.
2.6. Optional Prepayments. The Borrower may prepay the Term Loan, in
accordance with a Ratable Reduction of the Term Loan Facility, in whole or in
part from time to time on any Business Day, without penalty or premium, upon not
less than three (3) Business Days' prior written notice (effective upon receipt)
to the Agent, which notice shall be irrevocable. Any prepayment, whether a Base
Rate Segment or a Eurodollar Rate Segment, shall be made at a prepayment price
equal to (i) the amount of principal to be prepaid, plus (ii) all accrued and
unpaid interest on the amount so prepaid, to the date of prepayment. All
prepayments under this Section 2.6 shall be made in the minimum principal amount
of $5,000,000 or any integral multiple of $1,000,000 in excess thereof (or in
the entire remaining principal balance of the Term Loan), and all such
prepayments of principal shall be applied to installments of principal in such
order as the Borrower shall direct. No such prepayment shall result in the
payment of any Eurodollar Rate Segment other than on the last day of the
Interest Period of such Segment unless such prepayment is accompanied by amounts
due, if any, under Section 6.4. No payment under this Section 2.6 shall reduce
or excuse any payment required under Section 2.7.
2.7. Mandatory Prepayments. (a) In addition to the required payments of
principal of the Term Loan set forth in Section 2.3 and any optional payments of
principal of the Loans effected under Section 2.6 or Section 3.7(a), the
Borrower shall make the following required prepayments of the Term Loan
Facility, each such payment to be made to the Agent for the benefit of the
Lenders within the time period specified below:
the Borrower shall make prepayments of the Term Loan Facility by
application of an amount equal to one hundred percent (100%) of the Net
Cash Proceeds (including each Reserve Reduction Amount other than those
resulting from the payment in cash or other property by the Borrower or
any Restricted Subsidiary to pay or satisfy a liability giving rise to any
related Holdback Reserve or Tax Reserve) or Net Issuance Proceeds, as the
case may be, in each case to the extent not invested in the business of
the Borrower and its Subsidiaries within 270 days after receipt thereof,
of (X) all sales, transfers or other dispositions of property or assets of
the Borrower or any Restricted Subsidiary in accordance with the
provisions of Section 10.5(c) and 10.5(e)(ii) in which the aggregate
consideration received in such transactions (on a cumulative basis from
the Closing Date) exceeds $20,000,000 and (without limiting the obligation
to make prepayments as provided herein) the cumulative amount of such Net
Cash Proceeds from such dispositions since the most recent preceding
prepayment under this Section 2.7(a)(i), if any, shall equal or exceed
$5,000,000, (Y) each Permitted Receivables Securitization, or (Z) each
issuance of Consolidated Indebtedness permitted to be issued hereunder
(other than Indebtedness described in Section 10.4), each such prepayment
to be made within ten (10) Business Days of receipt of such proceeds and
upon not less than five (5) Business Days' written notice to the Agent,
which notice shall include a certificate of an Authorized Representative
setting forth in reasonable detail the calculations utilized in computing
the amount of such prepayment.
36
<PAGE>
(b) Each mandatory prepayment of the Term Loan pursuant to this Section
2.7 shall be applied to reduce remaining installments of principal otherwise
payable hereunder pro rata. Each pro rata application of prepayments to
installments of the Term Loan shall give effect to prior optional or mandatory
prepayments.
(c) The Agent shall give each Lender, within one (1) Business Day,
telefacsimile notice of each notice of each prepayment described in this Section
2.7. Any prepayment of a Eurodollar Rate Segment pursuant to this Section 2.7
other than on the last day of an Interest Period shall be accompanied by the
additional payment, if any, required by Section 6.4.
2.8. Term Notes. The portion of each of the Term Loan made by each Lender
shall be evidenced by the Term Note payable to the order of such Lender in the
respective amounts of its Term Loan Commitment, which Term Notes shall be dated
the Closing Date or a later date pursuant to an Assignment and Acceptance and
shall be duly completed, executed and delivered by the Borrower.
2.9. Use of Proceeds. The proceeds of the additional amount of the Term
Loan hereunder shall be used by the Borrower exclusively to fund the Acquisition
of AIMCOR.
2.10. Interest Periods. The Term Loan shall be, at the option of the
Borrower specified in an Interest Rate Selection Notice, comprised of either
Eurodollar Rate Segments or Base Rate Segments. Eurodollar Rate Segments and
Base Rate Segments may be outstanding at the same time, provided, however, there
shall not be outstanding at any one time Eurodollar Rate Loans (including
Revolving Loans) and Eurodollar Rate Segments having more than ten (10)
different Interest Periods. If the Agent does not receive an Interest Rate
Selection Notice giving notice of election of the duration of an Interest Period
or of conversion of any Segment to or continuation of a Segment as a Eurodollar
Rate Segment by the time prescribed by Section 2.11, the Borrower shall be
deemed to have elected to convert such Segment to (or continue such Segment as)
a Base Rate Segment until the Borrower notifies the Agent in accordance with
Section 2.11.
2.11. Conversions and Elections of Subsequent Interest Periods. Provided
that no Default or Event of Default shall have occurred and be continuing and
subject to the limitations set forth below and in Article VI, the Borrower may:
(a) upon delivery (effective upon receipt) of a properly completed
Interest Rate Selection Notice to the Agent on or before 10:30 A.M. on any
Business Day, convert any Eurodollar Rate Segment to a Base Rate Segment
on the last day of the Interest Period for such Eurodollar Rate Segment;
and
(b) upon delivery (effective upon receipt) of a properly completed
Interest Rate Selection Notice to the Agent on or before 10:30 A.M. three
(3) Business Days' prior to the date of such conversion:
37
<PAGE>
(i) elect a subsequent Interest Period for any Eurodollar Rate
Segment to begin on the last day of the then current Interest Period
for such Eurodollar Rate Segment; and
(ii) convert any Base Rate Segment to a Eurodollar Rate
Segment on any Business Day.
In addition, provided that the Borrower shall have given the Agent notice
of its request to obtain Eurodollar Rate Loans and Segments at the Closing Date,
by delivery (effective upon receipt) no later than 10:00 A.M. two Business Days
prior to the Closing Date of (i) an Interest Rate Selection Notice therefor,
together with (ii) the Borrower's written acknowledgment that the provisions of
Article VI hereof shall apply to any failure of the Borrower to borrow on the
Closing Date any or all of the amounts specified in such Interest Rate Selection
Notice, then upon the making of Loans as of the Closing Date such Loans may be
effected as Eurodollar Rate Loans or Eurodollar Rate Segments, as the case may
be, in accordance with such Interest Rate Selection Notice.
Each conversion pursuant to this Section 2.11 shall be subject to the
limitations on Eurodollar Rate Loans set forth in the definition of "Interest
Period" herein and in Sections 2.1, 2.10 and Article VI. The Agent shall give
written notice to each Lender of such notice of conversion prior to 3:00 P.M. on
the day such notice of election or conversion is received.
2.12. Non-Conforming Payments. (a) Each payment of principal (including
any prepayment) and payment of interest and fees, and any other amount required
to be paid to the Lenders with respect to the Term Loan, shall be made to the
Agent at the Principal Office, for the account of each Lender, in Dollars and in
immediately available funds before 3:00 P.M. on the date such payment is due.
The Agent may, but shall not be obligated to, debit the amount of any such
payment which is not made by such time to any ordinary deposit account, if any,
of the Borrower with the Agent.
(b) The Agent shall deem any payment made by or on behalf of the Borrower
hereunder that is not made both in Dollars and in immediately available funds
and prior to 3:00 P.M. to be a non-conforming payment. Any such payment shall
not be deemed to be received by the Agent until the later of (i) the time such
funds become available funds and (ii) the next Business Day. Any non-conforming
payment may constitute or become a Default or Event of Default. Interest shall
continue to accrue on any principal as to which a non-conforming payment is made
until the later of (x) the date such funds become available funds or (y) the
next Business Day at the respective rates of interest per annum specified in the
proviso to Section 2.4 regarding late payments of interest, from the date such
amount was due and payable.
2.13. Pro Rata Payments. Except as otherwise provided herein, (a) each
payment on account of the principal of and interest on the Term Loan shall be
made to the Agent for the account of the Lenders pro rata based on their
Applicable Commitment Percentages of the Term Loan, (b) all payments to be made
by the Borrower for the account of each of the Lenders on
38
<PAGE>
account of principal, interest and fees, shall be made without diminution,
set-off, recoupment or counterclaim, and (c) the Agent will promptly distribute
to the Lenders in immediately available funds payments received in fully
collected, immediately available funds from the Borrower.
39
<PAGE>
ARTICLE III
The Revolving Credit Facility
3.1. Revolving Loans.
(a) Commitment. Subject to the terms and conditions of this
Agreement, each Lender severally agrees to make Advances to the Borrower under
the Revolving Credit Facility from time to time from the Closing Date until the
Revolving Credit Termination Date on a pro rata basis as to the total borrowing
requested by the Borrower on any day determined by such Lender's Applicable
Commitment Percentage up to but not exceeding the Revolving Credit Commitment of
such Lender, provided, however, that the Lenders will not be required and shall
have no obligation to make any such Advance (i) so long as a Default or an Event
of Default has occurred and is continuing or (ii) if the Agent has accelerated
the maturity of any of the Notes as a result of an Event of Default; provided
further, however, that immediately after giving effect to each such Advance, the
principal amount of Revolving Credit Outstandings plus the sum of Letter of
Credit Outstandings, Swing Line Outstandings and Reserve Amount shall not exceed
the Total Revolving Credit Commitment. Within such limits, the Borrower may
borrow, repay and reborrow under the Revolving Credit Facility on a Business Day
from the Closing Date until, but (as to borrowings and reborrowings) not
including, the Revolving Credit Termination Date; provided, however, that (y) no
Revolving Loan that is a Eurodollar Rate Loan shall be made which has an
Interest Period that extends beyond the Stated Revolving Credit Termination Date
and (z) each Revolving Loan that is a Eurodollar Rate Loan may, subject to the
provisions of Section 3.7, be repaid only on the last day of the Interest Period
with respect thereto unless such payment is accompanied by the additional
payment, if any, required by Section 6.4.
(b) Amounts. Except as otherwise permitted by the Lenders from time
to time, the aggregate unpaid principal amount of the Revolving Credit
Outstandings plus the sum of Letter of Credit Outstandings, Swing Line
Outstandings and Reserve Amount shall not exceed at any time the Total Revolving
Credit Commitment, and, in the event there shall be outstanding any such excess,
the Borrower shall immediately make such payments and prepayments as shall be
necessary to comply with this restriction. Each Revolving Loan hereunder, other
than Base Rate Refunding Loans, and each conversion under Section 3.8, shall be
in an amount of at least $5,000,000, and, if greater than $5,000,000, an
integral multiple of $1,000,000.
(c) Advances. (i) An Authorized Representative shall give the Agent
(1) at least three (3) Business Days' irrevocable written notice by
telefacsimile transmission of a Borrowing Notice or Interest Rate Selection
Notice (as applicable) with appropriate insertions, effective upon receipt, of
each Revolving Loan that is a Eurodollar Rate Loan (whether representing an
additional borrowing hereunder or the conversion of a borrowing hereunder from
Base Rate Loans to Eurodollar Rate Loans) prior to 10:30 A.M. and (2)
irrevocable written notice by telefacsimile transmission of a Borrowing Notice
or Interest Rate Selection Notice (as applicable) with appropriate insertions,
effective upon receipt, of each Revolving Loan (other than Base Rate Refunding
Loans to the extent the same are effected without notice pursuant to Section
3.1(c)(iv))
40
<PAGE>
that is a Base Rate Loan (whether representing an additional borrowing hereunder
or the conversion of borrowing hereunder from Eurodollar Rate Loans to Base Rate
Loans) prior to 10:30 A.M. on the day of such proposed Revolving Loan. Each such
notice shall specify the amount of the borrowing, the type of Revolving Loan
(Base Rate or Eurodollar Rate), the date of borrowing and, if a Eurodollar Rate
Loan, the Interest Period to be used in the computation of interest. Notice of
receipt of such Borrowing Notice or Interest Rate Selection Notice, as the case
may be, together with the amount of each Lender's portion of an Advance
requested thereunder, shall be provided by the Agent to each Lender by
telefacsimile transmission with reasonable promptness, but (provided the Agent
shall have received such notice by 10:30 A.M.) not later than 1:00 P.M. on the
same day as the Agent's receipt of such notice.
(ii) Not later than 2:00 P.M. on the date specified for each borrowing
under this Section 3.1, each Lender shall, pursuant to the terms and subject to
the conditions of this Agreement, make the amount of the Advance or Advances to
be made by it on such day available by wire transfer to the Agent in the amount
of its pro rata share, determined according to such Lender's Applicable
Commitment Percentage of the Revolving Loan or Revolving Loans to be made on
such day. Such wire transfer shall be directed to the Agent at the Principal
Office and shall be in the form of Dollars constituting immediately available
funds. The amount so received by the Agent shall, subject to the terms and
conditions of this Agreement, be made available to the Borrower by delivery of
the proceeds thereof to the Borrower's Account or otherwise as shall be directed
in the applicable Borrowing Notice by the Authorized Representative and
reasonably acceptable to the Agent.
(iii) The Borrower shall have the option to elect the duration of the
initial and any subsequent Interest Periods and to convert the Revolving Loans
in accordance with Section 3.8. Eurodollar Rate Loans and Base Rate Loans may be
outstanding at the same time, provided, however, there shall not be outstanding
at any one time Eurodollar Rate Loans and Eurodollar Rate Segments having more
than ten (10) different Interest Periods. If the Agent does not receive a
Borrowing Notice or an Interest Rate Selection Notice giving notice of election
of the duration of an Interest Period or of conversion of any Loan to or
continuation of a Revolving Loan as a Eurodollar Rate Loan by the time
prescribed by Section 3.1(c) or 3.8, the Borrower shall be deemed to have
elected to convert such Loan to (or continue such Loan as) a Base Rate Loan
until the Borrower notifies the Agent in accordance with Section 3.8.
(iv) Notwithstanding the foregoing, if a drawing is made under any Letter
of Credit, such drawing is honored by the Issuing Bank prior to the Stated
Revolving Credit Termination Date, and the Borrower shall not immediately fully
reimburse the Issuing Bank in respect of such drawing, (A) provided that the
conditions to making a Revolving Loan as herein provided shall then be
satisfied, the Reimbursement Obligation arising from such drawing shall be paid
to the Issuing Bank by the Agent without the requirement of notice to or from
the Borrower from immediately available funds which shall be advanced as a Base
Rate Refunding Loan by each Lender under the Revolving Credit Facility in an
amount equal to such Lender's Applicable Commitment Percentage of such
Reimbursement Obligation, and (B) if the conditions to making a Revolving Loan
as herein provided shall not then be satisfied, each of the Lenders shall fund
41
<PAGE>
by payment to the Agent (for the benefit of the Issuing Bank) in immediately
available funds the purchase from the Issuing Bank of their respective
Participations in the related Reimbursement Obligation based on their respective
Applicable Commitment Percentages of the Total Letter of Credit Commitment. If a
drawing is presented under any Letter of Credit in accordance with the terms
thereof and the Borrower shall not immediately reimburse the Issuing Bank in
respect thereof, then notice of such drawing or payment shall be provided
promptly by the Issuing Bank to the Agent and the Agent shall provide notice to
each Lender by telephone or telefacsimile transmission. If notice to the Lenders
of a drawing under any Letter of Credit is given by the Agent at or before 12:00
noon on any Business Day, each Lender shall, pursuant to the conditions
specified in this Section 3.1(c)(iv), either make a Base Rate Refunding Loan or
fund the purchase of its Participation in the amount of such Lender's Applicable
Commitment Percentage of such drawing or payment and shall pay such amount to
the Agent for the account of the Issuing Bank at the Principal Office in Dollars
and in immediately available funds before 2:30 P.M. on the same Business Day. If
notice to the Lenders of a drawing under a Letter of Credit is given by the
Agent after 12:00 noon on any Business Day, each Lender shall, pursuant to the
conditions specified in this Section 3.1(c)(iv), either make a Base Rate
Refunding Loan or fund the purchase of its Participation in the amount of such
Lender's Applicable Commitment Percentage of such drawing or payment and shall
pay such amount to the Agent for the account of the Issuing Bank at the
Principal Office in Dollars and in immediately available funds before 12:00 noon
on the next following Business Day. Any such Base Rate Refunding Loan shall be
advanced as, and shall continue as, a Base Rate Loan unless and until the
Borrower converts such Base Rate Loan in accordance with the terms of Section
3.8.
(v) Notwithstanding the foregoing provisions of this Section 3.1, in
addition, provided that the Borrower shall have given the Agent notice of its
request to obtain Eurodollar Rate Loans under the Revolving Credit Facility at
the Closing Date, by delivery (effective upon receipt) no later than 10:00 A.M.
two Business Days prior to the Closing Date of (i) a Borrowing Notice, together
with (ii) the Borrower's written acknowledgment that the provisions of Article
VI hereof shall apply to any failure of the Borrower to borrow on the Closing
Date any or all of the amounts specified in such Borrowing Notice, then each
Lender shall, subject to the conditions hereof, make or cause to be made
available on or before 10:00 A.M. on the Closing Date its Applicable Commitment
Percentage of the Revolving Credit Loans requested in such Borrowing Notice.
3.2. Payment of Interest. (a) The Borrower shall pay interest to the Agent
for the account of each Lender on the outstanding and unpaid principal amount of
each Revolving Loan made by such Lender for the period commencing on the date of
such Revolving Loan until such Revolving Loan shall be due at the then
applicable Base Rate for Base Rate Loans or applicable Eurodollar Rate for
Eurodollar Rate Loans, as designated by the Authorized Representative pursuant
to Section 3.1; provided, however, that if any amount shall not be paid when due
(at maturity, by acceleration or otherwise), all amounts outstanding hereunder
shall bear interest thereafter at the Default Rate.
(b) Interest on each Revolving Loan based on the Base Rate shall be
computed on the basis of a year of 365/6 days and Interest on each Revolving
Loan based on the Eurodollar
42
<PAGE>
Rate shall be computed on the basis of a year of 360 days, calculated in each
case for the actual number of days elapsed. Interest on each Revolving Loan
shall be paid (i) quarterly in arrears on the last Business Day of each April,
July, October and January, commencing October 31, 1997 for each Base Rate Loan,
(ii) on the last day of the applicable Interest Period for each Eurodollar Rate
Loan and, if such Interest Period extends for more than three (3) months, at
intervals of three (3) months after the first day of such Interest Period, and
(iii) upon payment in full of the principal amount of such Revolving Loan and
termination of this Agreement.
3.3. Payment of Principal. The principal amount of each Revolving Loan
shall be due and payable to the Agent for the benefit of each Lender in full on
the Revolving Credit Termination Date, or earlier as specifically provided
herein. The principal amount of any Base Rate Loan under the Revolving Credit
Facility may be prepaid in whole or in part at any time. The principal amount of
any Eurodollar Rate Loan under the Revolving Credit Facility may be prepaid only
at the end of the applicable Interest Period unless the Borrower shall pay to
the Agent for the account of the Lenders the additional amount, if any, required
under Section 6.4. All prepayments of Revolving Loans made by the Borrower shall
be in the amount of $5,000,000 or such greater amount which is an integral
multiple of $1,000,000, or the amount equal to all Revolving Credit
Outstandings, or such other amount as necessary to comply with Section 3.1(b) or
Section 3.8.
3.4. Non-Conforming Payments. (a) Each payment of principal (including any
prepayment) and payment of interest and fees, and any other amount required to
be paid to the Lenders with respect to the Revolving Loans, shall be made to the
Agent at the Principal Office, for the account of each Lender, in Dollars and in
immediately available funds before 3:00 P.M. on the date such payment is due.
The Agent may, but shall not be obligated to, debit the amount of any such
payment which is not made by such time to any ordinary deposit account, if any,
of the Borrower with the Agent.
(b) The Agent shall deem any payment made by or on behalf of the Borrower
hereunder that is not made both in Dollars and in immediately available funds
and prior to 3:00 P.M. to be a non-conforming payment. Any such payment shall
not be deemed to be received by the Agent until the later of (i) the time such
funds become available funds and (ii) the next Business Day. Any non-conforming
payment may constitute or become a Default or Event of Default. Interest shall
continue to accrue on any principal as to which a non-conforming payment is made
until the later of (x) the date such funds become available funds or (y) the
next Business Day at the Default Rate from the date such amount was due and
payable.
(c) In the event that any payment hereunder or under the Revolving Notes
becomes due and payable on a day other than a Business Day, then such due date
shall be extended to the next succeeding Business Day unless provided otherwise
under clause (ii) of the definition of "Interest Period"; provided that interest
shall continue to accrue during the period of any such extension and provided
further, that in no event shall any such due date be extended beyond the
Revolving Credit Termination Date.
43
<PAGE>
3.5. Revolving Notes. Revolving Loans made by each Lender shall be
evidenced by the Revolving Note payable to the order of such Lender in the
amount of its Revolving Credit Commitment, which Revolving Note shall be dated
the Closing Date or a later date pursuant to an Assignment and Acceptance and
shall be duly completed, executed and delivered by the Borrower.
3.6. Pro Rata Payments. Except as otherwise provided herein, (a) each
payment on account of the principal of and interest on the Revolving Loans and
the fees described in Section 3.10 shall be made to the Agent for the account of
the Lenders pro rata based on their Applicable Commitment Percentages, (b) all
payments to be made by the Borrower for the account of each of the Lenders on
account of principal, interest and fees, shall be made without diminution,
setoff, recoupment or counterclaim, and (c) the Agent will promptly distribute
to the Lenders in immediately available funds payments received in fully
collected, immediately available funds from the Borrower.
3.7. Reductions. (a) The Borrower shall, by notice from an Authorized
Representative, have the right from time to time but not more frequently than
once each calendar month, upon not less than three (3) Business Days' written
notice to the Agent, effective upon receipt, to reduce the Total Revolving
Credit Commitment. The Agent shall give each Lender, within one (1) Business Day
of receipt of such notice, telefacsimile notice, or telephonic notice (confirmed
in writing), of such reduction. Each such reduction shall be in the aggregate
amount of $5,000,000 or such greater amount which is in an integral multiple of
$1,000,000, or the entire remaining Total Revolving Credit Commitment, and shall
permanently reduce the Total Revolving Credit Commitment.
(b) Each reduction of the Total Revolving Credit Commitment shall be
accompanied by payment of the Revolving Loans to the extent that the principal
amount of Revolving Credit Outstandings plus the sum of Letter of Credit
Outstandings, Swing Line Outstandings and Reserve Amount exceeds the Total
Revolving Credit Commitment after giving effect to such reduction, together with
accrued and unpaid interest on the amounts prepaid. No such reduction shall
result in the payment of any Eurodollar Rate Loan other than on the last day of
the Interest Period of such Eurodollar Rate Loan unless such prepayment is
accompanied by amounts due, if any, under Section 6.4.
3.8. Conversions and Elections of Subsequent Interest Periods. Provided
that no Default or Event of Default shall have occurred and be continuing and
subject to the limitations set forth below and in Article VI, the Borrower may:
(a) upon delivery, effective upon receipt, of a properly completed
Interest Rate Selection Notice to the Agent on or before 10:30 A.M. on any
Business Day, convert all or a part of Eurodollar Rate Loans under the Revolving
Credit Facility to Base Rate Loans on the last day of the Interest Period for
such Eurodollar Rate Loans; and
44
<PAGE>
(b) upon delivery, effective upon receipt, of a properly completed
Interest Rate Selection Notice to the Agent on or before 10:30 A.M. three (3)
Business Days' prior to the date of such election or conversion:
(i) elect a subsequent Interest Period for all or a portion of
Eurodollar Rate Loans under the Revolving Credit Facility to begin
on the last day of the then current Interest Period for such
Eurodollar Rate Loans; and
(ii) convert Base Rate Loans under the Revolving Credit
Facility to Eurodollar Rate Loans on any Business Day.
Each election and conversion pursuant to this Section 3.8 shall be subject
to the limitations on Eurodollar Rate Loans set forth in the definition of
"Interest Period" herein and in Sections 3.1, 3.3 and Article VI. The Agent
shall give written notice to each Lender of such notice of election or
conversion prior to 3:00 P.M. on the day such notice of election or conversion
is received. All such continuations or conversions of Loans shall be effected
pro rata based on the Applicable Commitment Percentages of the Lenders.
3.9. Increase and Decrease in Amounts. The amount of the Total Revolving
Credit Commitment which shall be available to the Borrower as Advances shall be
reduced by the aggregate amount of Revolving Credit Outstandings, Letter of
Credit Outstandings, Swing Line Outstandings and the Reserve Amount.
3.10. Unused Fee. For the period beginning on the Closing Date and ending
on the Revolving Credit Termination Date, the Borrower agrees to pay to the
Agent, for the pro rata benefit of the Lenders based on their Applicable
Commitment Percentages, an unused fee equal to the Applicable Unused Fee
multiplied by the average daily amount by which the Total Revolving Credit
Commitment exceeds the sum of (i) Revolving Credit Outstandings (without giving
effect to Swing Line Outstandings in the case of Lenders other than NationsBank)
plus (ii) Letter of Credit Outstandings. Such fees shall be due in arrears on
the last Business Day of each April, July, October and January, commencing
January 31, 1998, to and on the Revolving Credit Termination Date.
Notwithstanding the foregoing, so long as any Lender fails to make available any
portion of its Revolving Credit Commitment when requested, such Lender shall not
be entitled to receive payment of its pro rata share of such fee until such
Lender shall make available such portion. Such fee shall be calculated on the
basis of a year of 360 days for the actual number of days elapsed.
3.11. Deficiency Advances. No Lender shall be responsible for any default
of any other Lender in respect to such other Lender's obligation to make any
Loan or fund its purchase of any Participation hereunder nor shall the Revolving
Credit Commitment of any Lender hereunder be increased as a result of such
default of any other Lender. Without limiting the generality of the foregoing,
in the event any Lender shall fail to advance funds to the Borrower under the
Revolving Credit Facility as herein provided, the Agent may in its discretion,
but shall not be obligated to, advance under the Revolving Note in its favor as
a Lender all or any portion of such
45
<PAGE>
amount or amounts (each, a "Deficiency Advance") and shall thereafter be
entitled to payments of principal of and interest on such Deficiency Advance in
the same manner and at the same interest rate or rates to which such other
Lender would have been entitled had it made such advance under its Revolving
Note; provided that, upon payment to the Agent from such other Lender of the
entire outstanding amount of each such Deficiency Advance, together with accrued
and unpaid interest thereon, from the most recent date or dates interest was
paid to the Agent by the Borrower on each Revolving Loan comprising the
Deficiency Advance at the interest rate per annum for overnight borrowing by the
Agent from the Federal Reserve Bank, then such payment shall be credited against
the applicable Revolving Note of the Agent in full payment of such Deficiency
Advance and the Borrower shall be deemed to have borrowed the amount of such
Deficiency Advance from such other Lender as of the most recent date or dates,
as the case may be, upon which any payments of interest were made by the
Borrower thereon.
3.12. Use of Proceeds. The proceeds of the Loans made pursuant to the
Revolving Credit Facility hereunder shall be used by the Borrower, (i) together
with proceeds of the Term Loan to acquire all of the issued and outstanding
stock of the AIMCOR Group and (ii) for general corporate purposes and working
capital needs, including the making of Acquisitions permitted hereunder.
3.13. Swing Line. (a) Notwithstanding any other provision of this
Agreement to the contrary, in order to administer the Revolving Credit Facility
in an efficient manner and to minimize the transfer of funds between the Agent
and the Lenders, NationsBank shall make available Swing Line Loans to the
Borrower prior to the Revolving Credit Termination Date. NationsBank shall not
make any Swing Line Loan pursuant hereto (i) if to the actual knowledge of
NationsBank the Borrower is not in compliance with all the conditions to the
making of Revolving Loans set forth in this Agreement, (ii) if after giving
effect to such Swing Line Loan, the Swing Line Outstandings exceed $25,000,000,
or (iii) if after giving effect to such Swing Line Loan, the sum of the
principal amount of Swing Line Outstandings, Revolving Credit Outstandings,
Letter of Credit Outstandings and Reserve Amount exceeds the Total Revolving
Credit Commitment. Swing Line Loans shall be limited to Base Rate Loans. The
Company may borrow, repay and reborrow under this Section 3.13. Unless notified
to the contrary by NationsBank, borrowings under the Swing Line shall be made in
the minimum amount of $500,000 or, if greater, in amounts which are integral
multiples of $100,000, or in the amount necessary to effect a Base Rate
Refunding Loan, upon written request by telefacsimile transmission, effective
upon receipt, by an Authorized Representative of the Borrower made to
NationsBank not later than 3:00 P.M. on the Business Day of the requested
borrowing. Each such Borrowing Notice shall specify the amount of the borrowing
and the date of borrowing, and shall be in the form of Exhibit D-2, with
appropriate insertions. Unless notified to the contrary by NationsBank, each
repayment of a Swing Line Loan shall be in an amount which is an integral
multiple of $100,000 or the aggregate amount of all Swing Line Outstandings. If
the Borrower instructs NationsBank to debit any demand deposit account of the
Borrower in the amount of any payment with respect to a Swing Line Loan, or
NationsBank otherwise receives repayment, after 3:00 P.M. on a Business Day,
such payment shall be deemed received on the next Business Day.
46
<PAGE>
(b) Swing Line Loans shall bear interest at the Base Rate, the interest
payable on Swing Line Loans is solely for the account of NationsBank, and all
accrued and unpaid interest on Swing Line Loans shall be payable on the dates
and in the manner provided in Sections 3.2(b) and 3.4 with respect to interest
on Base Rate Loans. The Swing Line Outstandings shall be evidenced by the Note
delivered to NationsBank pursuant to Section 3.5.
(c) Upon the making of a Swing Line Loan, each Lender with a Revolving
Credit Commitment shall be deemed to have purchased from NationsBank a
Participation therein in an amount equal to that Lender's Applicable Commitment
Percentage of such Swing Line Loan. Upon demand made by NationsBank, each Lender
shall, according to its Applicable Commitment Percentage of such Swing Line
Loan, promptly provide to NationsBank its purchase price therefor in an amount
equal to its Participation therein. Any Advance made by a Lender pursuant to
demand of NationsBank of the purchase price of its Participation shall be deemed
(i) provided that the conditions to making Revolving Loans shall be satisfied, a
Base Rate Refunding Loan under Section 3.1 until the Borrower converts such Base
Rate Loan in accordance with the terms of Section 3.8, and (ii) in all other
cases, the funding by each Lender of the purchase price of its Participation in
such Swing Line Loan. The obligation of each Lender to so provide its purchase
price to NationsBank shall be absolute and unconditional and shall not be
affected by the occurrence of a Default or an Event of Default or any other
occurrence or event.
The Borrower, at its option and subject to the terms hereof, may request
an Advance pursuant to Section 3.1 in an amount sufficient to repay Swing Line
Outstandings on any date and the Agent shall provide from the proceeds of such
Advance to NationsBank the amount necessary to repay such Swing Line
Outstandings (which NationsBank shall then apply to such repayment) and credit
any balance of the Advance in immediately available funds in the manner directed
by the Borrower pursuant to Section 3.1(c)(ii). The proceeds of such Advances
shall be paid to NationsBank for application to the Swing Line Outstandings and
the Lenders shall then be deemed to have made Loans in the amount of such
Advances. The Swing Line shall continue in effect until the Revolving Credit
Termination Date, at which time all Swing Line Outstandings and accrued interest
thereon shall be due and payable in full.
47
<PAGE>
ARTICLE IV
Letters of Credit
4.1. Letters of Credit. (a) The Issuing Bank agrees, subject to the terms
and conditions of this Agreement, upon request of the Borrower to issue from
time to time from the Closing Date to the date 60 days prior to the Stated
Revolving Credit Termination Date, for the account of the Borrower or the
Borrower and a Restricted Subsidiary Letters of Credit upon delivery to the
Issuing Bank of an Application and Agreement for Letter of Credit relating
thereto in form and content acceptable to the Issuing Bank; provided, that (i)
the Letter of Credit Outstandings shall not exceed the Total Letter of Credit
Commitment and (ii) no Letter of Credit shall be issued if, after giving effect
thereto, Letter of Credit Outstandings plus the sum of the principal amount of
Revolving Credit Outstandings, Swing Line Outstandings and Reserve Amount shall
exceed the Total Revolving Credit Commitment. No Documentary Letter of Credit
shall have an expiry date later than the earlier of (1) 180 days after the date
of issuance thereof and (2) 60 days before the Stated Revolving Credit
Termination Date. No Standby Letter of Credit shall have an expiry date
(including all rights of the Borrower, any Restricted Subsidiary, or the
beneficiary named in such Standby Letter of Credit to require renewal) later
than one year after the date of issuance thereof, but any such Standby Letter of
Credit may by its terms be renewable annually upon notice (a "Notice of
Renewal") given to the Issuing Bank and the Agent at least three Business Days
prior to any date for notice of renewal set forth in such Standby Letter of
Credit and upon fulfillment of the applicable conditions set forth in Article
VII unless the Issuing Bank has notified the Borrower (with a copy to the Agent)
at least 30 Business Days prior to the date of automatic renewal of its election
not to renew such Standby Letter of Credit (a "Notice of Termination"); provided
that the terms of each Standby Letter of Credit that is automatically renewable
annually (x) shall require the Issuing Bank to give the beneficiary named in
such Standby Letter of Credit notice of any Notice of Termination, (y) shall
permit such beneficiary, upon receipt of such notice, to draw under such Standby
Letter of Credit prior to the date such Standby Letter of Credit otherwise would
have been automatically renewed and (z) shall not permit the expiry date (after
giving effect to any renewal) of such Standby Letter of Credit in any event to
be extended to a date later than 60 days before the first anniversary of the
Stated Revolving Credit Termination Date; and provided further that the Borrower
shall deposit or cause to be deposited Collateral (as defined in the LC Account
Agreement) with the Agent pursuant to the LC Account Agreement at least five
Business Days prior to the Stated Revolving Credit Termination Date an amount
equal to 105% of the sum of (I) the aggregate available amount for drawing under
all Standby Letters of Credit that have an expiry date (after giving effect to
any renewal) that extends beyond the Stated Revolving Credit Termination Date
and (II) the aggregate amount of all fees and expenses owing on or in respect of
such Standby Letters of Credit. If either a Notice of Renewal is not given by
the Borrower or a Notice of Termination is given by the Issuing Bank pursuant to
the immediately preceding sentence with respect to any Standby Letter of Credit,
such Standby Letter of Credit shall expire on the date on which it otherwise
would have been automatically renewed; provided, however, that if a Notice of
Renewal is not received by the Issuing Bank, such Issuing Bank may, in its
discretion, unless otherwise instructed by the Agent or the Borrower, deem that
48
<PAGE>
a Notice of Renewal had been timely delivered and, in such case, a Notice of
Renewal shall be deemed to have been so delivered for all purposes under this
Agreement.
(b) Subject to the approval by the Agent of the making available of an
Alternative Currency not otherwise provided for herein, upon completion of a
proper Application and Agreement for Letter of Credit, the Issuing Bank shall
issue upon request and for the account of Borrower and a Restricted Subsidiary
Letters of Credit payable in such Alternative Currency. For purposes of
determining Letters of Credit Outstandings, any Letter of Credit issued in an
Alternative Currency shall be recorded in the Agent's account in Dollars based
on the Dollar Value on the date of issuance of such Letter of Credit. Any draw
on a Letter of Credit issued in an Alternative Currency shall be repaid in the
same Alternative Currency and in a Dollar amount equivalent to the Dollar Value.
To the extent that the Agent shall determine at any time that the sum of (i) the
Dollar Value of Letters of Credit Outstanding made or issued in Alternative
Currencies and (ii) Outstanding made or issued in Dollars exceeds the Total
Revolving Credit Commitment, the Borrower shall immediately repay Revolving
Loans so that after giving effect to such payment the Outstandings do not exceed
the Total Revolving Credit Commitment. In addition, the Dollar Value of Letters
of Credit Outstandings made or issued in Alternative Currencies shall not exceed
$5,000,000 as at the date of issuance of any Letter of Credit in an Alternative
Currency after giving effect to the issuance of such Letter of Credit.
4.2. Reimbursement.
(a) The Borrower hereby unconditionally agrees to pay to the Issuing
Bank immediately on demand at the Principal Office all amounts required to pay
all drafts drawn or purporting to be drawn under the Letters of Credit and all
reasonable expenses incurred by the Issuing Bank in connection with the Letters
of Credit, and in any event and without demand to place in possession of the
Issuing Bank (which shall include Advances under the Revolving Credit Facility
if permitted by Section 3.1 and Swing Line Loans if permitted by Section 3.13)
sufficient funds to pay all debts and liabilities arising under any Letter of
Credit. The Issuing Bank agrees to give the Borrower prompt notice of any
request for a draw under a Letter of Credit. The Issuing Bank may charge any
account the Borrower may have with it for any and all amounts the Issuing Bank
pays under a Letter of Credit, plus charges and reasonable expenses as from time
to time agreed to by the Issuing Bank and the Borrower; provided that to the
extent permitted by Section 3.1(c)(iv) and Section 3.13, amounts shall be paid
pursuant to Advances under the Revolving Credit Facility or, if the Borrower
shall elect, by Swing Line Loans. The Borrower agrees to pay the Issuing Bank
interest on any Reimbursement Obligations not paid when due hereunder at the
Base Rate plus two percent (2.0%), or the maximum rate permitted by applicable
law, if lower, such rate to be calculated on the basis of a year of 360 days for
actual days elapsed.
(b) In accordance with the provisions of Section 3.1(c), the Issuing
Bank shall notify the Agent of any drawing under any Letter of Credit promptly
following the receipt by the Issuing Bank of such drawing.
49
<PAGE>
(c) Each Lender with a Revolving Credit Commitment (a "Revolving
Lender") (other than the Issuing Bank) shall automatically acquire on the date
of issuance thereof, a Participation in the liability of the Issuing Bank in
respect of each Letter of Credit in an amount equal to such Lender's Applicable
Commitment Percentage of such liability, and to the extent that the Borrower is
obligated to pay the Issuing Bank under Section 4.2(a), each Revolving Lender
(other than the Issuing Bank) thereby shall absolutely, unconditionally and
irrevocably assume, and shall be unconditionally obligated to pay to the Issuing
Bank as hereinafter described, its Applicable Commitment Percentage of the
liability of the Issuing Bank under such Letter of Credit.
(i) Each Revolving Lender (including the Issuing Bank in its
capacity as a Lender) shall, subject to the terms and conditions of
Article III, pay to the Agent for the account of the Issuing Bank at the
Principal Office in Dollars (determined in the case of a Letter of Credit
issued in an Alternative Currency based on the Dollar Value on the date of
payment) and in immediately available funds, an amount equal to its
Applicable Commitment Percentage of any drawing under a Letter of Credit,
such funds to be provided in the manner described in Section 3.1(c)(iv).
(ii) Simultaneously with the making of each payment by a
Revolving Lender to the Issuing Bank pursuant to Section 3.1(c)(iv)(B),
such Lender shall, automatically and without any further action on the
part of the Issuing Bank or such Lender, acquire a Participation in an
amount equal to such payment (excluding the portion thereof constituting
interest accrued prior to the date the Lender made its payment) in the
related Reimbursement Obligation of the Borrower. The Reimbursement
Obligations of the Borrower shall be immediately due and payable whether
by Advances made in accordance with Section 3.1(c)(iv), Swing Line Loans
made in accordance with Section 3.13, or otherwise.
(iii) Each Revolving Lender's obligation to make payment to
the Agent for the account of the Issuing Bank pursuant to Section
3.1(c)(iv) and this Section 4.2(c), and the right of the Issuing Bank to
receive the same, shall be absolute and unconditional, shall not be
affected by any circumstance whatsoever and shall be made without any
offset, abatement, withholding or reduction whatsoever. If any Revolving
Lender is obligated to pay but does not pay amounts to the Agent for the
account of the Issuing Bank in full upon such request as required by
Section 3.1(c)(iv) or this Section 4.2(c), such Revolving Lender shall, on
demand, pay to the Agent for the account of the Issuing Bank interest on
the unpaid amount for each day during the period commencing on the date of
notice given to such Revolving Lender pursuant to Section 3.1(c) until
such Revolving Lender pays such amount to the Agent for the account of the
Issuing Bank in full at the interest rate per annum for overnight
borrowing by the Agent from the Federal Reserve Bank.
(iv) In the event the Revolving Lenders have purchased
Participations in any Reimbursement Obligation as set forth in clause (ii)
above, then at any time payment (in fully collected, immediately available
funds) of such Reimbursement
50
<PAGE>
Obligation, in whole or in part, is received by Issuing Bank from the
Borrower, Issuing Bank shall promptly pay to each Revolving Lender an
amount equal to its Applicable Commitment Percentage of such payment from
the Borrower.
(d) Not later than ten (10) days prior to the end of each fiscal
quarter, the Issuing Bank shall deliver to the Agent a notice describing the
aggregate undrawn amount of all Letters of Credit at the end of such quarter.
Upon the request of any Revolving Lender from time to time, the Issuing Bank
shall deliver to the Agent, and the Agent shall deliver to such Revolving
Lender, any other information reasonably requested by such Lender with respect
to each Letter of Credit outstanding.
(e) The issuance by the Issuing Bank of each Letter of Credit shall,
in addition to the conditions precedent set forth in Article VII, be subject to
the conditions that such Letter of Credit be in such form and contain such terms
as shall be reasonably satisfactory to the Issuing Bank consistent with the then
current practices and procedures of the Issuing Bank with respect to similar
letters of credit, and the Borrower or if applicable the Borrower and a
Restricted Subsidiary, shall have executed and delivered such other instruments
and agreements relating to such Letters of Credit as the Issuing Bank shall have
reasonably requested consistent with such practices and procedures and shall not
be in conflict with any of the express terms herein contained. All Letters of
Credit shall be issued pursuant to and subject to the Uniform Customs and
Practice for Documentary Credits, 1993 revision, International Chamber of
Commerce Publication No. 500 and all subsequent amendments and revisions
thereto.
(f) The Borrower agrees that the Issuing Bank may, in its sole
discretion, accept or pay, as complying with the terms of any Letter of Credit,
any drafts or other documents otherwise in order which may be signed or issued
by an administrator, executor, trustee in bankruptcy, debtor in possession,
assignee for the benefit of creditors, liquidator, receiver, attorney in fact or
other legal representative of a party who is authorized under such Letter of
Credit to draw or issue any drafts or other documents.
(g) Without limiting the generality of the provisions of Section
13.9, the Borrower hereby agrees to indemnify and hold harmless the Issuing
Bank, each other Revolving Lender and the Agent from and against any and all
claims and damages, losses, liabilities, reasonable costs and expenses which the
Issuing Bank, such other Revolving Lender or the Agent may incur (or which may
be claimed against the Issuing Bank, such other Revolving Lender or the Agent)
by any Person by reason of or in connection with the issuance or transfer of or
payment or failure to pay under any Letter of Credit; provided that the Borrower
shall not be required to indemnify the Issuing Bank, any other Revolving Lender
or the Agent for any claims, damages, losses, liabilities, costs or expenses to
the extent, but only to the extent, (i) caused by the willful misconduct or
gross negligence of the party to be indemnified or (ii) caused by the failure of
the Issuing Bank to pay under any Letter of Credit after the presentation to it
of a request for payment strictly complying with the terms and conditions of
such Letter of Credit, unless such payment is prohibited by any law, regulation,
court order or decree. The
51
<PAGE>
indemnification and hold harmless provisions of this Section 4.2(g) shall
survive the occurrence of the Facility Termination Date.
(h) Without limiting Borrower's rights as set forth in Section
4.2(g), the obligation of the Borrower to immediately reimburse the Issuing Bank
for drawings made under Letters of Credit and the Issuing Bank's right to
receive such payment shall be absolute, unconditional and irrevocable, and that
such obligations of the Borrower shall be performed strictly in accordance with
the terms of this Agreement and such Letters of Credit and the related
Applications and Agreement for any Letter of Credit, under all circumstances
whatsoever, including the following circumstances:
(i) any lack of validity or enforceability of the Letter of
Credit, the obligation supported by the Letter of Credit or any other
agreement or instrument relating thereto (collectively, the "Related LC
Documents");
(ii) any amendment or waiver of or any consent to or departure
from all or any of the Related LC Documents;
(iii) the existence of any claim, setoff, defense (other than
the defense of payment in accordance with the terms of this Agreement) or
other rights which the Borrower may have at any time against any
beneficiary or any transferee of a Letter of Credit (or any persons or
entities for whom any such beneficiary or any such transferee may be
acting), the Agent, the Revolving Lenders or any other Person, whether in
connection with the Loan Documents, the Related LC Documents or any
unrelated transaction;
(iv) any breach of contract or other dispute between the
Borrower and any beneficiary or any transferee of a Letter of Credit (or
any persons or entities for whom such beneficiary or any such transferee
may be acting), the Agent, the Lenders or any other Person;
(v) any draft, statement or any other document presented under
the 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 whatsoever;
(vi) any delay, extension of time, renewal, compromise or
other indulgence or modification granted or agreed to by the Agent, with
or without notice to or approval by the Borrower in respect of any of
Borrower's Obligations under this Agreement; or
(vii) any other circumstance or happening whatsoever, whether
or not similar to any of the foregoing.
52
<PAGE>
4.3. Letter of Credit Facility Fees. (a) The Borrower shall pay to the
Agent, for the pro rata benefit of the Revolving Lenders based on their
Applicable Commitment Percentages, a fee on the aggregate amount available to be
drawn on each outstanding (i) Standby Letter of Credit at a per annum rate equal
to the Applicable Margin (L/C) and (ii) Documentary Letter of Credit at a per
annum rate equal to .50%. In addition the Borrower shall pay to the Issuing Bank
a fronting fee of .125% on the aggregate amount available to be drawn on each
outstanding Letter of Credit. Such fees shall be due with respect to each Letter
of Credit quarterly in arrears on the last Business day of each April, July,
October and January, the first such payment to be made on the first such date
occurring after the date of issuance of a Letter of Credit. The fees described
in this Section 4.3 shall be calculated on the basis of a year of 360 days for
the actual number of days elapsed.
4.4. Administrative and Other Fees. The Borrower shall pay to the Issuing
Bank such administrative fee and other fees, if any, in connection with the
Letters of Credit in such amounts and at such times as the Issuing Bank and the
Borrower shall agree from time to time.
53
<PAGE>
ARTICLE V
Security
5.1. Security. As security for the full and timely payment and performance
of all Obligations, the Credit Parties shall on or before the Closing Date do or
cause to be done all things necessary in the opinion of the Agent and its
counsel to grant to the Agent for the benefit of the Lenders a duly perfected
first priority security interest in all Collateral subject to no prior Lien or
other encumbrance or restriction on transfer (other than restrictions on
transfer imposed by applicable securities laws).
5.2. Further Assurances. At the request of the Agent, the Borrower will or
will cause its Subsidiaries, as the case may be to execute, by its duly
authorized officers, alone or with the Agent, any certificate, instrument,
statement or document, or to procure any such certificate, instrument, statement
or document, or to take such other action (and pay all connected costs) which
the Agent reasonably deems necessary from time to time to create, continue or
preserve the liens and security interests in Collateral (and the perfection and
priority thereof) of the Agent contemplated hereby and by the other Loan
Documents.
54
<PAGE>
ARTICLE VI
Yield Protection and Illegality
6.1. Additional Costs. (a) The Borrower shall promptly pay to the Agent
for the account of a Lender from time to time, without duplication, such amounts
as such Lender may reasonably determine to be necessary to compensate it for any
costs incurred by such Lender which it determines are attributable to its making
or maintaining any Loan or its obligation to make any Loans, or the issuance or
maintenance by the Issuing Bank of or any other Lender's Participation in any
Letter of Credit issued or Swing Line Loan extended hereunder, or any reduction
in any amount receivable by such Lender under this Agreement or the Notes in
respect of any of such Loans or the Letters of Credit, including reductions in
the rate of return on a Lender's capital (such increases in costs and reductions
in amounts receivable and returns being herein called "Additional Costs"), in
each case resulting from any Regulatory Change which: (i) changes the basis of
taxation of any amounts payable to such Lender under this Agreement or the Notes
in respect of any of such Loans or the Letters of Credit (other than taxes
imposed on or measured by the income, revenues, assets or net worth); or (ii)
imposes or modifies any reserve, special deposit, or similar requirements
relating to any extensions of credit or other assets of, or any deposits with or
other liabilities of, such Lender (other than any such reserve, deposit or
requirement reflected in the Prime Rate, Federal Funds Effective Rate or the
Interbank Offered Rate, in each case computed in accordance with the respective
definitions of such terms set forth in Section 1.1); or (iii) has or would have
the effect of reducing the rate of return on capital of any such Lender or any
Person controlling such Lender to a level below that which the Lender or such
Person could have achieved but for such Regulatory Change (taking into
consideration such Lender's or such Person's policies with respect to capital
adequacy); or (iv) imposes any other condition adversely affecting the Agent or
any Lender under this Agreement, the Notes or the issuance or maintenance of, or
any Lender's Participation in, the Letters of Credit or Swing Line Loans (or any
of such extensions of credit or liabilities). Each Lender will notify the
Authorized Representative and the Agent of any event occurring after the Closing
Date which would entitle it to compensation pursuant to this Section 6.1(a) as
promptly as practicable after it obtains knowledge thereof and determines to
request such compensation.
(b) Without limiting the effect of the foregoing provisions of this
Section 6.1, in the event that, by reason of any Regulatory Change, any Lender
either (i) incurs Additional Costs based on or measured by the excess above a
specified level of the amount of a category of deposits or other liabilities of
the Lender which includes deposits by reference to which the interest rate on
Eurodollar Rate Loans or Eurodollar Rate Segments is determined as provided in
this Agreement or a category of extensions of credit or other assets of any
Lender which includes Eurodollar Rate Loans or Eurodollar Rate Segments or (ii)
becomes subject to restrictions on the amount of such a category of liabilities
or assets which it may hold, then, if the Lender so elects by notice to the
other Lenders, the obligation hereunder of such Lender to make, and to convert
Base Rate Loans or Base Rate Segments into, Eurodollar Rate Loans or Eurodollar
Rate Segments that are the subject of such restrictions shall be suspended and
such Lender reasonably demonstrates that it has not been otherwise compensated
under this Article VI for any such
55
<PAGE>
Additional Costs, until the date such Regulatory Change ceases to be in effect
and the Borrower shall, on the last day(s) of the then current Interest
Period(s) for outstanding Eurodollar Rate Loans or Eurodollar Rate Segments
convert such Eurodollar Rate Loans or Eurodollar Rate Segments into Base Rate
Loans or Base Rate Segments; provided, however, that the suspension of such
obligation and the conversion of any Eurodollar Rate Loans or Eurodollar Rate
Segments into Base Rate Loans or Base Rate Segments shall apply only to any
Lender who is affected by such restrictions and who has provided such notice to
the other Lenders, and the obligation of the other Lenders to make, and to
convert Base Rate Loans or Base Rate Segments into, Eurodollar Rate Loans or
Eurodollar Rate Segments shall not be affected by such restrictions. In the
event that the obligation of some, but not all, of the Lenders to make, or to
convert Base Rate Loans or Base Rate Segments into, Eurodollar Rate Loans or
Eurodollar Rate Segments is suspended, then any request by the Borrower during
the pendency of such suspension for a Eurodollar Rate Loan or Eurodollar Rate
Segment shall be deemed a request for such Eurodollar Rate Loan or Eurodollar
Rate Segment from the Lender(s) not subject to such suspension and for a Base
Rate Loan or Base Rate Segments from the Lender(s) who are subject to such
suspension, in each case in the respective amounts based on the Lenders'
respective Applicable Commitment Percentages.
(c) Determinations by any Lender for purposes of this Section 6.1 of
the effect of any Regulatory Change on its costs of making or maintaining, or
being committed to make Loans, or by NationsBank as issuer of any Letter of
Credit of the effect of any Regulatory Change on its costs in connection with
the issuance or maintenance of, or any other Lender's Participation in, any
Letter of Credit issued or Swing Line Loan extended hereunder, or the effect of
any Regulatory Change on amounts receivable by any Lender in respect of Loans or
Letters of Credit, and of the additional amounts required to compensate the
Lender in respect of any Additional Costs, shall be made taking into account
such Lender's policies, or the policies of the parent corporation of such
Lender, as to the allocation of capital, costs and other items and shall be
conclusive absent manifest error. The Lender requesting such compensation shall
furnish to the Authorized Representative and the Agent within one hundred eighty
(180) days of the incurrence of any Additional Costs for which compensation is
sought an explanation of the Regulatory Change and calculations, in reasonable
detail, setting forth such Lender's determination of any such Additional Costs.
6.2. Suspension of Loans. Anything herein to the contrary notwithstanding,
if, on or prior to the determination of any interest rate for any Eurodollar
Rate Loan or Eurodollar Rate Segment for any Interest Period, the Agent
determines (which determination made on a reasonable basis shall be conclusive
absent manifest error) that:
(a) quotations of interest rates for the relevant deposits referred
to in the definition of "Eurodollar Rate" in Section 1.1 are not being
provided in the relevant amounts or for the relevant maturities for
purposes of determining the rate of interest for such Eurodollar Rate Loan
or Eurodollar Rate Segment as provided in this Agreement; or
(b) the relevant rates of interest referred to in the definition of
"Interbank Offered Rate" in Section 1.1 upon the basis of which the
Eurodollar Rate for such Interest
56
<PAGE>
Period is to be determined do not adequately reflect the cost to the
Lenders of making or maintaining such Eurodollar Rate Loan or Eurodollar
Rate Segment for such Interest Period;
then the Agent shall give the Authorized Representative prompt notice thereof,
and so long as such condition remains in effect, the Lenders shall be under no
obligation to make Eurodollar Rate Loans or Eurodollar Rate Segments that are
subject to such condition, or to convert Base Rate Loans or Base Rate Segments
into Eurodollar Rate Loans or Eurodollar Rate Segments, and the Borrower shall
on the last day(s) of the then current Interest Period(s) for outstanding
Eurodollar Rate Loans, as applicable, convert such Eurodollar Rate Loans or
Eurodollar Rate Segments into another Eurodollar Rate Loan or Eurodollar Rate
Segment if such Eurodollar Rate Loan or Eurodollar Rate Segment is not subject
to the same or similar condition, or Base Rate Loans or Base Rate Segments, if
available hereunder. The Agent shall give the Authorized Representative notice
describing in reasonable detail any event or condition described in this Section
6.2 promptly following the determination by the Agent that the availability of
Eurodollar Rate Loans or Eurodollar Rate Segments is, or is to be, suspended as
a result thereof.
6.3. Illegality. Notwithstanding any other provision of this Agreement, in
the event that it becomes unlawful for any Lender to honor its obligation to
make or maintain Eurodollar Rate Loans or Eurodollar Rate Segments hereunder,
then such Lender shall promptly notify the Borrower thereof (with a copy to the
Agent) and such Lender's obligation to make or continue Eurodollar Rate Loans or
Eurodollar Rate Segments, or to convert Base Rate Loans or Base Rate Segments
into Eurodollar Rate Loans or Eurodollar Rate Segments, shall be suspended until
such time as such Lender may again make and maintain Eurodollar Rate Loans or
Eurodollar Rate Segments, and such Lender's outstanding Eurodollar Rate Loans or
Eurodollar Rate Segments shall be converted into Base Rate Loans or Base Rate
Segments in accordance with Sections 2.11 and 3.8 or earlier if required by
applicable law. The conversion of any Eurodollar Rate Loans or Eurodollar Rate
Segments into Base Rate Loans or Base Rate Segments shall apply only to any
Lender who is affected by such restrictions and who has provided the notice
described above, and the obligation of the other Lenders to make, and to convert
Base Rate Loans or Base Rate Segments into, Eurodollar Rate Loans or Eurodollar
Rate Segments shall not be affected by such restrictions. In the event that the
obligation of some, but not all, of the Lenders to make, or to convert Base Rate
Loans or Base Rate Segments into, Eurodollar Rate Loans or Eurodollar Rate
Segments is so suspended, then any request by the Borrower during the pendency
of such suspension for a Eurodollar Rate Loan or Eurodollar Rate Segment shall
be deemed a request for such Eurodollar Rate Loan or Eurodollar Rate Segment
from the Lender(s) not subject to such suspension and for a Base Rate Loan or
Base Rate Segment from the Lender(s) who are subject to such suspension, in each
case in the respective amounts based on the Lenders' respective Applicable
Commitment Percentages.
6.4. Compensation. The Borrower shall promptly pay to each Lender, upon
the request of such Lender, such amount or amounts as shall be sufficient (in
the reasonable determination of Lender) to compensate it for any loss, cost or
expense incurred by it as a result of:
57
<PAGE>
(a) any payment, prepayment or conversion of a Eurodollar Rate Loan
on a date other than the last day of the Interest Period for such
Eurodollar Rate Loan or Eurodollar Rate Segment, including without
limitation any conversion required pursuant to Sections 6.1, 6.2 or 6.3;
or
(b) any failure by the Borrower to borrow or convert a Eurodollar
Rate Loan or Eurodollar Rate Segment on the date for such borrowing or
conversion specified in the relevant Borrowing Notice or Interest Rate
Selection Notice under Articles II or III hereof;
A determination of a Lender as to the amounts payable pursuant to this Section
6.4 shall be conclusive, provided that such determinations are made on a
reasonable basis. The Lender requesting compensation under this Section 6.4
shall promptly furnish to the Authorized Representative and the Agent
calculations in reasonable detail setting forth such Lender's determination of
the amount of such compensation. For a period of 180 days next following the
Closing Date the Borrower will reimburse each Lender for any breakage costs with
respect to Eurodollar Rate Segments incurred by reason of the early termination
of one or more Interest Periods occurring by reason of an assignment pursuant to
Section 13.1. Borrower acknowledges and agrees that during such period it will
assist the Agent and Lenders in the syndication of the Revolving Credit Facility
and Term Loan Facility and that the incurrence of such costs will not be a basis
for withholding consent to such assignment.
6.5. Alternate Loan and Lender. In the event any Lender suspends the
making of any Eurodollar Rate Loan or Eurodollar Rate Segment pursuant to this
Article VI (herein a "Restricted Lender"), the Restricted Lender's Applicable
Commitment Percentage of any Eurodollar Rate Loan or Eurodollar Rate Segment
shall bear interest at the Base Rate or the Eurodollar Rate for which the
suspension does not apply, as selected by Borrower, until the Restricted Lender
once again makes available the applicable Eurodollar Rate Loan or Eurodollar
Rate Segment. Notwithstanding the provisions of Sections 2.4 and 3.2(b),
interest shall be payable to the Restricted Lender at the time and manner as
paid to those Lenders making available Eurodollar Rate Loans or Eurodollar Rate
Segments.
6.6. Taxes. (a) All payments by the Borrower of principal of, and interest
on, the Loans and all other amounts payable hereunder shall be made free and
clear of and without deduction for any present or future excise, stamp or other
taxes, fees, duties, levies, imposts, charges, deductions, withholdings or other
charges of any nature whatsoever imposed by any taxing authority, but excluding
(i) franchise taxes, (ii) any taxes (other than withholding taxes) that would
not be imposed but for a connection between a Lender or the Agent and the
jurisdiction imposing such taxes (other than a connection arising solely by
virtue of the activities of such Lender or the Agent pursuant to or in respect
of this Agreement or any other Loan Document), (iii) any taxes imposed on or
measured by any Lender's assets, net income, receipts or branch profits, and
(iv) any taxes arising after the Closing Date solely as a result of or
attributable to a Lender changing its designated lending office after the date
such Lender becomes a party hereto (such non-excluded items being collectively
called "Taxes"). In the event that any withholding or
58
<PAGE>
deduction from any payment to be made by the Borrower hereunder is required in
respect of any Taxes pursuant to any applicable law, rule or regulation, then
the Borrower will
(x) pay directly to the relevant authority the full amount required
to be so withheld or deducted;
(y) promptly forward to the Agent an official receipt or other
documentation satisfactory to the Agent evidencing such payment to such
authority; and
(z) pay to the Agent for the account of each Lender such additional
amount or amounts as is necessary to ensure that the net amount actually
received by each Lender will equal the full amount such Lender would have
received had no such withholding or deduction been required.
(b) Prior to the date that any Lender or participant organized under the
laws of a jurisdiction outside the United States becomes a party hereto, such
Person shall deliver to the Borrower and the Agent such certificates, documents
or other evidence, as required by the Code or Treasury Regulations issued
pursuant thereto, properly completed, currently effective and duly executed by
such Lender or participant establishing that payments to it hereunder and under
the Notes are (i) not subject to United States Federal backup withholding tax
and (ii) not subject to United States Federal withholding tax under the Code
because such payment is either effectively connected with the conduct by such
Lender or participant of a trade or business in the United States or totally
exempt from United States Federal withholding tax by reason of the application
of the provisions of a treaty to which the United States is a party or such
Lender is otherwise exempt.
(c) If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Agent, for the account of the
respective Lender, the required receipts or other required documentary evidence,
the Borrower shall indemnify the Lenders for any incremental Taxes, interest or
penalties that may become payable by any Lender as a result of any such failure.
For purposes of this Section 6.6, a distribution hereunder by the Agent or any
Lender to or for the account of any Lender shall be deemed a payment by or on
behalf of the Borrower.
6.7. Replacement Banks. The Borrower may, in its sole discretion, on 10
Business Days' prior written notice to the agent and a Lender (except in the
case of the replacement of a Lender after notice from such Lender to the
Borrower pursuant to Section 6.1, in which case no prior notice from the
Borrower is required), cause a Lender who has incurred increased costs
(including as described in Section 6.1 and 6.6) or is unable to make Eurodollar
Rate Loans to (and such Lender shall) assign, pursuant to Section 13.1 all of
its rights and obligations under this Agreement to a bank or financial
institution designated by the Borrower which is willing to become a Lender for a
purchase price equal to the outstanding principal amount of the Loans payable to
such Lender plus any accrued but unpaid interest on such Loans, any accrued but
unpaid fees with respect to such Lender's Commitment and any other amount
payable to such
59
<PAGE>
Lender under this Agreement; provided, that any expenses or other amounts which
would be owing to such Lender pursuant to any indemnification provision hereof
(including, if applicable, Section 6.4) shall be payable by the Borrower as if
the Borrower had prepaid the Loans of such Lender rather than such Lender having
assigned its interest hereunder. The Borrower or the assignee shall pay the
applicable processing fee under Section 13.1.
60
<PAGE>
ARTICLE VII
Conditions to Making Loans and Issuing Letters of Credit
7.1. Conditions of Term Loans and Initial Advance. The obligations of the
Lenders to make the Term Loans and the initial Advance under the Revolving
Credit Facility, and of the Issuing Bank to issue any Letter of Credit, and of
NationsBank to make any Swing Line Loan, are subject to the conditions precedent
that:
(a) the Agent shall have received on the Closing Date, in form and
substance satisfactory to the Agent and Lenders, the following:
(i) executed originals of each of this Agreement, the Notes,
the initial Facility Guaranties, the Security Instruments, the LC
Account Agreement, the other Loan Documents, together with all
schedules and exhibits thereto;
(ii) the favorable written opinion or opinions with respect to
the Loan Documents and the transactions contemplated thereby of
counsel to the Credit Parties dated the Closing Date, addressed to
the Agent and the Lenders and satisfactory to Smith Helms Mulliss &
Moore, L.L.P., special counsel to the Agent, substantially in the
form(s) of Exhibit G;
(iii) resolutions of the boards of directors or other
appropriate governing body (or of the appropriate committee thereof)
of, or actions duly adopted by the shareholders of, each Credit
Party certified by its secretary or assistant secretary as of the
Closing Date, approving and adopting the Loan Documents to be
executed by such Person, and authorizing the execution, delivery and
performance thereof;
(iv) specimen signatures of officers of each Credit Party
executing the Loan Documents on behalf of such Credit Party,
certified by the secretary or assistant secretary of such Credit
Party;
(v) the charter documents of each Credit Party certified by
the Secretary or Assistant Secretary of such Credit Party;
(vi) the bylaws of each Credit Party certified as of the
Closing Date as true and correct by its secretary or assistant
secretary;
(vii) certificates issued as of a recent date by the
Secretaries of State of the respective jurisdictions of formation of
each Credit Party as to the due existence and good standing of each
Credit Party;
(viii) appropriate certificates of qualification to do
business, good standing and, where appropriate, authority to conduct
business under assumed name, issued
61
<PAGE>
in respect of the Borrower of a recent date by the Secretary of
State or comparable official of each jurisdiction in which the
failure to be qualified to do business or authorized so to conduct
business could have a Material Adverse Effect;
(ix) notice of appointment of the initial Authorized
Representative(s);
(x) certificate of an Authorized Representative dated the
Closing Date as to the Pro Forma Financial in form acceptable to the
Agent;
(xi) an initial Borrowing Notice, if any, and, if elected by
the Borrower, Interest Rate Selection Notice;
(xii) evidence of the filing of Uniform Commercial Code
financing statements reflecting the filing in all places required by
applicable law to perfect the Liens of the Agent under the Security
Instruments as a first priority Lien as to items of Collateral in
which a security interest may be perfected by the filing of
financing statements, and such other documents and/or evidence of
other actions as may be necessary under applicable law to perfect
the Liens of the Agent under the Security Instruments as a first
priority Lien in and to such other Collateral as the Agent may
require, including without limitation the delivery by the Borrower
and each Subsidiary of all stock certificates not previously
delivered to the Agent evidencing Pledged Stock, accompanied in each
case by duly executed stock powers (or other appropriate transfer
documents) in blank affixed thereto;
(xiii) evidence satisfactory to the Agent that all fees
payable by the Borrower on the Closing Date to the Agent, NMSI and
for the benefit of the Lenders have been paid in full or made
available to the Lenders;
(xiv) Uniform Commercial Code search results, to the extent
reasonably available, in respect of the Borrower and its
Subsidiaries showing only those Liens as are acceptable to the Agent
other than those to be terminated substantially concurrently with
the Closing Date;
(xv) Evidence satisfactory to the Agent that a Mortgage
Warehousing Facility for Mid-State will remain in effect following
the Closing Date, which Mortgage Warehousing Facility provides not
less than $400,000,000 in limited recourse financing;
(xvi) Receipt of the Pro Forma Financial Statements;
(xvii) Evidence satisfactory to the Agent of consummation of
the Related Acquisition in accordance with the Related Acquisition
Documents;
62
<PAGE>
(xviii) evidence satisfactory to the Agent that no default or
event of default exist under the Existing Agreement as at the
Closing Date; and
(b) In the good faith judgment of the Agent and the Lenders:
(i) there shall not have occurred or become known to the Agent
or the Lenders any event, condition, situation or status since the
Disclosure Date, other than the information theretofore furnished to
the Agent and the Lenders, that has had or could reasonably be
expected to result in a Material Adverse Effect;
(ii) there shall not be pending or threatened any action,
suit, investigation, litigation or other arbitral, administrative or
judicial proceeding, other than the Disclosed Litigation, which
could reasonably be likely to result in a Material Adverse Effect,
and there shall not have occurred any adverse change in status of or
results in any Disclosed Litigation which could reasonably be
expected to have a Materially Adverse Effect; and
(iii) the Borrower and its Subsidiaries shall have received
all material approvals, consents and waivers, and shall have made or
given all necessary filings and notices as shall be required to
consummate the transactions contemplated hereby without the
occurrence of any default under, conflict with or violation of (A)
any applicable law, rule, regulation, order or decree of any
Governmental Authority or arbitral authority or (B) any material
agreement, document or instrument to which any of the Borrower or
any Subsidiary is a party or by which any of them or their
properties is bound.
7.2. Conditions of Revolving Loans and Letters of Credit. The obligations
of the Lenders to make any Revolving Loans, of the Issuing Bank to issue or
renew Letters of Credit, and of NationsBank to make Swing Line Loans, hereunder
on or subsequent to the Closing Date are subject to the satisfaction of the
following conditions:
(a) the Agent or, in the case of Swing Line Loans, NationsBank shall
have received a Borrowing Notice if required by Article III;
(b) (i) the representations and warranties of the Borrower and the
Subsidiaries set forth in Article VIII and in each of the other Loan
Documents shall be true and correct in all material respects on and as of
the date of and both immediately before and after giving effect to such
Advance, Letter of Credit issuance or renewal or Swing Line Loan, with the
same effect as though such representations and warranties had been made on
and as of such date, except to the extent that such representations and
warranties expressly relate to an earlier date and except that the
financial statements referred to in Section 8.6(a) shall be deemed to be
those financial statements most recently delivered to the Agent and the
Lenders pursuant to Section 9.1 from the date financial statements are
delivered to the Agent and the Lenders in accordance with such Section,
and (ii) no
63
<PAGE>
statement furnished pursuant to Article IX shall disclose, either
individually or in the aggregate and cumulatively from the Closing Date, a
Material Adverse Change;
(c) in the case of the issuance of a Letter of Credit, the Borrower
shall have executed and delivered to the Issuing Bank an Application and
Agreement for Letter of Credit in form and content acceptable to the
Issuing Bank together with such other instruments and documents as it
shall request;
(d) immediately before and after giving effect to each Advance,
Swing Line Loan or the issuance or renewal of a Letter of Credit, no
Default or Event of Default specified in Article XI shall have occurred
and be continuing; and
(e) immediately after giving effect to:
(i) a Revolving Loan, the aggregate principal balance of all
outstanding Revolving Loans for each Lender shall not exceed such
Lender's Revolving Credit Commitment;
(ii) a Letter of Credit or renewal thereof, the aggregate
principal balance of all outstanding Participations in Letters of
Credit and Reimbursement Obligations (or in the case of the Issuing
Bank, its remaining interest after deduction of all Participations
in Letters of Credit and Reimbursement Obligations of other Lenders)
for each Lender and in the aggregate shall not exceed, respectively,
(X) such Lender's Letter of Credit Commitment or (Y) the Total
Letter of Credit Commitment;
(iii) a Swing Line Loan, the Swing Line Outstandings shall not
exceed $25,000,000; and
(iv) a Revolving Loan, Swing Line Loan or a Letter of Credit
(or renewal thereof), the sum of the principal amount of Letter of
Credit Outstandings, Revolving Credit Outstandings, Swing Line
Outstandings and Reserve Amount shall not exceed the Total Revolving
Credit Commitment.
64
<PAGE>
ARTICLE VIII
Representations and Warranties
The Borrower represents and warrants with respect to itself and to its
Restricted Subsidiaries, and where indicated its Unrestricted Subsidiaries
(which representations and warranties shall survive the delivery of the
documents mentioned herein and the making of Loans), that:
8.1. Organization and Authority.
(a) The Borrower and each Subsidiary (other than the MSH Trusts) is
a corporation duly organized and validly existing under the laws of the
jurisdiction of its formation, and each of the MSH Trusts is a validly
organized business trust existing under the laws of the State of Delaware;
(b) The Borrower and each Subsidiary (x) has the requisite power and
authority to own its properties and assets and to carry on its business as
now being conducted and as contemplated in the Loan Documents, and (y) is
qualified to do business in every jurisdiction in which failure so to
qualify would have a Material Adverse Effect;
(c) The Borrower has the power and authority to execute, deliver and
perform this Agreement and the Notes, and to borrow hereunder, and to
execute, deliver and perform each of the other Loan Documents to which it
is a party;
(d) Each Subsidiary has the power and authority to execute, deliver
and perform the Facility Guaranty, Unrestricted Subsidiary Subordination
Agreement and each of the other Loan Documents to which it is a party; and
(e) When executed and delivered, each of the Loan Documents to which
the Borrower or any Subsidiary is a party will be the legal, valid and
binding obligation or agreement, as the case may be, of the Borrower or
such Subsidiary, enforceable against the Borrower or such Subsidiary in
accordance with its terms, subject to the effect of any applicable
bankruptcy, moratorium, insolvency, reorganization or other similar law
affecting the enforceability of creditors' rights generally and to the
effect of general principles of equity (whether considered in a proceeding
at law or in equity).
8.2. Loan Documents. The execution, delivery and performance by the
Borrower and each Subsidiary of each of the Loan Documents to which it is a
party:
(a) have been duly authorized by all requisite corporate action
(including any required shareholder approval) of the Borrower and each
Subsidiary required for the lawful execution, delivery and performance
thereof;
65
<PAGE>
(b) do not violate any provisions of (i) applicable law, rule or
regulation, (ii) any judgment, writ, order, determination, decree or
arbitral award of any Governmental Authority or arbitral authority binding
on the Borrower or any Subsidiary or its properties, or (iii) the charter
documents or bylaws of the Borrower or any Subsidiary;
(c) does not and will not be in conflict with, result in a breach of
or constitute an event of default, or an event which, with notice or lapse
of time or both, would constitute an event of default, under any contract,
indenture, agreement or other instrument or document to which Borrower or
any Subsidiary is a party, or by which the properties or assets of
Borrower or any Subsidiary are bound; and
(d) does not and will not result in the creation or imposition of
any Lien upon any of the properties or assets of Borrower or any
Subsidiary except any Liens in favor of the Agent and the Lenders created
by the Security Instruments.
8.3. Solvency. The Borrower and each Subsidiary is Solvent at the Closing
Date after giving effect to the transactions contemplated by the Loan Document.
8.4. Subsidiaries and Stockholders. The Borrower has no Subsidiaries other
than those Persons listed as Subsidiaries in Schedule 8.4 and additional
Subsidiaries created or acquired after the Closing Date in compliance with
Section 9.19; Schedule 8.4 states as of the date hereof the organizational form
of each entity, the authorized and issued capitalization of each Subsidiary
listed thereon, the number of shares or other equity interests of each class of
capital stock or interest issued and outstanding of each such Subsidiary and the
number and/or percentage of outstanding shares or other equity interest
(including options, warrants and other rights to acquire any interest) of each
such class of capital stock or other equity interest owned by Borrower or by any
such Subsidiary; the outstanding shares or other equity interests of each such
Subsidiary have been duly authorized and validly issued and are fully paid and
nonassessable; and Borrower and each such Subsidiary owns beneficially and of
record all the shares and other interests it is listed as owning in Schedule
8.4, free and clear of any Lien.
8.5. Investments. Set forth on Schedule 8.5 is a complete and accurate
list of all material Investments (other than Investments described on Schedule
8.4, Cash Equivalents, and loans and advances to employees otherwise permitted
under Section 10.6(k)) held by the Borrower or any of its Restricted
Subsidiaries, showing as of the date of delivery of such Schedule or of the most
recent amendment or supplement thereto delivered pursuant to Section 9.1(g) the
amount, obligor or issuer, obligee and maturity, if any, thereof. Neither the
Borrower nor any of its Restricted Subsidiaries owns any interest in any Person
other than as listed in Schedules 8.4 and 8.5, Cash Equivalents and advances to
employees otherwise permitted under Section 10.6(k).
66
<PAGE>
8.6. Financial Condition.
(a) The Borrower has heretofore furnished to each Lender an audited
consolidated balance sheet of the Borrower and its Subsidiaries (and
related consolidating balance sheets of the Borrower and its Restricted
Subsidiaries) as at May 31, 1997 and the notes thereto, and the related
consolidated statements of operations, retained earnings and cash flows
for the Fiscal Year then ended (and related consolidating statements of
the Borrower and its Restricted Subsidiaries) as examined and certified by
Price Waterhouse, and unaudited consolidated interim financial statements
of the Borrower and its Subsidiaries consisting of a consolidated balance
sheet and related consolidated statements of operations, retained earnings
and cash flows, in each case with related notes, for and as of the end of
the three month period ending August 31, 1997 (and related interim
consolidating balance sheets and statements of operations, retained
earnings and cash flows of the Borrower and its Restricted Subsidiaries as
at and for the same interim period). Except as set forth therein, such
financial statements (including the notes thereto) present fairly in all
material respects the financial condition of the Borrower and its
Subsidiaries as of the end of such Fiscal Year and three month period and
results of their operations and the changes in its stockholders' equity
for the Fiscal Year and interim period then ended, all in conformity with
GAAP applied on a Consistent Basis, subject however, in the case of
unaudited interim statements to year end audit adjustments;
(b) The Borrower has furnished to each Lender the Pro Forma
Financial Statements which have been prepared by the Borrower or AIMCOR,
as the case may be, and are based on assumptions believed to be reasonable
at the time delivered; and
(c) since August 31, 1997 there has been no material adverse change
in the condition, financial or otherwise, of the Borrower or any of its
Subsidiaries or in the businesses, properties, performance, prospects or
operations of the Borrower or its Subsidiaries, nor have such businesses
or properties, been adversely affected as a result of any fire, explosion,
earthquake, accident, strike, lockout, combination of workers, drought,
storm, hail, flood, embargo or act of God or a public enemy, in any case
which act, event, condition or occurrence has had or could reasonably be
expected to have a Material Adverse Effect.
8.7. Title to Properties. The Borrower and each of its Restricted
Subsidiaries has good and marketable title to all its real and personal
properties, except where failure to have such title could not reasonably be
expected to have a Material Adverse Effect.
8.8. Taxes. The Borrower and each of its Subsidiaries has filed or caused
to be filed all federal, and material state and local tax returns which are
required to be filed by it and, except for taxes and assessments described in
Schedule 8.8 being contested in good faith by appropriate proceedings diligently
conducted and against which reserves, to the extent required by the Borrower's
independent certified public accountants, have been established and reflected in
the financial statements described in Section 8.6(a) (to the extent available
with respect to the
67
<PAGE>
applicable period), have paid or caused to be paid all taxes as shown on said
returns or on any assessment received by it, to the extent that such taxes have
become due.
8.9. Other Agreements. Neither the Borrower nor any Subsidiary is
(a) a party to or subject to any judgment, order, decree, agreement,
lease or instrument, or subject to other restrictions, which individually
or in the aggregate could reasonably be expected to have a Material
Adverse Effect; or
(b) in default in the performance, observance or fulfillment of any
of the obligations, covenants or conditions contained in any agreement or
instrument to which the Borrower or any Subsidiary is a party, which
default has, or if not remedied within any applicable grace period could
reasonably be likely to have, a Material Adverse Effect.
8.10. Litigation. Except for those matters set forth on Schedule 8.10 (the
"Disclosed Litigation"), each of which matters were disclosed to the Agent prior
to the Disclosure Date, there is no action, suit or proceeding at law or in
equity or by or before any governmental instrumentality or agency or arbitral
body pending, or, to the knowledge of the Borrower, threatened by or against the
Borrower or any Subsidiary or affecting the Borrower or any Subsidiary or any
properties or rights of the Borrower or any Subsidiary, and since the Disclosure
Date there has occurred no change in the status or financial effect of any
Disclosed Litigation, in either case which could reasonably be likely to have a
Material Adverse Effect.
8.11. Margin Stock. The proceeds of the borrowings made hereunder will be
used by the Borrower only for the purposes expressly authorized herein. None of
such proceeds will be used, directly or indirectly, for the purpose of
purchasing or carrying any equity securities registered pursuant to Section 12
of the Exchange Act or any margin stock or for the purpose of reducing or
retiring any Indebtedness which was originally incurred to purchase or carry
such equity securities or margin stock, or for any other purpose which might
constitute any of the Loans under this Agreement a "purpose credit" within the
meaning of said Regulation U, Regulation G or Regulation X (12 C.F.R. Part 224)
of the Board. Neither the Borrower nor any agent acting in its behalf has taken
or will take any action which might cause this Agreement or any of the documents
or instruments delivered pursuant hereto to violate any regulation of the Board
or to violate the Exchange Act, or the Securities Act of 1933, as amended, or
any state securities laws, in each case as in effect on the date hereof.
8.12. Investment Company. Neither the Borrower nor any Subsidiary 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 (15 U.S.C. ss. 80a-1, et seq.). The
application of the proceeds of the Loans and repayment thereof by the Borrower
and the performance by the Borrower and the Guarantors of the transactions
contemplated by the Loan Documents will not violate any provision of said Act,
or any rule, regulation or order issued by the Securities and Exchange
Commission thereunder, in each case as in effect on the date hereof.
68
<PAGE>
8.13. Patents, Etc. The Borrower and each Restricted Subsidiary owns or
has the right to use, under valid license agreements or otherwise, all material
patents, licenses, franchises, trademarks, trademark rights, trade names, trade
name rights, trade secrets and copyrights necessary to or used in the conduct of
its businesses as now conducted and as contemplated by the Loan Documents,
without known conflict with any patent, license, franchise, trademark, trade
secret, trade name, copyright, other proprietary right of any other Person,
except to the extent that failure to so own or have such right could not
reasonably be expected to have a Material Adverse Effect.
8.14. No Untrue Statement. Neither (a) this Agreement nor any other Loan
Document or certificate or document executed and delivered by or on behalf of
the Borrower or any Subsidiary in accordance with or pursuant to any Loan
Document nor (b) the information (other than projections) or any other written
statement, representation, or warranty provided to the Agent in connection with
the negotiation or preparation of the Loan Documents contains any
misrepresentation or untrue statement of material fact or omits to state a
material fact necessary, in light of the circumstance under which it was made,
in order to make any such warranty, representation or statement contained
therein not misleading.
8.15. No Consents, Etc. Neither the respective businesses or properties of
the Borrower or any Subsidiary, nor any relationship between the Borrower or any
Subsidiary and any other Person, nor any circumstance in connection with the
execution, delivery and performance of the Loan Documents and the transactions
contemplated thereby, is such as to require a consent, approval or authorization
of, or filing, registration or qualification with, any Governmental Authority or
any other Person on the part of the Borrower or any Subsidiary as a condition to
the execution, delivery and performance of, or consummation of the transactions
contemplated by the Loan Documents, which, if not obtained or effected, would be
reasonably likely to have a Material Adverse Effect or to materially impair or
impose burdensome conditions on the performance of any of the Loan Documents, or
if so, such consent, approval, authorization, filing, registration or
qualification has been duly obtained or effected, as the case may be.
8.16. Employee Benefit Plans. Except to the extent that failure to so
comply could not reasonably be expected to have a Material Adverse Effect:
(a) The Borrower and each ERISA Affiliate is in compliance with all
applicable provisions of ERISA and the regulations and published
interpretations thereunder and in compliance with all Foreign Benefit Laws
with respect to all Employee Benefit Plans except for any required
amendments for which the remedial amendment period as defined in Section
401(b) of the Code has not yet expired. Each Employee Benefit Plan that is
intended to be qualified under Section 401(a) of the Code has been
determined by the Internal Revenue Service to be so qualified, and each
trust related to such plan has been determined to be exempt under Section
501(a) of the Code. No material liability has been incurred by the
Borrower or any ERISA Affiliate which remains unsatisfied for any taxes or
penalties with respect to any Employee Benefit Plan or any Multiemployer
Plan;
69
<PAGE>
(b) Neither the Borrower nor any ERISA Affiliate has (i) engaged in
a nonexempt prohibited transaction described in Section 4975 of the Code
or Section 406 of ERISA affecting any of the Employee Benefit Plans or the
trusts created thereunder which could subject any such Employee Benefit
Plan or trust to a material tax or penalty on prohibited transactions
imposed under Internal Revenue Code Section 4975 or ERISA, (ii) incurred
any accumulated funding deficiency with respect to any Employee Benefit
Plan, whether or not waived, or any other liability to the PBGC which
remains outstanding other than the payment of premiums and there are no
premium payments which are due and unpaid, (iii) failed to make a required
contribution or payment to a Multiemployer Plan, or (iv) failed to make a
required installment or other required payment under Section 412 of the
Code, Section 302 of ERISA or the terms of such Employee Benefit Plan;
(c) No Termination Event has occurred or is reasonably expected to
occur with respect to any Pension Plan or Multiemployer Plan, and neither
the Borrower nor any ERISA Affiliate has incurred any unpaid withdrawal
liability with respect to any Multiemployer Plan;
(d) Except as described on Schedule 8.16A, the present value of all
vested accrued benefits under each Employee Benefit Plan which is subject
to Title IV of ERISA, did not, as of the most recent valuation date for
each such plan, exceed the then current value of the assets of such
Employee Benefit Plan allocable to such benefits, and since such valuation
date there has occurred no material adverse change in the funding of any
such Employee Benefit Plan;
(e) To the best of the Borrower's knowledge, each Employee Benefit
Plan subject to Title IV of ERISA, maintained by the Borrower or any ERISA
Affiliate, has been administered in accordance with its terms in all
material respects and is in compliance in all material respects with all
applicable requirements of ERISA and other applicable laws, regulations
and rules;
(f) The consummation of the Loans and the issuance of the Letters of
Credit provided for herein will not involve any prohibited transaction
under ERISA which is not subject to a statutory or administrative
exemption; and
(g) No material proceeding, claim, lawsuit and/or investigation
exists or, to the best knowledge of the Borrower after due inquiry, is
threatened concerning or involving any Employee Benefit Plan;
(h) Set forth on Schedule 8.16B is a complete and accurate list as
of the Closing Date of all Pension Plans and Multiemployer Plans.
8.17. No Default. As of the date hereof, there does not exist any Default
or Event of Default hereunder.
70
<PAGE>
8.18. Hazardous Materials. (a) Except as set forth on Schedule 8.18A, the
operations and properties of the Borrower and each of its Subsidiaries comply in
all material respects with all applicable Environmental Laws, except to the
extent failure to so comply could not reasonably be expected to have a Material
Adverse Effect, and no circumstances exist that could reasonably be expected to
(i) form the basis of an Environmental Action against the Borrower or any of its
Subsidiaries or any of their properties that could have a Material Adverse
Effect or (ii) cause any such property to be subject to any restrictions on
ownership, occupancy, use or transferability under any applicable Environmental
Law that could have a Material Adverse Effect; and
(b) Except as set forth on Schedule 8.18B hereto and except to the extent
failure to so comply could not reasonably be expected to have a Material Adverse
Effect, none of the properties owned or operated by the Borrower or any of its
Subsidiaries is listed or proposed for listing on the national priorities list
established under CERCLA or on the CERCLIS, or on any analogous state or local
list; no underground storage tanks (as defined in 42 U.S.C. ss. 6991) are
located on any property owned or operated by the Borrower or any of its
Subsidiaries, except in compliance with all applicable Environmental Laws; and
Hazardous Materials have not been released or disposed of on, generated, used,
treated, handled or stored at, or transported to or from, any property currently
or formerly owned or operated by the Borrower or any of its Subsidiaries in
violation of any applicable Environmental Laws or in a manner that, either
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect. The Borrower and each Subsidiary is in compliance with
all applicable Environmental Laws in all material respects except to the extent
failure to so comply could not reasonably be expected to have a Material Adverse
Effect. Except as set forth on Schedule 8.18A and except as could not reasonably
be expected to have a Material Adverse Effect, neither the Borrower nor any
Subsidiary has been notified of any action, suit, proceeding or investigation
which calls into question compliance by the Borrower or any Subsidiary with any
Environmental Laws or which seeks to suspend, revoke or terminate any license,
permit or approval necessary for the generation, handling, storage, treatment or
disposal of any Hazardous Material, and none of such actions, suits, proceedings
or investigations could reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
8.19. Employment Matters. (a) Except as set forth on Schedule 8.19, none
of the employees of the Borrower or any Subsidiary is subject to any collective
bargaining agreement and there are no strikes, work stoppages, election or
decertification petitions or proceedings, unfair labor charges, equal
opportunity proceedings, or other material labor/employee related controversies
or proceedings pending or, to the best knowledge of the Borrower, threatened
against the Borrower or any Subsidiary or between the Borrower or any Subsidiary
and any of its employees, other than any of the foregoing which could not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect; and
(b) Except to the extent a failure to maintain compliance would not have a
Material Adverse Effect, the Borrower and each Subsidiary is in compliance in
all respects with all applicable laws, rules and regulations pertaining to labor
or employment matters, including without limitation those pertaining to wages,
hours, occupational safety and taxation and there is
71
<PAGE>
neither pending or threatened any litigation, administrative proceeding nor, to
the knowledge of the Borrower, any investigation, in respect of such matters
which, if decided adversely, could reasonably be likely, individually or in the
aggregate, to have a Material Adverse Effect.
8.20. RICO. Neither the Borrower nor any Subsidiary is engaged in or has
engaged in any course of conduct that could subject any of their respective
properties material to the Borrower or its Subsidiaries to any Lien, seizure or
other forfeiture under any criminal law, racketeer influenced and corrupt
organizations law, civil or criminal, or other similar laws.
8.21. Related Acquisition. The Related Acquisition has been fully
consummated in accordance with the Related Acquisition Transaction Documents.
8.22. Representations and Warranties from the Related Acquisition
Transaction Documents. As of the Closing Date (and immediately prior to giving
effect to the Related Acquisition), each of the representations and warranties
made by the Borrower or any Subsidiary in the Related Acquisition Transaction
Documents are true and correct in all material respects as of the date hereof,
and the Borrower is not aware that any of the representations and warranties of
AIMCOR contained in the Related Acquisition Transaction Documents are not true
and correct in all material respects as of the date hereof.
72
<PAGE>
ARTICLE IX
Affirmative Covenants
Until the Facility Termination Date, unless the Required Lenders shall
otherwise consent in writing, the Borrower will, and where applicable will cause
each Subsidiary to:
9.1. Financial Reports, Etc. (a) As soon as practical and in any event
within 90 days after the end of each Fiscal Year of the Borrower, deliver or
cause to be delivered to the Agent and each Lender (i) a consolidated balance
sheet of the Borrower and its Subsidiaries and a consolidating balance sheet of
the Borrower and its Restricted Subsidiaries as at the end of such Fiscal Year,
and the notes thereto, and the related consolidated statements of operations,
retained earnings and cash flows of the Borrower and its Subsidiaries, and the
respective notes thereto, and consolidating statement of operations of the
Borrower and its Restricted Subsidiaries, and any notes thereto, for such Fiscal
Year, setting forth (other than for consolidating statements) comparative
financial statements for the preceding Fiscal Year, all prepared in accordance
with GAAP applied on a Consistent Basis and containing, with respect to the
consolidated financial statements, opinions of Price Waterhouse, or other such
independent certified public accountants selected by the Borrower and approved
by the Agent, which are unqualified as to the scope of the audit performed and
as to the "going concern" status of the Borrower and its Subsidiaries and
without any exception not acceptable to the Lenders, and (ii) a certificate of
an Authorized Representative (A) demonstrating compliance with Sections 10.1,
10.4(g), 10.4(k), 10.4(l), 10.6(e), 10.6(g), 10.6(k), 10.6(l) and 10.8(b) and
(B) showing the net cash investment by the Borrower and Restricted Subsidiaries
in the Unrestricted Subsidiaries, which certificate shall be in the form of
Exhibit H;
(b) (i) as soon as practical and in any event within 45 days after
the end of each fiscal quarter (except the last fiscal quarter of the Fiscal
Year), deliver to the Agent and each Lender (A) a consolidated balance sheet of
the Borrower and its Subsidiaries and the related consolidated statements of
operations, retained earnings and cash flows for such fiscal quarter and for the
period from the beginning of the then current Fiscal Year through the end of
such reporting period, and accompanied by a certificate of an Authorized
Representative to the effect that such financial statements present fairly the
financial position of the Borrower and its Subsidiaries as of the end of such
fiscal period and the results of their operations and the changes in their
financial position for such fiscal period, in conformity with the standards set
forth in Section 8.6(a) with respect to interim financial statements, and (B) a
management discussion and analysis of operating results of the Borrower and its
Subsidiaries for such fiscal quarter and for the period from the beginning of
the then current Fiscal Year, in form and detail reasonably acceptable to the
Agent, and (ii) as soon as practical and in any event within 60 days after the
end of each fiscal quarter (except the last fiscal quarter of the Fiscal Year),
deliver to the Agent and each Lender (A) a consolidating balance sheet of the
Borrower and its Restricted Subsidiaries and the related consolidating statement
of operations for such fiscal quarter and for the period from the beginning of
the then current Fiscal Year through the end of such reporting period, and
accompanied by a certificate of an Authorized Representative to the effect that
such consolidating
73
<PAGE>
financial statements present fairly the financial position of the Borrower and
its Restricted Subsidiaries as of the end of such fiscal period and the results
of their operations and the changes in their financial position for such fiscal
period, in conformity with the standards set forth in Section 8.6(a) with
respect to interim financial statements, and (B), beginning with the quarterly
period ending February 28, 1998, a certificate of an Authorized Representative
containing computations for such quarter comparable to that required pursuant to
Section 9.1(a)(ii);
(c) together with each delivery of the financial statements required by
Section 9.1(a)(i), deliver to the Agent and each Lender a letter from the
Borrower's accountants specified in Section 9.1(a)(i) stating that in performing
the audit necessary to render an opinion on the financial statements delivered
under Section 9.1(a)(i), they obtained no knowledge of any Default or Event of
Default by the Borrower in the fulfillment of the terms and provisions of this
Agreement insofar as they relate to financial matters (which at the date of such
statement remains uncured); or if the accountants have obtained knowledge of
such Default or Event of Default, a statement specifying the nature and period
of existence thereof;
(d) promptly upon their becoming available to the Borrower, the Borrower
shall deliver to the Agent and each Lender a copy of (i) all regular or special
reports or effective registration statements which Borrower or any Subsidiary
shall file with the Securities and Exchange Commission (or any successor
thereto) or any securities exchange, (ii) any proxy statement distributed by the
Borrower or any Subsidiary to its shareholders, bondholders or the financial
community in general, and (iii) any management letter or other report submitted
to the Borrower or any Subsidiary by independent accountants in connection with
any annual, interim or special audit of the Borrower or any Subsidiary;
(e) together with each delivery of the financial statements required by
Sections 9.1(a)(i) and 9.1(b)(i), deliver to the Agent and each Lender each of
the following items as to the Borrower and its Restricted Subsidiaries in
respect of the period covered by the financial statements accompanying such item
and, in the case of items accompanying quarterly financial statements, in
respect of the period from the beginning of the then current Fiscal Year through
the end of such quarterly period, each to be certified as true and correct by
the Authorized Representative: (i) a schedule of Consolidated Capital
Expenditures and (ii) a statement of the aggregate amount of each of Holdback
Reserves and Tax Reserves as at the end of such period;
(f) As soon as available and in any event no later than 15 days before the
end of each Fiscal Year, a consolidated business plan for the Borrower and its
Subsidiaries, a supplemental consolidated business plan for the Borrower and its
Restricted Subsidiaries, in each case prepared by management of the Borrower,
substantially similar in form and detail to the business plans prepared prior to
the Closing Date and furnished to the Agent, of balance sheets, operations and
retained earnings statements and cash flow statements (to include separate
forecasts for Consolidated Capital Expenditures and Consolidated EBITDA), and a
reasonably detailed explanation of any underlying assumptions with respect
thereto, on a quarterly basis for the forthcoming Fiscal Year; and
74
<PAGE>
(g) promptly, from time to time, deliver or cause to be delivered to the
Agent and each Lender such other information regarding Borrower's and any
Subsidiary's operations, business affairs and financial condition as the Agent
or such Lender may reasonably request.
The Agent and the Lenders are hereby authorized to deliver a copy of any
such financial or other information delivered hereunder to the Lenders (or any
affiliate of any Lender) or to the Agent, to any Governmental Authority having
jurisdiction over the Agent or any of the Lenders pursuant to any written
request therefor or in the ordinary course of examination of loan files, or to
any other Person who shall acquire or consider the assignment of, or acquisition
of any participation interest in, any Obligation permitted by this Agreement
(subject, in the case of delivery of information to Persons considering the
acquisition of a participation interest, to the agreement of such Person to
comply with customary confidentiality undertakings with respect to such
information then employed by the Agent in such circumstances).
9.2. Maintain Properties. Maintain all properties necessary to its
operations in good working order and condition, make all needed repairs,
replacements and renewals to such properties, and maintain free from Liens all
trademarks, trade names, patents, copyrights, trade secrets, know-how, and other
intellectual property and proprietary information (or adequate licenses
thereto), in each case as are reasonably necessary to conduct its business as
currently conducted or as contemplated hereby, all in accordance with customary
and prudent business practices.
9.3. Existence, Qualification, Etc. Except as otherwise expressly
permitted under Section 10.7, do or cause to be done all things necessary to
preserve and keep in full force and effect its existence and all material rights
and franchises, and maintain its license or qualification to do business as a
foreign corporation and good standing in each jurisdiction in which its
ownership or lease of property or the nature of its business makes such license
or qualification necessary, except where the failure to so qualify would not
have a Material Adverse Effect.
9.4. Regulations and Taxes. Comply in all material respects with or
contest in good faith all statutes and governmental regulations and pay all
taxes, assessments, governmental charges, claims for labor, supplies, rent and
any other obligation which, if unpaid, would become a Lien against any of its
properties the existing of which Lien would have a Material Adverse Effect
except where such liabilities are being contested in good faith by appropriate
proceedings diligently conducted and against which adequate reserves acceptable
to the Borrower's independent certified public accountants have been established
unless and until any Lien resulting therefrom attaches to its property and
assets and becomes enforceable against its creditors.
9.5. Insurance. (a) Keep all of its insurable properties adequately
insured at all times with responsible insurance carriers against loss or damage
by fire and other hazards to the extent and in the manner substantially similar
to that in effect as of the Closing Date, (b) maintain general public liability
insurance at all times with responsible insurance carriers against liability on
account of damage to persons and property, and (c) maintain insurance under all
applicable workers' compensation laws (or in the alternative, maintain required
reserves if self-insured for
75
<PAGE>
workers' compensation purposes), such policies of insurance to have such limits,
deductibles, exclusions, co-insurance and other provisions providing no less
coverages than that specified in Schedule 9.5 and to be in form reasonably
satisfactory to the Agent. Each of the policies of insurance described in this
Section 9.5 shall provide that the insurer shall give the Agent not less than
thirty (30) days' prior written notice before any such policy shall be
terminated, lapse or be altered in any manner.
9.6. True Books. Keep true books of record and account in which full, true
and correct entries will be made of all of its dealings and transactions, and
set up on its books such reserves as may be required by GAAP with respect to
doubtful accounts and all taxes, assessments, charges, levies and claims and
with respect to its business in general, and include such reserves in interim as
well as year-end financial statements.
9.7. Right of Inspection. Permit any Person designated by any Lender or
the Agent to visit and inspect any of the properties, corporate books and
financial reports of the Borrower or any Subsidiary and to discuss its affairs,
finances and accounts with its principal officers and independent certified
public accountants, all at reasonable times, at reasonable intervals and with
reasonable prior notice.
9.8. Observe all Laws. Conform to and duly observe in all material
respects all laws, rules and regulations and all other valid requirements of any
Governmental Authority with respect to the conduct of its business, except where
the failure to do so could not reasonably be expected to have a Material Adverse
Effect.
9.9. Governmental Licenses. Obtain and maintain all licenses, permits,
certifications and approvals of all applicable Governmental Authorities as are
required for the conduct of its business as currently conducted and as
contemplated by the Loan Documents, except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect.
9.10. Covenants Extending to Other Persons. Cause each of its Subsidiaries
to do with respect to itself, its business and its assets, each of the things
required of the Borrower in Sections 9.2 through 9.9, 9.18 and 9.21 inclusive.
9.11. Officer's Knowledge of Default. Upon the chief financial officer,
Vice President-Controller or Vice President-Treasurer (or other officer of
different title exercising the same function) of the Borrower obtaining
knowledge of any Default or Event of Default hereunder, or any event,
development or occurrence which could reasonably be expected to have a Material
Adverse Effect, cause any such officer to promptly notify the Agent of the
nature thereof, the period of existence thereof, and what action the Borrower or
such Subsidiary proposes to take with respect thereto.
9.12. Suits or Other Proceedings. Upon any officer of the Borrower
obtaining knowledge (i) of any litigation or other proceedings being instituted
against the Borrower or any Subsidiary, or any attachment, levy, execution or
other process being instituted against any assets of the
76
<PAGE>
Borrower or any Subsidiary, which individually or in the aggregate could
reasonably be likely to have a Material Adverse Effect, or (ii) of any Material
Adverse Change in Disclosed Litigation, promptly deliver to the Agent written
notice thereof stating the nature and status of such litigation, dispute,
proceeding, levy, execution or other process.
9.13. Notice of Discharge of Hazardous Material or Environmental
Complaint. Promptly provide to the Agent true, accurate and complete copies of
any and all notices, complaints, orders, directives, claims, or citations
received by the Borrower or any Subsidiary relating to any (a) violation or
alleged violation by the Borrower or any Subsidiary of any applicable
Environmental Law; (b) release or threatened release by the Borrower or any
Subsidiary, or at any facility or property owned or leased or operated by the
Borrower or any Subsidiary, of any Hazardous Material, except where occurring
legally; or (c) liability or alleged liability of the Borrower or any Subsidiary
for the costs of cleaning up, removing, remediating or responding to a release
of Hazardous Materials, in any case which could reasonably be expected to have a
Material Adverse Effect.
9.14. Environmental Compliance. If the Borrower or any Subsidiary shall
receive any letter, notice, complaint, order, directive, claim or citation from
any Governmental Authority or in connection with any pending or threatened
litigation alleging that the Borrower or and Subsidiary has violated any
Environmental Law or is liable for the costs of cleaning up, removing,
remediating or responding to a release of Hazardous Materials, the Borrower
shall, in any case relating to any claim, liability, act, event or occurrence
which could reasonably be expected to have a Material Adverse Effect, within the
time period permitted by the applicable Environmental Law or the Governmental
Authority responsible for enforcing such Environmental Law, remove or remedy, or
cause the applicable Subsidiary to remove or remedy, such violation or release
or satisfy such liability, unless and only during the period that the
applicability of the Environmental Law, the fact of such violation or liability
or what is required to remove or remedy such violation is being contested by the
Borrower or the applicable Subsidiary by appropriate proceedings diligently
conducted, all reserves with respect thereto as may be required under Generally
Accepted Accounting Principles, if any, have been made, and no Lien shall have
attached to property of the Borrower or the applicable Subsidiary which shall
have become enforceable against creditors of such Person.
9.15. Indemnification. Without limiting the generality of Section 13.9,
the Borrower hereby agrees to indemnify and hold the Agent, the Lenders and
NMSI, and their respective officers, directors, employees and agents, harmless
from and against any and all claims, losses, penalties, liabilities, damages and
expenses (including assessment and cleanup costs and reasonable attorneys' fees
and disbursements) arising directly or indirectly from, out of or by reason of
(a) the violation of any Environmental Law by the Borrower or any Subsidiary or
with respect to any property owned, operated or leased by the Borrower or any
Subsidiary or (b) the handling, storage, treatment, emission or disposal of any
Hazardous Materials by or on behalf of the Borrower or any Subsidiary or on or
with respect to property owned or leased or operated by the Borrower or any
Subsidiary. The provisions of this Section 9.15 shall survive the Facility
Termination Date.
77
<PAGE>
9.16. Further Assurances. At the Borrower's cost and expense, upon request
of the Agent, duly execute and deliver or cause to be duly executed and
delivered, to the Agent such further certificates and financing and continuation
statements, and do and cause to be done such further acts that may be reasonably
necessary or advisable in the reasonable opinion of the Agent to carry out more
effectively the provisions and purposes of the Security Instruments.
9.17. Employee Benefit Plans.
(a) With reasonable promptness, and in any event within thirty (30)
days thereof, give notice to the Agent of (a) any material increase in the
benefits of any Employee Benefit Plan, (b) each funding waiver request
filed with respect to any Employee Benefit Plan and all communications
received or sent by the Borrower or any ERISA Affiliate with respect to
such request and (c) the failure of the Borrower or any ERISA Affiliate to
make a required installment or payment under Section 302 of ERISA or
Section 412 of the Code by the due date;
(b) Promptly and in any event within fifteen (15) days of becoming
aware of the occurrence or forthcoming occurrence of any (a) Termination
Event or (b) nonexempt "prohibited transaction," as such term is defined
in Section 406 of ERISA or Section 4975 of the Code, in connection with
any Pension Plan or any trust created thereunder, deliver to the Agent a
notice specifying the nature thereof, what action the Borrower or any
ERISA Affiliate has taken, is taking or proposes to take with respect
thereto and, when known, any action taken or threatened by the Internal
Revenue Service, the Department of Labor or the PBGC with respect thereto;
and
(c) With reasonable promptness but in any event within fifteen (15)
days for purposes of clauses (a), (b) and (c), deliver to the Agent copies
of (a) any unfavorable determination letter from the Internal Revenue
Service regarding the qualification of an Employee Benefit Plan under
Section 401(a) of the Code, (b) all notices received by the Borrower or
any ERISA Affiliate of the PBGC's intent to terminate any Pension Plan or
to have a trustee appointed to administer any Pension Plan, (c) if the
Agent shall request, each Schedule B (Actuarial Information) to the annual
report (Form 5500 Series) filed by the Borrower or any ERISA Affiliate
with the Internal Revenue Service with respect to each Pension Plan and
(d) all notices received by the Borrower or any ERISA Affiliate from a
Multiemployer Plan sponsor concerning the imposition and amount, if any,
of withdrawal liability pursuant to Section 4202 of ERISA. The Borrower
will notify the Agent in writing within five (5) Business Days of the
Borrower or any ERISA Affiliate obtaining knowledge or reason to know that
the Borrower or any ERISA Affiliate has filed or intends to file a notice
of intent to terminate any Pension Plan under a distress termination
within the meaning of Section 4041(c) of ERISA,
to the extent that, in the case of any occurrence or condition described in
clauses (a) through (c) above, such occurrence could reasonably be expected to
have a Material Adverse Effect.
78
<PAGE>
9.18. Continued Operations. Continue at all times to conduct its business
and engage principally in the same line or lines of business substantially as
heretofore conducted.
9.19. New Domestic Subsidiaries and Material Foreign Subsidiaries. Within
thirty (30) days following the acquisition or creation of any Domestic
Subsidiary other than an MSH Trust, or the date upon which any previously
inactive Domestic Subsidiary ceases to be inactive, or upon any Foreign
Subsidiary becoming a Material Foreign Subsidiary cause to be delivered to the
Agent for the benefit of the Lenders each of the following:
(a) in the case of a Domestic Subsidiary, a Facility Guaranty
executed by such Subsidiary substantially in the form of Exhibit I;
(b) (A) the Pledged Stock of such Domestic Subsidiary or 65% of the
Voting Stock and 100% of the non-voting stock of a Material Foreign
Subsidiary, together with duly executed stock powers or powers of
assignment in blank affixed thereto, and (B) if such Collateral shall be
owned by a Subsidiary who has not then executed and delivered to the Agent
a Stock Pledge Agreement granting a Lien to the Agent in such Collateral,
a Stock Pledge Agreement substantially similar in form and content to that
executed and delivered by the Borrower as of the Closing Date, with
appropriate revisions as to the identity of the pledgor and securing the
obligations of such pledgor under its Facility Guaranty;
(c) a supplement to the appropriate schedule attached to the
appropriate Security Instruments listing the additional Collateral,
certified as true, correct and complete by the Authorized Representative
(provided that the failure to deliver such supplement shall not impair the
rights conferred under the Security Instruments in after acquired
Collateral);
(d) an opinion of counsel (which may include in-house counsel) to
the Subsidiary dated as of the date of delivery of the Facility Guaranty
and other Loan Documents provided for in this Section 9.19 and addressed
to the Agent and the Lenders, in form and substance reasonably acceptable
to the Agent (which opinion may include assumptions and qualifications of
similar effect to those contained in the opinions of counsel delivered
pursuant to Section 7.1(a)), to the effect that:
(A) such Subsidiary is duly organized, validly existing and in
good standing in the jurisdiction of its formation, has the
requisite power and authority to own its properties and conduct its
business as then owned and then conducted and proposed to be
conducted, and is duly qualified to transact business and is in good
standing as a foreign corporation or partnership in each other
jurisdiction in which the character of the properties owned or
leased, or the business carried on by it, requires such
qualification and the failure to be so qualified could reasonably be
likely to result in a Material Adverse Effect;
79
<PAGE>
(B) the execution, delivery and performance of the Facility
Guaranty and other Loan Documents described in this Section 9.19 to
which such Subsidiary is a signatory have been duly authorized by
all requisite corporate or partnership action (including any
required shareholder or partner approval), each of such agreements
has been duly executed and delivered and constitutes the valid and
binding agreement of such Subsidiary, enforceable against such
Subsidiary in accordance with its terms, subject to the effect of
any applicable bankruptcy, moratorium, insolvency, reorganization or
other similar law affecting the enforceability of creditors' rights
generally and to the effect of general principles of equity (whether
considered in a proceeding at law or in equity); and
(C) to the extent required by applicable law, the Uniform
Commercial Code financing statements on Form UCC-1 delivered to the
Agent by the Subsidiary in connection with the delivery of the
Security Instruments of such Subsidiary have been duly executed by
the Subsidiary and are in form, substance and number sufficient for
filing in all Uniform Commercial Code filing offices in all
jurisdictions in which filing is necessary to perfect in favor of
the Agent for the benefit of the Lenders the Lien on Collateral
conferred under such Security Instruments to the extent such Lien
may be perfected by Uniform Commercial Code filing, and to the
extent that possession of the Pledged Stock owned by such Subsidiary
is required to perfect the Lien of the Agent therein, the Agent has
a duly perfected Lien in such Collateral as in existence as of the
date of such opinion;
provided, however, that the Agent may waive, in its sole discretion, the
furnishing of an opinion if the Agent shall determine that the assets,
revenues and operations of such Subsidiary are not material;
(e) current copies of the charter documents and bylaws of such
Subsidiary, minutes of duly called and conducted meetings (or duly
effected consent actions) of the Board of Directors or appropriate
committees thereof (and, if required by such charter documents, bylaws or
by applicable law, of the shareholders) of such Subsidiary authorizing the
actions and the execution and delivery of documents described in this
Section 9.19.
9.20. Mortgage Warehousing Facility. Cause Mid-State to maintain a
mortgage warehousing program in an aggregate amount of at least $375,000,000
(the availability of which may be subject to substantially the same criteria as
those included in the documentation evidencing the Mortgage Warehousing Facility
on the Closing Date) and otherwise on substantially the same terms as the terms
of the Mortgage Warehousing Facility.
9.21. Transactions with Affiliates. Conduct, and cause each of its
Subsidiaries to conduct, directly or indirectly, all transactions otherwise
permitted under the Loan Documents with any of their Affiliates on terms that
are fair and reasonable and no less favorable to such Borrower or
80
<PAGE>
such Subsidiary than it would obtain in a comparable arm's-length transaction
with a Person that is not an Affiliate, other than:
(i) the consummation by the Borrower and its Subsidiaries of
the transactions effected by the Loan Documents;
(ii) any employment arrangement entered into by such Borrower
or any of its Subsidiaries in the ordinary course of business and
consistent with the past practices of such Borrower or such
Subsidiary, as the case may be;
(iii) transactions between or among such Borrower and its
Subsidiaries or between or among Subsidiaries of such Borrower, in
each case to the extent otherwise permitted under the terms of the
Loan Documents; and
(iv) the declaration and payment of dividends and the making
of distributions to all holders of any class of capital stock of
such Borrower or any of its Subsidiaries to the extent otherwise
permitted under Section 10.8;
9.22. Permitted Receivables Securitization. In the event that the Borrower
shall enter into any Permitted Receivables Securitization, the Borrower shall
maintain such Permitted Receivables Securitization (or a replacement Permitted
Receivables Securitization on terms no less favorable to the Lenders than the
facility so replaced), including without limitation availability of advances
thereunder, on the terms and conditions approved by the Agent and the Required
Lenders.
81
<PAGE>
ARTICLE X
Negative Covenants
Until the Facility Termination Date, unless the Required Lenders shall
otherwise consent in writing, the Borrower will not, nor will it permit any
Subsidiary or Restricted Subsidiary, as the case may be, to:
10.1. Financial Covenants.
(a) Fixed Charge Coverage. Cause, suffer or permit the Consolidated
Fixed Charge Coverage Ratio as at the end of each Four-Quarter Period to
be less than 1.25 to 1.00.
(b) Leverage. Cause, suffer or permit the Consolidated Leverage
Ratio as at the end of each Four-Quarter Period during the respective
periods set forth below to be greater than the amount set forth opposite
each such period:
Ratio Must
Period Not Exceed
------ ----------
For the period ending
February 28, 1998 3.90 to 1.00
to and including May 30, 1998
From May 31, 1998 to
and including May 30, 1999 3.75 to 1.00
From May 31, 1999 and thereafter 3.25 to 1.00
10.2. Acquisitions. Enter into any agreement, contract, binding commitment
or other arrangement providing for any Acquisition, or take any action to
solicit the tender of securities or proxies in respect thereof in order to
effect any Acquisition, unless (i) the board of directors of the Person to be
(or whose assets are to be) acquired has not voted to, or recommended to its
shareholders to, oppose such Acquisition and the requirements of Section 9.18
would be satisfied upon the consummation thereof, (ii) no Default or Event of
Default shall exist and be continuing immediately prior to and immediately after
giving effect to such Acquisition and if the Cost of Acquisition is in excess of
$10,000,000, the Borrower shall have furnished to the Agent (A) pro forma
historical financial statements as of the end of the most recently completed
Fiscal Year of the Borrower and most recent interim fiscal quarter, if
applicable giving effect to such Acquisition and (B) a certificate in the form
of Exhibit J prepared on a historical pro forma basis giving effect to such
Acquisition, which certificate shall demonstrate that no Default or Event of
Default would exist immediately after giving effect thereto, (iii) the Person
acquired shall be a Restricted Subsidiary, or be merged into the Borrower or a
Restricted Subsidiary, immediately upon
82
<PAGE>
consummation of the Acquisition (or if assets are being acquired, the acquiror
shall be the Borrower or a Restricted Subsidiary), and (iv) after giving effect
to such Acquisition, the aggregate Costs of Acquisition incurred since the
Closing Date, together with the aggregate amount of all other loans, advances
and Investments described in Section 10.6(l) do not exceed the amount permitted
under such Section 10.6(l).
10.3. Liens. Incur, create or permit to exist any Lien with respect to any
property or assets now owned or hereafter acquired by the Borrower or any
Subsidiary, including the Borrower's interest in capital stock of each
Subsidiary, other than
(a) Liens created under the Security Instruments in favor of the
Agent and the Lenders;
(b) Liens existing as of the date hereof and as set forth in
Schedule 10.3;
(c) Liens imposed by law for taxes, assessments or charges of any
Governmental Authority for claims not yet due or which are being contested
in good faith by appropriate proceedings diligently conducted, which,
except as expressly so specified on Schedule 8.7, are inferior in respect
of the Collateral to the Liens conferred under the Security Instruments,
and with respect to which adequate reserves or other appropriate
provisions are being maintained in accordance with GAAP;
(d) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed by law or
created in the ordinary course of business and in existence less than 90
days from the date of creation thereof for amounts not yet due or which
are being contested in good faith by appropriate proceedings diligently
conducted, which, except as expressly so specified on Schedule 8.7, are
inferior in respect of the Collateral to the Liens conferred under the
Security Instruments, and with respect to which adequate reserves or other
appropriate provisions are being maintained in accordance with GAAP;
(e) Liens incurred or deposits made in the ordinary course of
business (including, without limitation, surety bonds and appeal bonds) in
connection with workers' compensation, unemployment insurance and other
types of social security benefits or to secure the performance of tenders,
bids, leases, contracts (other than for the repayment of Indebtedness),
statutory obligations and other similar obligations or arising as a result
of progress payments under government contracts;
(f) easements (including reciprocal easement agreements and utility
agreements), rights-of-way, covenants, consents, reservations,
encroachments, variations and zoning and other restrictions, charges or
encumbrances (whether or not recorded), which do not interfere materially
with the ordinary conduct of the business of the Borrower or any
Subsidiary and which do not detract from the value of the property to
83
<PAGE>
which they attach or impair the use thereof to the Borrower or any
Subsidiary in a manner which could have a Material Adverse Effect;
(g) any interest or title of a lessor or sublessor and any
restriction or encumbrance to which the interest or title of such lessor
or sublessor may be subject that is incurred in the ordinary course of
business and, either individually or when aggregated with all other Liens
described in clauses (a) through (f) in effect on any date of
determination, could not be reasonably expected to have a Material Adverse
Effect;
(h) Liens on certain property and assets of Jim Walter Homes and
Mid-State (i) pursuant to the terms of the documentation evidencing the
Mortgage-Backed Securities and the Mortgage Warehousing Facility or (ii)
securing Indebtedness incurred under Section 10.4(d)(iii) (including for
purposes of this clause (ii) Liens on Mid-State's residual beneficial
interest in Mid-State Trust III constituting one of the MSH Trusts
provided that such Lien is created in a transaction permitted under
Section 10.16(ii));
(i) purchase money Liens upon or in real property or equipment
acquired or held by the Borrower or any of its Subsidiaries in the
ordinary course of business to secure the purchase price of such real
property or equipment or to secure Indebtedness permitted by Section
10.4(g) incurred solely for the purpose of financing the acquisition,
construction or improvement of such real property or equipment to be
subject to such Liens, or Liens existing on any such real property or
equipment at the time of its acquisition (other than any such Liens
created in contemplation of such acquisition that do not secure the
purchase price of such real property or equipment); provided, however,
that no such Lien shall extend to or cover any property other than the
real property or equipment being acquired, constructed or improved; and
provided further that any Indebtedness secured by such Liens shall
otherwise be permitted under the terms of the Loan Documents;
(j) Liens arising in connection with Capital Leases permitted under
Section 10.4(k); provided that no such Lien shall extend to or cover any
Collateral or any property or assets other than the assets subject to such
Capital Leases; and
(k) the replacement, extension or renewal of any Lien permitted
under clauses (b), (h), (i) and (j) of this Section 10.3 solely upon or in
the same property and assets theretofore subject thereto; provided that
any Indebtedness secured by such Liens shall otherwise be permitted under
the terms of the Loan Documents;
(l) Liens on life insurance policies securing Indebtedness permitted
under Section 10.4(n); and
(m) Liens securing Indebtedness the amount of which Liens shall not
exceed in the aggregate at any time $10,000,000 and the book value of the
property securing such Indebtedness shall not exceed $12,500,000.
84
<PAGE>
10.4. Indebtedness. Incur, create, assume or permit to exist any
Indebtedness of the Borrower or its Subsidiaries, howsoever evidenced, except:
(a) Indebtedness existing as of the Closing Date and as set forth in
Schedule 8.6;
(b) Indebtedness owing to the Agent or any Lender in connection with
this Agreement, any Note or other Loan Document;
(c) the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
(d) in the case of Mid-State and each MSH Trust, where applicable,
(i) non-recourse Indebtedness evidenced by the Mortgage-
Backed Securities,
(ii) limited recourse Indebtedness created under the Mortgage
Warehousing Facility, and
(iii) limited recourse Indebtedness resulting from the
issuance of additional securities by one or more special purpose
entities owned by Mid-State or in which Mid-State shall have the
sole residual or beneficial interest, secured or otherwise supported
by Mortgage Accounts, which securities shall not restrict the
actions or businesses of any Borrower or any of its Subsidiaries
(other than Mid-State) in any manner and shall not include terms
requiring any guarantee or other credit support from or recourse to
the Borrower or any of its Restricted Subsidiaries that are less
favorable to the Borrower and its Restricted Subsidiaries than those
contained in the Mortgage-Backed Securities; and
(e) in the case of Jim Walter Homes, (A) Indebtedness resulting from
the contingent obligations of Jim Walter Homes (1) to repurchase Mortgage
Accounts pursuant to Section 3(b) of the Depositor Account Transfer
Agreement, (2) to repurchase Foreclosure Accounts (as defined in the
Depositor Account Transfer Agreement) pursuant to the terms of Section 4
of the Depositor Account Transfer Agreement and (3) to indemnify certain
Indemnitees referred to in the Depositor Account Transfer Agreement for
expenses incurred thereby on the terms set forth in Section 6 of the
Depositor Account Transfer Agreement; provided that the amount of
Indebtedness incurred under subclauses (e)(A)(1) and (e)(A)(3) shall not
exceed $10,000,000 at any time, and (B) Indebtedness owed to Mid-State
resulting from the receipt of proceeds from the issuance and sale of the
Mortgage-Backed Securities or additional securities otherwise permitted
under subclauses (d)(i) and (d)(iii) of this Section 10.4;
85
<PAGE>
(f) Indebtedness between the Borrower and its Subsidiaries and
Indebtedness between Subsidiaries;
(g) purchase money Indebtedness secured by Liens described in
Section 10.3(i) not to exceed an aggregate outstanding amount at any time
of $60,000,000;
(h) Subordinated Payables;
(i) Indebtedness arising in connection with Permitted Receivables
Securitizations not to exceed $75,000,000 at any time;
(j) Indebtedness arising from Rate Hedging Obligations (provided
that such Indebtedness is incurred to limit risks of currency or interest
rate fluctuations to which the Borrower and its Subsidiaries are otherwise
subject by virtue of the operations of their businesses, and not for
speculative purposes):
(i) of Unrestricted Subsidiaries; and
(ii) of the Borrower and its Restricted Subsidiaries in
aggregate notional amount not to exceed $450,000,000 at any time;
(k) Capital Leases in aggregate principal amount not at any time
exceeding $20,000,000 in the aggregate;
(l) additional Indebtedness for Money Borrowed of the Borrower or
its Subsidiaries not otherwise covered by clauses (a) through (k) above,
provided that the aggregate outstanding principal amount of all such other
Indebtedness permitted under this clause (l) shall in no event exceed
$30,000,000 at any time;
(m) Indebtedness extending the maturity of, or refunding or
refinancing, in whole or in part, any Indebtedness incurred under clauses
(a), (f), (g), (k) and (l) of this Section 10.4, provided, however, that
the terms of any such extension, refunding or refinancing Indebtedness
(and of any agreement entered into and of any instrument issued in
connection therewith) are no less favorable to the Agent and the Lenders
than the terms of the Indebtedness so extended, refunded or refinanced and
are otherwise expressly permitted under the terms of the Loan Documents,
and provided further, however, that (1) the aggregate principal amount of
such extended, refunding or refinancing Indebtedness shall not be
increased above the outstanding principal amount thereof immediately prior
to such extension, refunding or refinancing, (2) the direct and contingent
obligors therefor shall not be changed as a result of or in connection
with such extension, refunding or refinancing and (3) immediately before
and immediately after giving effect to any such extension, refunding or
refinancing, no Default shall have occurred and be continuing;
86
<PAGE>
(n) loans to a Credit Party against and secured by the cash
surrender value of life insurance policies owned by such Credit Party,
provided that the aggregate principal amount of such loan does not exceed
the cash surrender value of the policy constituting security therefor;
(o) Guaranties of Indebtedness permitted under this Section 10.4;
and
(p) surety bonds permitted under Section 10.3.
10.5. Transfer of Assets. Sell, lease, transfer or otherwise dispose of
any assets of Borrower or any Restricted Subsidiary except:
(a) dispositions of assets (including without limitation inventory,
cash and Cash Equivalents) in the ordinary course of business;
(b) sales of Mortgage Accounts by Jim Walter Homes and other
Subsidiaries of the Borrower;
(c) sales for the fair market value thereof (which shall be
determined in the good faith judgment of the Borrower) of assets other
than the capital stock of any Subsidiary of the Borrower (or any security
exchangeable, exercisable or convertible into such capital stock) with the
exception of J.W. Window Components, Inc., Southern Precision Corporation,
Vestal Manufacturing Company, Walter Land Company, J.W. Walter, Inc.,
Hamer Properties, Inc., Land Holdings Corporaiton, J.W.I. Holdings
Corporation , or Hamer Holdings, Inc., provided that (i) not less than 75%
of the aggregate purchase price therefor is paid in cash, (ii) to the
extent required hereunder, the proceeds of such sale are applied in
accordance with the terms hereof to the Ratable Reduction of Term Loan
Facilities, and (iii) immediately prior to and after giving effect to any
such sale, no Default or Event of Default shall exist and be continuing
hereunder;
(d) dispositions for fair market value (which shall be determined in
the good faith judgment of the Borrower) of equipment which, in the
aggregate during any Fiscal Year, has an aggregate fair market value not
in excess of $2,000,000 and 100% of the Net Cash Proceeds of which are
used to acquire replacement equipment having at least equivalent value;
(e) sales for fair market value (which shall be determined in the
good faith judgment of the Borrower) of property, that is (i)
substantially worn, damaged, obsolete or (ii), in the judgment of the
Borrower, no longer best used or useful in its business or that of any
Subsidiary, provided that the aggregate fair market value of such property
sold in any Fiscal Year shall not exceed $2,000,000;
(f) sales of accounts receivable of Restricted Subsidiaries in
connection with Permitted Receivables Securitizations;
87
<PAGE>
(g) transfers or utilization of assets necessary to give effect to
merger or consolidation transactions permitted by Section 10.7 and loans,
advances and investments permitted by Section 10.6; and
(h) sales of land by United Land Corporation, Walter Land Company,
J.W. Walter, Inc. or Hamer Properties, Inc., the net proceeds of which are
included in the computation of Consolidated Net Income.
10.6. Investments. Purchase, own, invest in or otherwise acquire, directly
or indirectly, any Investments, except that Borrower and its Subsidiaries may
maintain Investments or invest in the following:
(a) securities of any Person acquired in an Acquisition permitted
hereunder;
(b) investments in Cash Equivalents;
(c) investments existing as of the date hereof and as set forth in
Schedules 8.4 and 8.5;
(d) accounts receivable arising and trade credit granted in the
ordinary course of business and any securities received in satisfaction or
partial satisfaction thereof in connection with accounts of financially
troubled Persons to the extent reasonably necessary in order to prevent or
limit loss; and
(e) Investments in Guarantors, Foreign Subsidiaries and Tennessee
Alloy Company; provided that the amount of Investments in Foreign
Subsidiaries shall not exceed $10,000,000;
(f) Subordinated Payables;
(g) Net Cash Advances to Unrestricted Subsidiaries in an amount not
to exceed $40,000,000 at any time after the Closing Date, on the condition
that all of the proceeds of such Net Cash Advances are used solely to
satisfy certain tax obligations and other administrative and operating
expenses of the Unrestricted Subsidiaries incurred in the ordinary course
of business, provided that immediately before and after giving effect
thereto no Default or Event of Default shall have occurred and be
continuing;
(h) investments in Rate Hedging Obligations permitted to be
maintained under Section 10.4(j);
(i) investments of Mid-State in special purpose entities created for
the purpose of issuing asset-backed securities permitted under Section
10.4(d)(iii);
88
<PAGE>
(j) investments of the Borrower or Restricted Subsidiaries in
special purpose entities created in connection with Permitted Receivables
Securitizations;
(k) loans and advances to employees in the ordinary course of the
business of the Borrower and its Subsidiaries as presently conducted in an
aggregate principal amount not to exceed $1,000,000 at any time
outstanding;
(l) additional investments (including Acquisitions) in an aggregate
amount not to exceed at any time the positive amount, if any, equal to the
sum of (i) $60,000,000, (ii) 30% of the net cash proceeds actually
received by the Borrower from equity contributions and issuances of its
capital stock and (iii) 30% of Consolidated Net Income for each quarterly
period ending after the Closing Date, minus any net loss in any quarterly
period after the Closing Date; provided that (i) no Default or Event of
Default shall exist and be continuing immediately before or immediately
after giving effect to such Investment and (ii) to the extent such
Investment shall constitute an Acquisition, the provisions of Sections
10.2 and 9.19 shall be complied with; and
(m) investments by Cardem and each of the MSH Trusts in the ordinary
course of business and in conformity with their respective investment
policies in effect from time to time.
10.7. Merger or Consolidation. (a) Consolidate with or merge into any
other Person, or (b) permit any other Person to merge into it, or (c) liquidate,
wind-up or dissolve or sell, transfer or lease or otherwise dispose of all or
substantially all of its assets; provided, however, (i) any Restricted
Subsidiary of the Borrower may merge or transfer all or substantially all of its
assets into or consolidate with the Borrower or any Restricted Subsidiary of the
Borrower, and (ii) any other Person may merge into or consolidate with the
Borrower (so long as the Borrower is the survivor) or any Restricted Subsidiary
and any Subsidiary may merge into or consolidate with any other Person in order
to consummate an Acquisition permitted by Section 10.2; provided further that
any resulting or surviving entity shall execute such agreements and other
documents, including a Facility Guaranty, and take such other action as the
Agent may reasonably require to evidence its express assumption of the
obligations and liabilities of its predecessor entities under the Loan
Documents;
10.8. Restricted Payments. Make any Restricted Payment or apply or set
apart any of their assets therefor or agree to do any of the foregoing;
provided, however, the Borrower may make the following Restricted Payments if
prior to and immediately after giving effect thereto no Default or Event of
Default shall exist and be continuing:
(a) the purchase, redemption or other acquisition of capital stock
of the Borrower acquired solely with the Net Issuance Proceeds of the
issuance of other shares of capital stock of the Borrower having equal or
inferior voting rights to the shares so acquired;
89
<PAGE>
(b) Restricted Payments in an aggregate amount not to exceed the sum
of $10,000,000 plus 50% of Consolidated Net Income for any Fiscal Year;
and
(c) repurchase shares of its capital stock with options or warrants
in respect of any thereof) held by the officers, directors and employees
of the Borrower or any Subsidiary, so long as such repurchase is pursuant
to, and in accordance with the terms of, management and/or employee stock
plans, stock subscription agreements or shareholder agreements;
provided that not less than ten days prior to any Restricted Payment described
in clauses (a), (b) and (c), the Borrower shall deliver to the Agent a
certificate of an Authorized Representative describing such Restricted Payment
in reasonable detail and including, in the case of a Restricted Payment
described in clause (b), computations on a pro forma basis demonstrating that no
Default or Event of Default shall occur as a result of such Restricted Payment.
10.9. Compliance with ERISA. With respect to any Pension Plan, Employee
Benefit Plan or Multiemployer Plan:
(a) permit the occurrence of any Termination Event which would
result in a liability on the part of the Borrower or any ERISA Affiliate
to the PBGC; or
(b) fail to comply with ERISA and other applicable laws with respect
to the funding of liabilities arising under any Pension Plan; or
(c) permit any accumulated funding deficiency (as defined in Section
302 of ERISA and Section 412 of the Code) with respect to any Pension
Plan, whether or not waived to the extent not permitted under ERISA or
other applicable law; or
(d) fail to make any contribution or payment to any Multiemployer
Plan which the Borrower or any ERISA Affiliate may be required to make
under any agreement relating to such Multiemployer Plan, or any law
pertaining thereto; or
(e) engage, or permit any Borrower or any ERISA Affiliate to engage,
in any prohibited transaction under Section 406 of ERISA or Sections 4975
of the Code for which a civil penalty pursuant to Section 502(I) of ERISA
or a tax pursuant to Section 4975 of the Code may be imposed; or
(f) fail, or permit the Borrower or any ERISA Affiliate to fail, to
establish, maintain and operate each Employee Benefit Plan in compliance
in all material respects with the provisions of ERISA, the Code, all
applicable Foreign Benefit Laws and all other applicable laws and the
regulations and interpretations thereof;
if, in the case of any occurrence described in clauses (a) through (f) above,
such occurrence could reasonably be expected to have a Material Adverse Effect.
90
<PAGE>
10.10. Fiscal Year. Change its Fiscal Year.
10.11. Negative Pledge Clauses. Enter into or suffer to exist any
agreement with any Person other than the Agent and the Lenders pursuant to this
Agreement or any other Loan Documents which prohibits or limits the ability of
any of the Borrower or any Subsidiary to create, incur, assume or suffer to
exist any Lien upon any of its property, assets or revenues, whether now owned
or hereafter acquired, other than:
(a) such provisions as are contained as of the Closing Date in
Indebtedness described as of the Closing Date on Schedule 8.6;
(b) such provisions as are contained in Indebtedness of any
Subsidiary as of the date it becomes a Subsidiary of the Borrower in any
transaction otherwise permitted hereunder;
(c) such provisions as may be contained in any Indebtedness
permitted hereunder to be issued under Section 10.4(m) to refinance or
replace other Indebtedness, provided that the terms of such provisions
shall be no less favorable to the Agent and the Lenders as were contained
in the Indebtedness being refinanced or replaced; and
(d) such provisions as are or may be imposed on the MSH Trusts or on
other special purpose entities created in connection with the issuance of
asset-backed securities permitted by Section 10.4(d)(iii) or in connection
with any Permitted Receivables Securitization;
(e) such provisions as may be contained in any Indebtedness
permitted under Section 10.4(g), (i), (k) and (l) so long as such
prohibition applies only to the assets acquired with the proceeds of such
Indebtedness
(f) provisions limiting Liens on property subject to a prior Lien
permitted under Section 10.3(c), (d), (e), (g), (h) and (l).
10.12. Prepayments, Etc. of Indebtedness. (a) Prepay, redeem, purchase,
defease or otherwise satisfy prior to the scheduled maturity thereof in any
manner, or make any payment in violation of any subordination terms of, any
Subordinated Payables, except that so long as no Default shall have occurred and
be continuing or would result therefrom, repayments of advances by the Borrower
to Mid-State, and Subordinated Payables;
(b) amend, modify or change in any manner any term or condition of (i) the
Mortgage-Backed Securities or any Indebtedness described on Schedule 8.6 as of
the Closing Date, or (ii) the Mortgage Warehousing Facility, or (iii) any
material lease, so that the terms and conditions thereof are less favorable to
the Agent and the Lenders than the terms of such facilities or agreements on the
Closing Date.
91
<PAGE>
10.13. Creation of New Subsidiaries. Create or acquire any new Subsidiary
after the Closing Date other than Restricted Subsidiaries created or acquired in
accordance with Section 9.19.
10.14. Mid-State Rights in Mortgage Accounts. Except as permitted in
Section 10.16(ii), cause, suffer or permit Mid-State to grant any Lien on (i)
the residual value of Mortgage Accounts transferred to any special purpose
entity in connection with the Mortgage-Backed Securities, the Mortgage
Warehousing Facility or the issuance of additional securities secured or
supported by Mortgage Accounts, or (ii) its rights as servicer of Mortgage
Accounts in any such transaction.
10.15. Sale of Mid-State. Sell, transfer or otherwise dispose of all or
any material portion of the assets of Mid-State, other than (i) the transfer by
Mid-State of Mortgage Accounts to one or more special purpose entities in
connection with the issuance of securities secured or supported by such Mortgage
Accounts and otherwise permitted hereunder and (ii) the transfer by Mid-State of
its residual beneficial interest in Mid State Trust III and the creation of a
Lien thereon constituting one of the MSH Trusts to a new special purpose entity
created in connection with the issuance of asset-backed securities permitted
under Section 10.4(d)(iii), provided that the portion of the proceeds received
by Mid-State in connection with such issuance and allocable to the transfer of
such residual beneficial interest (which portion shall be established by the
Borrower to the satisfaction of the Agent) shall immediately be advanced to the
Borrower or a Restricted Subsidiary upon receipt thereof as a Subordinated
Payable.
10.16. Sales of Mortgage Accounts to Mid-State. Sell Mortgage Accounts to
Mid-State on terms other than those substantially similar to the terms of sale
provided in connection with the Mortgage-Backed Securities and the Mortgage
Warehousing Facility.
92
<PAGE>
ARTICLE XI
Events of Default and Acceleration
11.1. Events of Default. If any one or more of the following events
(herein called "Events of Default") shall occur for any reason whatsoever (and
whether such occurrence shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
Governmental Authority) and shall be continuing, that is to say:
(a) if default shall be made in the due and punctual payment of the
principal of any Loan, Reimbursement Obligation, when and as the same
shall be due and payable whether pursuant to any provision of Article II
or Article III or Article IV, at maturity, by acceleration or otherwise;
or
(b) if default shall be made in the due and punctual payment of any
amount of any Obligation other than those described in clause (a) above,
of interest on any Loan, Reimbursement Obligation or other Obligation or
of any fees or other amounts payable to any of the Lenders, any Managing
Agent or the Agent on the date on which the same shall be due and payable;
or
(c) if default shall be made in the performance or observance of any
covenant set forth in Section 2.9, 9.7, 9.11, 9.19, 9.20, 9.24 or Article
X; or
(d) if a default shall be made in the performance or observance of,
or shall occur under, any covenant, agreement or provision contained in
this Agreement or any other Loan Document (other than as described in
clauses (a), (b) or (c) above) and such default shall continue for 30 or
more days after the earlier of receipt of notice of such default by the
Authorized Representative from the Agent or any of the chief financial
officer, Vice President-Controller or Vice President-Treasurer (or other
officer of different title exercising the same function) becomes aware of
such default, or if a default shall be made in the performance or
observance of, or shall occur under, any covenant, agreement or provision
contained in any of the other Loan Documents (beyond a period of 30 days,
or such lesser period, if any, specifically provided herein) or in any
instrument or document evidencing or creating any obligation, guaranty, or
Lien in favor of the Agent or any of the Lenders or delivered to the Agent
or any of the Lenders in connection with or pursuant to this Agreement or
any of the Obligations, or if any material Lien under the Security
Instruments or any material provision of the Facility Guaranties ceases to
be in full force and effect (other than by reason of any action by the
Agent), or if without the written consent of the Lenders, this Agreement
or any other Loan Document shall be disaffirmed in writing or shall
terminate, be terminable or be terminated or become void or unenforceable
for any reason whatsoever (other than in accordance with its terms in the
absence of default or by reason of any action by the Lenders or the
Agent); or
93
<PAGE>
(e) if a default shall occur, which is not waived, (i) in the
payment (after passage of any grace period) of any principal, interest,
premium or other amount with respect to any Indebtedness or Rate Hedging
Obligation (other than the Loans and other Obligations) of the Borrower or
any Subsidiary in an amount in excess of $20,000,000 in the aggregate
outstanding or in the case of a Rate Hedging Obligation a termination
amount in excess of $20,000,000, or (ii) in the performance, observance or
fulfillment of any term or covenant contained in or the occurrence of any
other event specified in any agreement or instrument under or pursuant to
which any such Indebtedness may have been issued, created, assumed,
guaranteed or secured by the Borrower or any Subsidiary, and such default
shall continue for more than the period of grace, if any, therein
specified, and such default or occurrence shall permit the holder of any
such Indebtedness (or any agent or trustee acting on behalf of one or more
holders) to accelerate the maturity thereof; or
(f) if any representation, warranty or other statement of fact
contained in any Loan Document or in any writing, certificate, report or
statement at any time furnished to the Agent or any Lender by or on behalf
of the Borrower or any Subsidiary pursuant to or in connection with any
Loan Document, or otherwise, shall be false or misleading in any material
respect when given; or
(g) if the Borrower or any Subsidiary shall be unable to pay its
debts generally as they become due; file a petition to take advantage of
any insolvency statute; make an assignment for the benefit of its
creditors; commence a proceeding for the appointment of a receiver,
trustee, liquidator or conservator of itself or of the whole or any
substantial part of its property; file a petition or answer seeking
liquidation, reorganization or arrangement or similar relief under the
federal bankruptcy laws or any other applicable law or statute; or
(h) if a court of competent jurisdiction shall enter an order,
judgment or decree appointing a custodian, receiver, trustee, liquidator
or conservator of the Borrower or any Subsidiary or of the whole or any
substantial part of its properties and such order, judgment or decree
continues unstayed and in effect for a period of sixty (60) days, or
approve a petition filed against the Borrower or any Subsidiary seeking
liquidation, reorganization or arrangement or similar relief under the
federal bankruptcy laws or any other applicable law or statute of the
United States of America or any state, which petition is not dismissed
within sixty (60) days; or if, under the provisions of any other law for
the relief or aid of debtors, a court of competent jurisdiction shall
assume custody or control of the Borrower or any Subsidiary or of the
whole or any substantial part of its properties, which control is not
relinquished within sixty (60) days; or if there is commenced against the
Borrower or any Subsidiary any proceeding or petition seeking
reorganization, arrangement or similar relief under the federal bankruptcy
laws or any other applicable law or statute of the United States of
America or any state which proceeding or petition remains undismissed for
a period of sixty (60) days; or if the Borrower or any Subsidiary takes
any action to indicate its consent to or approval of any such proceeding
or petition; or
94
<PAGE>
(i) if one or more judgments or orders where the amount not
satisfied or covered by insurance (or the amount as to which the insurer
denies liability) is equal to or in excess of $15,000,000 is rendered
against the Borrower or any Subsidiary, and either (A) enforcement
proceedings shall have been commenced by any creditor upon any such
judgment or order and remain unstayed or (B) there shall be any period of
30 consecutive days during which a stay of enforcement of any such
judgment or order shall not be in effect; or
(j) if there shall occur a Change of Control; or
(k) if Mid-State shall cease to be the "servicer" or Jim Walter
Homes shall cease to be the "subservicer" on any mortgages securing any of
the financings contemplated under Section 10.4(d);
then, and in any such event and at any time thereafter, if such Event of Default
or any other Event of Default shall have not been waived, either or both of the
following actions may be taken:
(i) the Agent, with the consent of the Required Lenders, may,
and at the direction of the Required Lenders shall, declare any
obligation of the Lenders and the Issuing Bank to make further
Revolving Loans and Swing Line Loans or to issue additional Letters
of Credit terminated, whereupon the obligation of each Lender to
make further Revolving Loans, of NationsBank to make further Swing
Line Loans, and of the Issuing Bank to issue additional Letters of
Credit, hereunder shall terminate immediately, and
(ii) the Agent shall at the direction of the Required Lenders,
at their option, declare by notice to the Borrower any or all of the
Obligations to be immediately due and payable, and the same,
including all interest accrued thereon and all other obligations of
the Borrower to the Agent and the Lenders, shall forthwith become
immediately due and payable without presentment, demand, protest,
notice or other formality of any kind, all of which are hereby
expressly waived, anything contained herein or in any instrument
evidencing the Obligations to the contrary notwithstanding;
provided, however, that notwithstanding the above, if there shall
occur an Event of Default under clause (g) or (h) above, then the
obligation of the Lenders to make Revolving Loans, of NationsBank to
make Swing Line Loans, and of the Issuing Bank to issue Letters of
Credit hereunder shall automatically terminate and any and all of
the Obligations shall be immediately due and payable without the
necessity of any action by the Agent or the Required Lenders or
notice to the Agent or the Lenders;
the Borrower shall, upon demand of the Agent or the Required
Lenders, deposit cash with the Agent in an amount equal to the
amount of any Letter of Credit Outstandings, as collateral security
for the repayment of any future
95
<PAGE>
drawings or payments under such Letters of Credit, and such amounts
shall be held by the Agent pursuant to the terms of the LC Account
Agreement; and
the Agent and each of the Lenders shall have all of the rights
and remedies available under the Loan Documents or under any
applicable law.
11.2. Agent to Act. In case any one or more Events of Default shall occur
and not have been waived, the Agent may, and at the direction of the Required
Lenders shall, proceed to protect and enforce their rights or remedies either by
suit in equity or by action at law, or both, whether for the specific
performance of any covenant, agreement or other provision contained herein or in
any other Loan Document, or to enforce the payment of the Obligations or any
other legal or equitable right or remedy.
11.3. Cumulative Rights. No right or remedy herein conferred upon the
Lenders or the Agent is intended to be exclusive of any other rights or remedies
contained herein or in any other Loan Document, and every such right or remedy
shall be cumulative and shall be in addition to every other such right or remedy
contained herein and therein or now or hereafter existing at law or in equity or
by statute, or otherwise.
11.4. No Waiver. No course of dealing between the Borrower and any Lender
or the Agent or any failure or delay on the part of any Lender or the Agent in
exercising any rights or remedies under any Loan Document or otherwise available
to it shall operate as a waiver of any rights or remedies and no single or
partial exercise of any rights or remedies shall operate as a waiver or preclude
the exercise of any other rights or remedies hereunder or of the same right or
remedy on a future occasion.
11.5. Allocation of Proceeds. If an Event of Default has occurred and not
been waived, and the maturity of the Notes has been accelerated pursuant to
Article XI hereof, all payments received by the Agent hereunder, in respect of
any principal of or interest on the Obligations or any other amounts payable by
the Borrower hereunder, shall be applied by the Agent in the following order:
(a) amounts due to the Lenders pursuant to Sections 3.10, 4.3, 4.4
and 13.5;
(b) amounts due to the Agent pursuant to Section 12.11;
(c) payments of interest on Loans, Swing Line Loans and
Reimbursement Obligations, to be applied for the ratable benefit of the
Lenders based on their respective Applicable Commitment Percentages (with
amounts payable in respect of Swing Line Outstandings being included in
such calculation and paid to NationsBank);
(d) payments of principal of Loans, Swing Line Loans and
Reimbursement Obligations, to be applied for the ratable benefit of the
Lenders in accordance with their
96
<PAGE>
respective Applicable Commitment Percentages (with amounts payable in
respect of Swing Line Outstandings being included in such calculation and
paid to NationsBank);
(e) payments of cash amounts to the Agent in respect of outstanding
Letters of Credit pursuant to Section 11.1(B);
(f) amounts due to the Lenders pursuant to Sections 4.2(g), 9.15 and
13.9;
(g) payments of all other amounts due under any of the Loan
Documents, if any, to be applied for the ratable benefit of the Lenders;
(h) amounts due to any of the Lenders in respect of Obligations
consisting of liabilities under any Swap Agreement with any of the Lenders
on a pro rata basis according to the amounts owed; and
(i) any surplus remaining after application as provided for herein,
to the Borrower or otherwise as may be required by applicable law.
97
<PAGE>
ARTICLE XII
The Agent
12.1. Appointment. Each Lender hereby irrevocably designates and appoints
NationsBank as the Agent for the Lenders under this Agreement, and each of the
Lenders hereby irrevocably authorizes NationsBank as the Agent for such Lender,
to take such action on its behalf under the provisions of this Agreement and the
other Loan Documents and to exercise such powers as are expressly delegated to
the Agent by the terms of this Agreement and such other Loan Documents, together
with such other powers as are reasonably incidental thereto. The Agent shall not
have any duties or responsibilities, except those expressly set forth herein, or
any fiduciary relationship with any of the Lenders, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or any other Loan Document or otherwise exist against the
Agent.
12.2. Attorneys-in-fact. The Agent may execute any of its duties under the
Loan Documents by or through agents or attorneys-in-fact and shall be entitled
to advice of counsel concerning all matters pertaining to such duties. The Agent
shall not be responsible for the negligence, gross negligence or willful
misconduct of any agents or attorneys-in-fact selected by it with reasonable
care.
12.3. Limitation on Liability. Neither the Agent nor any of its officers,
directors, employees, agents or attorneys-in-fact shall be liable to the Lenders
for any action lawfully taken or omitted to be taken by it or them under or in
connection with the Loan Documents except for its or their own gross negligence
or willful misconduct. Neither the Agent nor any of its affiliates shall be
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Borrower, any of its Subsidiaries or
any officer or representative thereof contained in any Loan Document, or in any
certificate, report, statement or other document referred to or provided for in
or received by the Agent under or in connection with any Loan Document, or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of any Loan Document, or for any failure of any Credit Party to perform its
obligations under any Loan Document, or for any recitals, statements,
representations or warranties made, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of any collateral. The Agent shall
not be under any obligation to any of the Lenders to ascertain or to inquire as
to the observance or performance of any of the terms, covenants or conditions of
any Loan Document on the part of any Credit Party or to inspect the properties,
books or records of the Borrower or its Subsidiaries.
12.4. Reliance. The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any Note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telefacsimile or telex
message, statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrower), independent accountants and other experts
selected by the Agent. The
98
<PAGE>
Agent may deem and treat the payee of any Note as the owner thereof for all
purposes unless an Assignment shall have been filed with and accepted by the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under the Loan Documents unless it shall first receive advice or
concurrence of the Lenders or the Required Lenders as provided in this Agreement
or it shall first be indemnified to its satisfaction by the Lenders against any
and all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under the Loan Documents in
accordance with a request of the Required Lenders, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Lenders and all present and future holders of the Notes.
12.5. Notice of Default. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default hereunder unless
the Agent has received notice from a Lender, the Authorized Representative or
the Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event that
the Agent receives such a notice, the Agent shall promptly give notice thereof
to the Lenders. The Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Lenders;
provided that, unless and until the Agent shall have received such directions,
the Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Event of Default as it shall deem
advisable in the best interests of the Lenders.
12.6. No Representations. Each Lender expressly acknowledges that neither
the Agent, any Managing Agent, NMSI nor any of their affiliates has made any
representations or warranties to it and that no act by the Agent hereafter
taken, including any review of the affairs of the Borrower and its Subsidiaries,
shall be deemed to constitute any representation or warranty by the Agent, any
Managing Agent or NMSI to any Lender. Each Lender represents to the Agent that
it has, independently and without reliance upon the Agent, any Managing Agent,
NMSI or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
financial condition, creditworthiness, affairs, status and nature of each Credit
Party and made its own decision to enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon the Agent, any
Managing Agent, NMSI or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
the Loan Documents and to make such investigation as it deems necessary to
inform itself as to the status and affairs, financial or otherwise, of each
Credit Party. Except for notices, reports and other documents expressly required
to be furnished to the Lenders by the Agent hereunder, the Agent shall not have
any duty or responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition or business of any
Credit Party which may come into the possession of the Agent or any of its
affiliates.
12.7. Indemnification. Each of the Lenders agree to indemnify the Agent in
its capacity as such (to the extent required to be but not reimbursed by any
Credit Party and without limiting
99
<PAGE>
any obligations of any Credit Party), ratably according to the respective
principal amount of the Notes held by them (or, if no Notes are outstanding,
ratably in accordance with their respective Applicable Commitment Percentages as
then in effect) from and against any and all liabilities, obligations, losses
(excluding any losses suffered by the Agent as a result of Borrower's failure to
pay any fee owing to the Agent), damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may at
any time (including without limitation at any time following the payment of the
Notes) be imposed on, incurred by or asserted against the Agent in any way
relating to or arising out of any Loan Document or any other document
contemplated by or referred to therein or the transactions contemplated thereby
or any action taken or omitted by the Agent under or in connection with any of
the foregoing; provided that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the Agent's
gross negligence or willful misconduct. The agreements in this subsection shall
survive the Facility Termination Date.
12.8. Lender. The Agent, each Managing Agent and its affiliates may make
loans to, accept deposits from and generally engage in any kind of business with
any Credit Party as though it were not the Agent or Managing Agent hereunder.
With respect to its Loans made or renewed by it and any Note issued to it, the
Agent and each Managing Agent shall have the same rights and powers under this
Agreement as any Lender and may exercise the same as though it were not the
Agent or Managing Agent, as the case may be, and the terms "Lender" and
"Lenders" shall, unless the context otherwise indicates, include the Agent and
each Managing Agent in its individual capacity.
12.9. Resignation. If the Agent shall resign as Agent under this
Agreement, then the Required Lenders may appoint, with the consent, so long as
there shall not have occurred and be continuing a Default or Event of Default,
of the Borrower, which consent shall not be unreasonably withheld, a successor
Agent for the Lenders, which successor Agent shall be a commercial bank
organized under the laws of the United States or any state thereof, having a
combined surplus and capital of not less than $500,000,000, whereupon such
successor Agent shall succeed to the rights, powers and duties of the former
Agent and the obligations of the former Agent shall be terminated and canceled,
without any other or further act or deed on the part of such former Agent or any
of the parties to this Agreement; provided, however, that the former Agent's
resignation shall not become effective until such successor Agent has been
appointed and has succeeded of record to all right, title and interest in any
collateral held by the Agent; provided, further, that if the Required Lenders
and, if applicable, the Borrower cannot agree as to a successor Agent within
ninety (90) days after such resignation, the Agent shall appoint a successor
Agent which satisfies the criteria set forth above in this Section 12.9 for a
successor Agent and the parties hereto agree to execute whatever documents are
necessary to effect such action under this Agreement or any other Document
executed pursuant to this Agreement; provided, however that in such event all
provisions of the Loan Documents, shall remain in full force and effect. After
any retiring Agent's resignation hereunder as Agent, the provisions of this
Article XII shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under this Agreement.
100
<PAGE>
12.10. Sharing of Payments, etc. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, set-off, counterclaim or
otherwise, obtain payment with respect to its Obligations (other than pursuant
to Article VI) which results in its receiving more than its pro rata share of
the aggregate payments with respect to all of the Obligations (other than any
payment expressly provided hereunder to be distributed on other than a pro rata
basis and payments pursuant to Article VI), then (a) such Lender shall be deemed
to have simultaneously purchased from the other Lenders a share in their
Obligations so that the amount of the Obligations held by each of the Lenders
shall be pro rata and (b) such other adjustments shall be made from time to time
as shall be equitable to insure that the Lenders share such payments ratably;
provided, however, that for purposes of this Section 12.10 the term "pro rata"
shall be determined with respect to both the Revolving Credit Commitment and
Term Loan Commitment of each Lender and to the Total Revolving Credit
Commitments and Total Term Loan Commitment after subtraction in each case of
amounts, if any, by which any such Lender has not funded its share of the
outstanding Loans and Obligations. If all or any portion of any such excess
payment is thereafter recovered from the Lender which received the same, the
purchase provided in this Section 12.10 shall be rescinded to the extent of such
recovery, without interest. The Borrower expressly consents to the foregoing
arrangements and agrees that each Lender so purchasing a portion of the other
Lenders' Obligations may exercise all rights of payment (including, without
limitation, all rights of set-off, banker's lien or counterclaim) with respect
to such portion as fully as if such Lender were the direct holder of such
portion.
12.11. Fees. The Borrower agrees to pay to the Agent, for its individual
account, an annual Agent's fee as heretofore and from time to time hereafter
agreed to by the Borrower and Agent in writing.
101
<PAGE>
ARTICLE XIII
Miscellaneous
13.1. Assignments and Participations. (a) At any time after the Closing
Date each Lender may, with the prior consent of the Agent and (so long as no
Default or Event of Default has occurred and is continuing) the Borrower, which
consents shall not be unreasonably withheld, assign to one or more banks or
financial institutions all or a portion of its rights and obligations under the
Loan Documents (including, without limitation, all or a portion of any Note
payable to its order); provided, that (i) each such assignment with respect to
the Revolving Credit Facility shall be of a constant and not a varying
percentage of all of the assigning Lender's rights and obligations under the
Revolving Credit Facility, Letter of Credit Facility and Swing Line Facility,
(ii) for each assignment involving the issuance and transfer of a Note, the
assigning Lender shall execute the applicable Assignment and Acceptance and the
Borrower hereby agrees to execute a replacement Note or Notes to give effect to
the assignment, (iii) in any case the amount of Revolving Credit Commitment and
Letter of Credit Commitment, or the amount of Term Loan Commitment, as
applicable, which shall be assigned is a minimum of $5,000,000 and, if greater,
an amount which is an integral multiple of $1,000,000, (iv) such assignee shall
have an office located in the United States, and (v) no consent of the Borrower
or the Agent shall be required in connection with any assignment by a Lender to
another Lender or to an affiliate of any Lender. Upon such execution, delivery,
approval and acceptance, from and after the effective date specified in each
Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto
and, to the extent that rights and obligations hereunder or under any such Note
have been assigned or negotiated to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and a holder
of such Note and (y) the assignor thereunder shall, to the extent that rights
and obligations hereunder or under such Note have been assigned or negotiated by
it pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement. Any Lender who makes an
assignment shall pay to the Agent a one-time administrative fee of $3,500 which
fee shall not be reimbursed by the Borrower.
(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) the assignment made under
such Assignment and Acceptance is made under such Assignment and Acceptance
without recourse; (ii) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of any
Credit Party or the performance or observance by any Credit Party of its
obligations under any Loan Document or any other instrument or document
furnished pursuant hereto; (iii) such assignee confirms that it has received a
copy of this Agreement, together with copies of the financial statements
delivered pursuant to Section 8.6(a) or Section 9.1, as the case may be, and
such other Loan Documents and 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, NMSI or 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
102
<PAGE>
under any Loan Document; (v) such assignee appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise such powers under the
Loan Documents as are delegated to the Agent by the terms hereof and thereof,
together with such powers as are reasonably incidental thereto; and (vi) such
assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Loan Documents are required to be
performed by it as a Lender and a holder of such Notes.
(c) The Agent shall maintain at one of its offices in Charlotte, North
Carolina a copy of each Lender Assignment and Acceptance delivered to it in
accordance with the terms of Section 13.1(a) above and a register for the
recordation of the identity of the principal amount, type and Interest Period of
each Loan outstanding hereunder, the names, addresses and the Revolving Credit
Commitments, the Term Loan Commitments of the Lenders pursuant to the terms
hereof from time to time (the "Register"). The Agent will make reasonable
efforts to maintain the accuracy of the Register and to promptly update the
Register from time to time, as necessary. The entries in the Register shall be
conclusive in the absence of manifest error and the Borrower, the Agent and the
Lenders may treat each Person whose name is recorded in the Register pursuant to
the terms hereof as a Lender hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower and each Lender, at
any reasonable time and from time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender, the Agent shall give prompt notice thereof to Borrower.
(e) Nothing herein shall prohibit any Lender from pledging or assigning,
without notice to or consent of the Borrower and without the payment of the
administrative fee referred to in Section 13.1(a), any Note to any Federal
Reserve Bank in accordance with applicable law.
(f) Each Lender may sell participations at its expense to one or more
banks or other entities as to all or a portion of its rights and obligations
under this Agreement; provided, that (i) such Lender's obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender shall remain the holder of any Note issued to it for the
purpose of this Agreement, (iv) such participations shall be in a minimum amount
of $5,000,000 and, if greater, an amount which is an integral multiple of
$1,000,000, and shall include an allocable portion of such Lender's
Participation, (v) Borrower, the Agent 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 with regard to any and all
payments to be made under this Agreement; provided, that the participation
agreement between a Lender and its participants may provide that such Lender
will obtain the approval of such participant prior to such Lender's agreeing to
any amendment or waiver of any provisions of any Loan Document which would (A)
extend the maturity of any Note, (B) reduce the interest rates hereunder or (C)
increase the Revolving Credit Commitment, either of the Term Loan Commitment or
the Letter of Credit Commitment of the Lender granting the participation, and
(vi) the sale of any such participations which require
103
<PAGE>
Borrower to file a registration statement with the United States Securities and
Exchange Commission or under the securities regulations or laws of any state
shall not be permitted.
(g) The Borrower may not assign, nor shall it permit any other Credit
Party to assign, any rights, powers, duties or obligations under this Agreement
or the other Loan Documents without the prior written consent of all the
Lenders.
13.2. Notices. Any notice shall be conclusively deemed to have been
received by any party hereto and be effective (i) on the day on which delivered
(including hand delivery by commercial courier service) to such party (against
receipt therefor), (ii) on the date of receipt at such address, telefacsimile
number or telex number as may from time to time be specified by such party in
written notice to the other parties hereto or otherwise received), in the case
of notice by telegram, telefacsimile or telex, respectively (where the receipt
of such message is verified by return), or (iii) on the fifth Business Day after
the day on which mailed, if sent prepaid by certified or registered mail, return
receipt requested, in each case delivered, transmitted or mailed, as the case
may be, to the address, telex number or telefacsimile number, as appropriate,
set forth below or such other address or number as such party shall specify by
notice hereunder:
(a) if to the Borrower:
Walter Industries, Inc.
1500 N. Dale Mabry Highway
Tampa, Florida 33607
Attn: Chief Financial Officer
Telephone: (813) 871-4811
Telefacsimile: (813) 871-4430
with a copy to:
Walter Industries, Inc.
1500 N. Dale Mabry Highway
Tampa, Florida 33607
Attn: Chief Financial Officer
Telephone: (813) 871-4811
Telefacsimile: (813) 871-4430
Attn: Corporate Secretary
Telephone: (813) 871-4811
Telefacsimile: (813) 871-4430
104
<PAGE>
(b) if to the Agent:
NationsBank, National Association
Independence Center, 15th Floor
101 North Tryon Street
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Telephone: (704) 388-2374
Telefacsimile: (704) 386-9923
with a copy to:
NationsBank, National Association
400 North Ashley Drive
Tampa, Florida 33603
Attention: Corporate Finance Department
Telephone: (813) 224-5242
Telefacsimile: (813) 224-5948
(c) if to the Lenders:
At the addresses set forth on the signature pages hereof and
on the signature page of each Assignment and Acceptance;
(d) if to any Guarantor, at the address set forth on the signature
page of the Facility Guaranty of such Guarantor.
13.3. Setoff. The Borrower hereby authorizes the Agent and each Lender to
apply all deposits or deposit accounts, of any kind, or any interest in any
deposits or deposit accounts thereof, now or hereafter pledged, mortgaged,
transferred or assigned to the Agent or such Lender or otherwise in the
possession or control of the Agent or such Lender (other than for safekeeping)
for any purpose for the account or benefit of the Borrower and including any
balance of any deposit account or of any credit of the Borrower with the Agent
or such Lender, whether now existing or hereafter established, at any time or
times with or without prior notice, or any part thereof, to such of the
Obligations of the Borrower to the Lenders then past due and in such amounts as
they may elect, and whether or not the collateral or the responsibility of other
Persons primarily, secondarily or otherwise liable may be deemed adequate. For
the purposes of this paragraph, all remittances and property shall be deemed to
be in the possession of the Agent or such Lender as soon as the same may be put
in transit to it by mail or carrier or by other bailee.
13.4. Survival. All covenants, agreements, representations and warranties
made herein shall survive the making by the Lenders of the Loans and the
issuance of the Letters of Credit and the execution and delivery to the Lenders
of this Agreement and the Notes and shall continue in
105
<PAGE>
full force and effect so long as any of Obligations remain outstanding or any
Lender has any commitment hereunder or the Borrower has continuing obligations
hereunder unless otherwise provided herein. Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
successors and permitted assigns of such party and all covenants, provisions and
agreements by or on behalf of the Borrower which are contained in the Loan
Documents shall inure to the benefit of the successors and permitted assigns of
the Lenders or any of them.
13.5. Expenses. The Borrower agrees (a) to pay or reimburse the Agent for
all its reasonable out-of-pocket costs and expenses incurred in connection with
the preparation, negotiation and execution of, and any amendment, supplement or
modification to, any of the Loan Documents (including due diligence expenses and
travel expenses relating to closing), and the consummation of the transactions
contemplated thereby, including the reasonable fees and disbursements of counsel
to the Agent, (b) to pay or reimburse the Agent and the Lenders for all their
costs and expenses incurred in connection with the enforcement or preservation
of any rights under the Loan Documents, including the reasonable fees and
disbursements of their counsel and any payments in indemnification or otherwise
payable by the Lenders to the Agent pursuant to the Loan Documents, and (c) to
pay, indemnify and hold the Agent and the Lenders harmless from any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any failure to pay or delay in paying, documentary, stamp, excise
and other similar taxes, if any, which may be payable or determined to be
payable in connection with the execution and delivery of any of the Loan
Documents, or consummation of any amendment, supplement or modification of, or
any waiver or consent under or in respect of, any Loan Document.
13.6. Amendments. No amendment, modification or waiver of any provision of
any Loan Document and no consent by the Lenders to any departure therefrom by
any Credit Party shall be effective unless such amendment, modification or
waiver shall be in writing and signed by the Agent, shall have been approved by
the Required Lenders through their written consent, and the same shall then be
effective only for the period and on the conditions and for the specific
instances and purposes specified in such writing; provided, however, that, no
such amendment, modification or waiver
(i) which changes, extends or waives any provision of Section
2.13, Section 3.6, Section 12.9 or this Section 13.6, reduces the
amount of or the due date of any principal (including any scheduled
installment thereof), any fees or any interest (or the rate thereof)
payable on any Obligation, which changes the definition of "Required
Lenders", which permits an assignment by any Credit Party of its
Obligations under any Loan Document, which reduces the required
consent of Lenders provided hereunder, which increases, decreases
(other than pursuant to the express terms hereof) or extends (other
than pursuant to the express terms hereof) the Revolving Credit
Commitment, the Term Loan Commitment or Letter of Credit Commitment
of any Lender, shall be effective unless in writing and signed by
each of the Lenders directly affected thereby;
106
<PAGE>
(ii) which waives or excuses any mandatory prepayment of the
Revolving Credit Facility or the Term Loan Facility pursuant to
Section 2.7 or 3.7(b), shall be effective unless with the written
consent of each of the following: (i) the Lenders holding Revolving
Loans representing a majority of the Revolving Credit Outstandings;
and (ii) the Lenders holding Term Loan representing a majority of
the Term Loan Outstandings under Term Loan;
(iii) which amends, modifies or waives Section 2.6, 2.7, or
3.7, or the definition of "Ratable Reduction of Term Loan
Facilities", or any required application, allocation or priority of
application to facilities, in each case in a manner which would
cause the holders of the Revolving Loans, Term Loans (each, an
"Affected Class") to be treated in a manner less favorable as to
ratable distribution of payments provided for therein as in effect
immediately before giving effect to any such modification, amendment
or waiver, unless with the prior written consent of the Lenders
holding a majority of the Revolving Credit Outstandings or Term Loan
Outstandings held by such members of such Affected Class;
(iv) which releases all or substantially all of the Collateral
or all or substantially all of the obligations under the Facility
Guaranties shall be effective unless with the written consent of the
Lenders having Credit Exposures (as defined in the definition of
Required Lenders) aggregating in excess of 66 2/3% of the aggregate
Credit Exposures of all Lenders; or
(v) which affects the rights, privileges or obligations of
NationsBank as provider of Swing Line Loans, shall be effective
unless signed in writing by NationsBank;
(vi) which affects the rights, privileges or obligations of
the Issuing Bank as issuer of Letters of Credit, shall be effective
unless signed in writing by the Issuing Bank; or
(vii) which affects the rights, privileges, immunities or
indemnities of the Agent shall be effective unless in writing and
signed by the Agent.
Notwithstanding any provision of the other Loan Documents to the contrary, as
between the Agent and the Lenders, execution by the Agent shall not be deemed
conclusive evidence that the Agent has obtained the written consent of the
Required Lenders. No notice to or demand on the Borrower in any case shall
entitle the Borrower to any other or further notice or demand in similar or
other circumstances, except as otherwise expressly provided herein. No delay or
omission on any Lender's or the Agent's part in exercising any right, remedy or
option shall operate as a waiver of such or any other right, remedy or option or
of any Default or Event of Default.
107
<PAGE>
13.7. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such fully-executed counterpart.
13.8. Termination. The termination of this Agreement shall not affect any
rights of the Borrower, the Lenders, the Agent or NMSI or any obligation of the
Borrower, the Lenders or the Agent, arising prior to the effective date of such
termination, and the provisions hereof shall continue to be fully operative
until all transactions entered into or rights created or obligations incurred
prior to such termination have been fully disposed of, concluded or liquidated
and the Obligations arising prior to or after such termination have been
irrevocably paid in full. The rights granted to the Agent for the benefit of the
Lenders under the Loan Documents shall continue in full force and effect,
notwithstanding the termination of this Agreement, until all of the Obligations
have been paid in full after the termination hereof (other than Obligations in
the nature of continuing indemnities or expense reimbursement obligations not
yet due and payable, which shall continue) or the Borrower has furnished the
Lenders and the Agent with an indemnification satisfactory to the Agent and each
Lender with respect thereto. All representations, warranties, covenants, waivers
and agreements contained herein shall survive termination hereof until payment
in full of the Obligations unless otherwise provided herein. Notwithstanding the
foregoing, if after receipt of any payment of all or any part of the
Obligations, the Agent or any Lender is for any reason compelled to surrender
such payment to any Person because such payment is determined to be void or
voidable as a preference, impermissible setoff, a diversion of trust funds or
for any other reason, this Agreement shall continue in full force and the
Borrower shall be liable to, and shall indemnify and hold such Lender harmless
for, the amount of such payment surrendered until such Lender shall have been
finally and irrevocably paid in full. The provisions of the foregoing sentence
shall be and remain effective notwithstanding any contrary action which may have
been taken by the Agent or the Lenders in reliance upon such payment, and any
such contrary action so taken shall be without prejudice to the Lenders' rights
under this Agreement and shall be deemed to have been conditioned upon such
payment having become final and irrevocable.
13.9. Indemnification; Limitation of Liability. In consideration of the
execution and delivery of this Agreement by the Agent and each Lender and the
extension of credit under the Loans, the Borrower hereby indemnifies, exonerates
and holds the Agent, NMSI and each Lender and each of their respective
affiliates, officers, directors, employees, agents and advisors (collectively,
the "Indemnified Parties") free and harmless from and against any and all
claims, actions, causes of action, suits, losses, costs, liabilities and
damages, and expenses incurred in connection therewith (irrespective of whether
any such Indemnified Party is a party to the action for which indemnification
hereunder is sought), including reasonable attorneys' fees and disbursements
(collectively, the "Indemnified Liabilities") that may be incurred by or
asserted or awarded against any Indemnified Party, in each case arising out of
or in connection with or by reason of, or in connection with (i) any acquisition
or proposed acquisition by the Borrower or any of its Subsidiaries or Affiliates
of all or a portion of the capital stock or substantially all of the assets of
any other Person, (ii) the execution, delivery, enforcement, performance or
108
<PAGE>
administration of this Agreement and the other Loan Documents, or any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of any Loan (including any Swing Line Loan) or
Letter of Credit, or (iii) any case or proceeding involving the Borrower or any
Subsidiary or Affiliates pursuant to any bankruptcy, insolvency, reorganization,
moratorium or similar law whether or not such action is brought against the
Agent, NMSI or any Lender, the shareholders or creditors of any of such Persons
or an Indemnified Party or an Indemnified Party is otherwise a party thereto and
whether or not the transactions contemplated herein 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, and if and
to the extent that the foregoing undertaking may be unenforceable for any
reason, the Borrower hereby agrees to make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. The Borrower agrees that no Indemnified Party
shall have any liability (whether direct or indirect, in contract or tort or
otherwise) to it, any of its Subsidiaries, any Guarantor, or any security
holders or creditors thereof arising out of, related to or in connection with
the transactions contemplated herein, except to the extent that such liability
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; provided, however, in no event shall any Indemnified Party be liable
for consequential, indirect or special, as opposed to direct, damages.
13.10. Severability. If any provision of this Agreement or the other Loan
Documents shall be determined to be illegal or invalid as to one or more of the
parties hereto, then such provision shall remain in effect with respect to all
parties, if any, as to whom such provision is neither illegal nor invalid, and
in any event all other provisions hereof shall remain effective and binding on
the parties hereto.
13.11. Entire Agreement. This Agreement, together with the other Loan
Documents, constitutes the entire agreement among the parties with respect to
the subject matter hereof and supersedes all previous proposals, negotiations,
representations, commitments and other communications between or among the
parties, both oral and written, with respect thereto.
13.12. Agreement Controls. In the event that any term of any of the Loan
Documents other than this Agreement conflicts with any express term of this
Agreement, the terms and provisions of this Agreement shall control to the
extent of such conflict.
13.13. Usury Savings Clause. Notwithstanding any other provision herein,
the aggregate interest rate charged under any of the Notes, including all
charges or fees in connection therewith deemed in the nature of interest under
applicable law shall not exceed the Highest Lawful Rate (as such term is defined
below). If the rate of interest (determined without regard to the preceding
sentence) under this Agreement at any time exceeds the Highest Lawful Rate (as
defined below), the outstanding amount of the Loans made hereunder shall bear
interest at the Highest Lawful Rate until the total amount of interest due
hereunder equals the amount of interest which would have been due hereunder if
the stated rates of interest set forth in this Agreement had at all times been
109
<PAGE>
in effect. In addition, if when the Loans made hereunder are repaid in full the
total interest due hereunder (taking into account the increase provided for
above) is less than the total amount of interest which would have been due
hereunder if the stated rates of interest set forth in this Agreement had at all
times been in effect, then to the extent permitted by law, the Borrower shall
pay to the Agent an amount equal to the difference between the amount of
interest paid and the amount of interest which would have been paid if the
Highest Lawful Rate had at all times been in effect. Notwithstanding the
foregoing, it is the intention of the Lenders and the Borrower to conform
strictly to any applicable usury laws. Accordingly, if any Lender contracts for,
charges, or receives any consideration which constitutes interest in excess of
the Highest Lawful Rate, then any such excess shall be cancelled automatically
and, if previously paid, shall at such Lender's option be applied to the
outstanding amount of the Loans made hereunder or be refunded to the Borrower.
As used in this paragraph, the term "Highest Lawful Rate" means the maximum
lawful interest rate, if any, that at any time or from time to time may be
contracted for, charged, or received under the laws applicable to such Lender
which are presently in effect or, to the extent allowed by law, under such
applicable laws which may hereafter be in effect and which allow a higher
maximum nonusurious interest rate than applicable laws now allow.
13.14. Governing Law; Waiver of Jury Trial.
(a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH
STATE.
(b) THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND
CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED
IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF HILLSBOROUGH, STATE
OF FLORIDA, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF
THIS AGREEMENT, THE BORROWER EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN, OR TO THE EXERCISE OF
JURISDICTION OVER IT AND ITS PROPERTY BY, ANY SUCH COURT IN ANY SUCH SUIT,
ACTION OR PROCEEDING, AND THE BORROWER HEREBY 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 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 PROVIDED
IN SECTION
110
<PAGE>
13.2, OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE
LAWS IN EFFECT IN THE STATE OF FLORIDA.
(d) NOTHING CONTAINED IN SUBSECTIONS (a) OR (b) HEREOF SHALL
PRECLUDE THE AGENT OR ANY LENDER FROM BRINGING ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT IN THE COURTS
OF ANY JURISDICTION WHERE THE BORROWER OR ANY OF THE BORROWER'S PROPERTY
OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE
APPLICABLE LAWS OF ANY SUCH JURISDICTION, THE BORROWER HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN
RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, OBJECTION TO THE EXERCISE
OF JURISDICTION OVER IT AND ITS PROPERTY BY ANY SUCH OTHER COURT OR COURTS
WHICH NOW OR HEREAFTER MAY BE AVAILABLE UNDER APPLICABLE LAW.
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER OR RELATED TO ANY LOAN DOCUMENT OR ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE
DELIVERED IN CONNECTION THEREWITH, THE BORROWER, THE AGENT AND THE LENDERS
HEREBY AGREE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY
AND HEREBY IRREVOCABLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION OR
PROCEEDING.
[Signatures on following pages]
111
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
made, executed and delivered by their duly authorized officers as of the day and
year first above written.
WALTER INDUSTRIES, INC.
WITNESS:
By: /s/ F.A. Hult
----------------------------------------
Name: F.A. Hult
Title: Vice President
<PAGE>
NATIONSBANK, NATIONAL ASSOCIATION,
as Agent for the Lenders
By: /s/ Miles C. Dearden III
----------------------------------------
Name: Miles C. Dearden III
Title: Senior Vice President
NATIONSBANK, NATIONAL ASSOCIATION
By: /s/ Miles C. Dearden III
----------------------------------------
Name: Miles C. Dearden III
Title: Senior Vice President
Lending Office:
NationsBank, National Association
101 North Tryon Street
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Telephone: (704) 388-2374
Telefacsimile: (704) 386-9923
Wire Transfer Instructions:
NationsBank, National Association
Tampa, Florida
ABA# 063100277
Account No.: 136621-2163
Reference: Walter Industries, Inc.
Attention: Corporate Credit Support
<PAGE>
EXHIBIT A
Applicable Commitment Percentages
I. Revolving Credit Facility
Revolving Applicable
Credit Commitment
Lender Commitment Percentage
- ------ ---------- ----------
NationsBank, National $350,000,000.00 100%
Association
II. Term Loan Facility
Applicable
Term Loan Commitment
Lender Commitment Percentage
- ------ ---------- ----------
NationsBank, National $450,000,000.00 100%
Association
A-1
<PAGE>
EXHIBIT B-1
Form of Assignment and Acceptance
DATED ____________, __
Reference is made to the Credit Agreement dated as of October 15, 1997
(the "Agreement") among Walter Industries, Inc., a Delaware corporation (the
"Borrower"), the Lenders (as defined in the Agreement), and NationsBank,
National Association, as Agent for the Lenders ("Agent"). Unless otherwise
defined herein, terms defined in the Agreement are used herein with the same
meanings.
_______________ (the "Assignor") and ___________________ (the "Assignee")
agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the Assignee
hereby purchases and assumes from the Assignor, WITHOUT RECOURSE, a _______%(1)
interest in and to all of the Assignor's rights and obligations under the
Agreement in respect of the Revolving Credit Facility and Participations as of
the Effective Date (as defined below), including, without limitation, such
percentage interest in the Loans owing to the Assignor on the Effective Date,
and evidenced by the Revolving Note and each of the Term Notes held by the
Assignor.
2. The Assignor (i) represents and warrants that, as of the date hereof,
(A) the aggregate principal amount of Revolving Loans owing to it (without
giving effect to the assignments thereof which have not yet become effective) is
$__________ under a Revolving Note dated ____________, ____ in the principal
amount of $_________ and (B) the aggregate principal amount of the
Participations purchased by it (without giving effect to the assignments thereof
which have not yet become effective) is $_________; (ii) represents and warrants
that it is the legal and beneficial owner of the interest being assigned by it
hereunder and that such interest is free and clear of any adverse claim; (iii)
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
the Agreement or any of the Loan Documents or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Agreement or any of the
Loan Documents or any other instrument or document furnished pursuant thereto;
(iv) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower, any Subsidiary or any other
Guarantor or the performance or observance by the Borrower or any Guarantor of
any of its obligations under any of the Loan Documents or any other instrument
or document furnished pursuant thereto and (v) attaches hereto the Revolving
Note referred to in paragraph 1 above and requests that the Agent exchange such
Note for a replacement Note as follows: a Revolving Note dated _____________,
____ in the principal amount of
- ----------
(1) Specify percentage in no more than 4 decimal points.
B-1-1
<PAGE>
$________________ payable to the order of the Assignor, and a Revolving Note
dated _____________, ____ in the principal amount of $________________ payable
to the order of the Assignee.
3. The Assignee (i) confirms that it has received a copy of the Agreement,
together with copies of the financial statements referred to in Section 9.1
thereof and such other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into this Assignment and
Acceptance; (ii) agrees that it will, independently and without reliance upon
the Agent, NMSI or the Assignor, 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 the Agreement; (iii)
appoints and authorizes the Agent to take such actions on its behalf and to
exercise such powers under the Loan Documents as are delegated to the Agent by
the terms thereof, together with such powers as are reasonably incidental
thereto; (iv) will perform all of the obligations which by the terms of the
Agreement are required to be performed by the Lender; and (v) specifies as its
address for notices the office set forth beneath its name on the signature pages
hereof.
4. The effective date for this Assignment and Acceptance shall be
_____________________________ (the "Effective Date"). Following the execution of
this Assignment and Acceptance, it will be delivered to the Agent together with
the transfer fee payable under Section 13.1(a) of the Agreement in connection
therewith for acceptance and recording in the Register by the Agent pursuant to
Section 13.1(c) of the Agreement.
5. Upon such acceptance and recording, as of the Effective Date, (i) the
Assignee shall be a party to the Agreement and, to the extent provided in this
Assignment and Acceptance, have the rights and obligations of a Lender
thereunder and under the Loan Documents and (ii) the Assignor shall, to the
extent provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Agreement and the other Loan Documents.
6. Upon such acceptance and recording, from and after the Effective Date,
the Agent shall make all payments under the Agreement and Notes in respect of
the interest assigned hereby (including, without limitation, all payments of
principal, interest, commitment fees and letter of credit fees with respect
thereto) to the Assignee. The Assignor and Assignee shall make all appropriate
adjustments in payments under the Agreement and the Notes for periods prior to
the Effective Date directly between themselves.
B-1-2
<PAGE>
7. This Assignment and Acceptance shall be governed by and construed in
accordance with, the laws of the State of Florida.
[NAME OF ASSIGNOR]
By:_________________________________________
Name:____________________________________
Title:___________________________________
Notice Address:_____________________________
_____________________________
_____________________________
After the Effective Date:
Outstanding Revolving Loans:$______
Outstanding LC
Participations: $___________
Outstanding Swing Line
Participations: $___________
[NAME OF ASSIGNEE]
By:_________________________________________
Name:____________________________________
Title:___________________________________
Notice Address/Lending Office
_____________________________
_____________________________
_____________________________
Wire transfer Instructions:
_____________________________
_____________________________
_____________________________
After the Effective Date
Outstanding Revolving Loans:$______
Outstanding LC
Participations: $___________
Outstanding Swing Line
Participations: $___________
B-1-3
<PAGE>
Accepted this ____ day of _______, ______
NATIONSBANK, NATIONAL ASSOCIATION, as Agent
By:_________________________________________
Name:____________________________________
Title:___________________________________
Consented to:
WALTER INDUSTRIES, INC.
By:______________________________
Name:_________________________
Title:________________________
B-1-4
<PAGE>
EXHIBIT B-2
Form of Assignment and Acceptance
DATED ___________________, ____
Reference is made to the Credit Agreement dated as of October 15, 1997
(the "Agreement") among Walter Industries, Inc., a Delaware corporation (the
"Borrower"), the Lenders (as defined in the Agreement), and NationsBank,
National Association, as Agent for the Lenders ("Agent"). Unless otherwise
defined herein, terms defined in the Agreement are used herein with the same
meanings.
________________ (the "Assignor") and __________________ (the "Assignee")
agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the Assignee
hereby purchases and assumes from the Assignor, WITHOUT RECOURSE, a _______%(1)
interest in and to all of the Assignor's rights and obligations under the
Agreement in respect of the Term Loan Facility as of the Effective Date (as
defined below), including, without limitation, such percentage interest in the
Loans owing to the Assignor on the Effective Date and evidenced by the Term
Note.
2. The Assignor (i) represents and warrants that, as of the date hereof,
the aggregate outstanding principal amount of the Term Loan owing to it (without
giving effect to assignments thereof which have not yet become effective) is
$________ under a Term Note dated __________, ____ in the principal amount of
$_________; (ii) represents and warrants that it is the legal and beneficial
owner of the interest being assigned by it hereunder and that such interest is
free and clear of any adverse claim; (iii) makes no representation or warranty
and assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Agreement or any of the Loan
Documents or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Agreement or any of the Loan Documents or any other
instrument or document furnished pursuant thereto; (iv) makes no representation
or warranty and assumes no responsibility with respect to the financial
condition of the Borrower, any Subsidiary or any other Guarantor or the
performance or observance by the Borrower or any Guarantor of any of its
obligations under any of the Loan Documents or any other instrument or document
furnished pursuant thereto and (v) attaches hereto the Term Note referred to in
paragraph 1 above and requests that the Agent exchange such Note for replacement
Notes as follows: a Term Note dated _____________, ____ in the principal amount
of $______________, payable to the order of the Assignor, and a Term Note dated
_____________, ____ in the principal amount of $______________, payable to the
order of the Assignee.
- ----------
(1) Specify percentage in no more than 4 decimal points.
B-2-1
<PAGE>
3. The Assignee (i) confirms that it has received a copy of the Agreement,
together with copies of the financial statements referred to in Section 9.1
thereof and such other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into this Assignment and
Acceptance; (ii) agrees that it will, independently and without reliance upon
the Agent, NMSI or the Assignor, 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 the Agreement; (iii)
appoints and authorizes the Agent to take such actions on its behalf and to
exercise such powers under the Loan Documents as are delegated to the Agent by
the terms thereof, together with such powers as are reasonably incidental
thereto; (iv) will perform all of the obligations which by the terms of the
Agreement are required to be performed by the Lender; and (v) specifies as its
address for notices the office set forth beneath its name on the signature pages
hereof.
4. The effective date for this Assignment and Acceptance shall be
_____________________________ (the "Effective Date"). Following the execution of
this Assignment and Acceptance, it will be delivered to the Agent together with
the transfer fee payable under Section 13.1(a) of the Agreement in connection
therewith for acceptance and recording in the Register by the Agent pursuant to
Section 13.1(c) of the Agreement.
5. Upon such acceptance and recording, as of the Effective Date, (i) the
Assignee shall be a party to the Agreement and, to the extent provided in this
Assignment and Acceptance, have the rights and obligations of a Lender
thereunder and under the Loan Documents and (ii) the Assignor shall, to the
extent provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Agreement and the other Loan Documents.
6. Upon such acceptance and recording, from and after the Effective Date,
the Agent shall make all payments under the Agreement and Notes in respect of
the interest assigned hereby (including, without limitation, all payments of
principal, interest, commitment fees and letter of credit fees with respect
thereto) to the Assignee. The Assignor and Assignee shall make all appropriate
adjustments in payments under the Agreement and the Notes for periods prior to
the Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by and construed in
accordance with, the laws of the State of Florida.
[NAME OF ASSIGNOR]
By:_________________________________________
Name:____________________________________
Title:___________________________________
Notice Address:_____________________________
_____________________________
_____________________________
After the Effective Date:
B-2-2
<PAGE>
Outstanding Term Loan: $_________
[NAME OF ASSIGNEE]
By:_________________________________________
Name:____________________________________
Title:___________________________________
Notice Address/Lending Office
_____________________________
_____________________________
_____________________________
Wire transfer Instructions:
_____________________________
_____________________________
_____________________________
After the Effective Date
Outstanding Term Loan: $_________
B-2-3
<PAGE>
Accepted this ____ day of _______, ___
NATIONSBANK, NATIONAL ASSOCIATION, as Agent
By:_________________________________________
Name:____________________________________
Title:___________________________________
Consented to:
WALTER INDUSTRIES, INC.
By:______________________________
Name:_________________________
Title:________________________
B-2-4
<PAGE>
EXHIBIT C
Notice of Appointment (or Revocation) of Authorized Representative
Reference is hereby made to the Credit Agreement dated as of October 15,
1997 (the "Agreement") among Walter Industries, Inc., a Delaware corporation
(the "Borrower"), the Lenders (as defined in the Agreement), and NationsBank,
National Association, as Agent for the Lenders ("Agent"). Capitalized terms used
but not defined herein shall have the respective meanings therefor set forth in
the Agreement.
The Borrower hereby nominates, constitutes and appoints each individual
named below as an Authorized Representative under the Loan Documents, and hereby
represents and warrants that (i) set forth opposite each such individual's name
is a true and correct statement of such individual's office (to which such
individual has been duly elected or appointed), a genuine specimen signature of
such individual and an address for the giving of notice, and (ii) each such
individual has been duly authorized by the Borrower to act as Authorized
Representative under the Loan Documents:
Name and Address Office Specimen Signature
_________________ _______________________ __________________________
_________________
_________________
_________________ _______________________ __________________________
_________________
_________________
Borrower hereby revokes (effective upon receipt hereof by the Agent) the prior
appointment of ________________ as an Authorized Representative.
This the ___ day of __________________, ____.
WALTER INDUSTRIES. INC.
By:___________________________________
Name:_________________________________
Title:________________________________
C-1
<PAGE>
EXHIBIT D-1
Form of Borrowing Notice
To: NationsBank, National Association,
as Agent
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Telefacsimile: (704) 386-9923
Reference is hereby made to the Credit Agreement dated as of October 15,
1997 (the "Agreement") among Walter Industries, Inc. (the "Borrower"), the
Lenders (as defined in the Agreement), and NationsBank, National Association, as
Agent for the Lenders ("Agent"). Capitalized terms used but not defined herein
shall have the respective meanings therefor set forth in the Agreement.
The Borrower through its Authorized Representative hereby gives notice to
the Agent that Loans of the type and amount set forth below be made on the date
indicated:
Type of Loan Interest Aggregate
(check one) Period(1) Amount(2) Date of Loan(3)
- ----------- ------ ------ ------------
Revolving Loan
Base Rate Loan ______ _________ ____________
Eurodollar Rate Loan ______ _________ ____________
- ----------
(1) For any Eurodollar Rate Loan, one, two, three or six months.
(2) Must be $5,000,000 or if greater an integral multiple of $1,000,000,
unless a Base Rate Refunding Loan.
(3) At least three (3) Business Days later if a Eurodollar Rate Loan;
The Borrower hereby requests that the proceeds of Loans described in this
Borrowing Notice be made available to the Borrower as follows: [insert
transmittal instructions] .
The undersigned hereby certifies that:
1. No Default or Event of Default exists either now or after giving effect
to the borrowing described herein; and
D-1-1
<PAGE>
2. All the representations and warranties set forth in Article VIII of the
Agreement and in the Loan Documents (other than those expressly stated to refer
to a particular date) are true and correct as of the date hereof except that the
reference to the financial statements in Section 8.6(a) of the Agreement are to
those financial statements most recently delivered to you pursuant to Section
9.1 of the Agreement (it being understood that any financial statements
delivered pursuant to Section 9.1(b) have not been certified by independent
public accountants) and attached hereto are any changes to the Schedules
referred to in connection with such representations and warranties; and
3. All conditions contained in the Agreement to the making of any Loan
requested hereby have been met or satisfied in full .
WALTER INDUSTRIES, INC.
BY: ___________________________________
Authorized Representative
DATE: _________________________________
D-1-2
<PAGE>
EXHIBIT D-2
Form of Borrowing Notice--Swing Line Loans
To: NationsBank, National Association,
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Telefacsimile: (704)386-9923
Reference is hereby made to the Credit Agreement dated as of October 15,
1997 (the "Agreement") among Walter Industries, Inc. (the "Borrower"), the
Lenders (as defined in the Agreement), and NationsBank, National Association, as
Agent for the Lenders ("Agent"). Capitalized terms used but not defined herein
shall have the respective meanings therefor set forth in the Agreement.
The Borrower through its Authorized Representative hereby gives notice to
NationsBank that a Swing Line Loan of the amount set forth below be made on the
date indicated:
Amount(1) Date of Loan
--------- ------------
--------- ----------, ----
- ----------
(1) Must be $500,000 or if greater an integral multiple of $100,000, unless a
Base Rate Refunding Loan.
The Borrower hereby requests that the proceeds of Swing Line Loans
described in this Borrowing Notice be made available to the Borrower as follows:
[insert transmittal instructions] ________.
The undersigned hereby certifies that:
1. No Default or Event of Default exists either now or after giving effect
to the borrowing described herein; and
2. All the representations and warranties set forth in Article VIII of the
Agreement and in the Loan Documents (other than those expressly stated to refer
to a particular date) are true and correct as of the date hereof except that the
reference to the financial statements in Section 8.6(a) of the Agreement are to
those financial statements most recently delivered to you pursuant to Section
9.1 of the Agreement (it being understood that any financial statements
delivered
D-2-1
<PAGE>
pursuant to Section 9.1(b) have not been certified by independent public
accountants) and attached hereto are any changes to the Schedules referred to in
connection with such representations and warranties; and
3. All conditions contained in the Agreement to the making of any Loan
requested hereby have been met or satisfied in full .
WALTER INDUSTRIES, INC.
BY: ___________________________________
Authorized Representative
DATE: _________________________________
D-2-2
<PAGE>
EXHIBIT E
Form of Interest Rate Selection Notice
To: NationsBank, National Association,
as Agent
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Telefacsimile: (704) 386-9923
Reference is hereby made to the Credit Agreement dated as of October 15,
1997 (the "Agreement") among Walter Industries, Inc. (the "Borrower"), the
Lenders (as defined in the Agreement), and NationsBank, National Association, as
Agent for the Lenders ("Agent"). Capitalized terms used but not defined herein
shall have the respective meanings therefor set forth in the Agreement.
The Borrower through its Authorized Representative hereby gives notice to
the Agent of the following selection of a type of Loan or Segment and Interest
Period:
Type of Loan Interest Aggregate
(check one) Period(1) Amount(2) Date of Loan(3)
- ----------- ------ ------ ------------
Revolving Loan
Base Rate Loan ______ _________ ____________
Eurodollar Rate Loan ______ _________ ____________
Term Loan Segment
Base Rate Segment ______ _________ ____________
Eurodollar Rate
Segment ______ _________ ____________
- ----------
(1) For any Eurodollar Rate Loan or Segment, one, two, three or six months.
(2) Must be $5,000,000 or if greater an integral multiple of $1,000,000,
unless a Base Rate Refunding Loan.
(3) At least three (3) Business Days later if a Eurodollar Rate Loan or
Eurodollar Rate Segment;
E-1
<PAGE>
WALTER INDUSTRIES, INC.
BY: ________________________________
Authorized Representative
DATE: ______________________________
E-2
<PAGE>
EXHIBIT F-1
Form of Revolving Note
Promissory Note
(Revolving Loan)
$-------------- ---------, --------------
------ --, ----
FOR VALUE RECEIVED, WALTER INDUSTRIES, INC., a Delaware corporation having
its principal place of business located in Tampa, Florida (the "Borrower"),
hereby promises to pay to the order of ________________________________________,
its successors and registered assigns (the "Lender"), in its individual
capacity, at the office of NATIONSBANK, NATIONAL ASSOCIATION, as agent for the
Lenders (the "Agent"), located at One Independence Center, 101 North Tryon
Street, NC1-001-15-04, Charlotte, North Carolina 28255 (or at such other place
or places as the Agent may designate in writing) at the times set forth in the
Credit Agreement dated as of October 15, 1997 among the Borrower, the financial
institutions party thereto as lenders (collectively, the "Lenders"), the Agent
and certain financial institutions as managing agents (the "Agreement" -- all
capitalized terms not otherwise defined herein shall have the respective
meanings set forth in the Agreement), in lawful money of the United States of
America, in immediately available funds, the principal amount of ___________
DOLLARS ($__________) or, if less than such principal amount, the aggregate
unpaid principal amount of all Revolving Loans made by the Lender to the
Borrower pursuant to the Agreement on the Revolving Credit Termination Date or
such earlier date as may be required pursuant to the terms of the Agreement, and
to pay interest from the date hereof on the unpaid principal amount hereof, in
like money, at said office, on the dates and at the rates provided in Article
III of the Agreement. All or any portion of the principal amount of Loans may be
prepaid or required to be prepaid as provided in the Agreement.
If payment of all sums due hereunder is accelerated under the terms of the
Agreement or under the terms of the other Loan Documents executed in connection
with the Agreement, the then remaining principal amount and accrued but unpaid
interest shall bear interest which shall be payable on demand at the rates per
annum set forth in the proviso to Section 3.2 (a) of the Agreement. Further, in
the event of such acceleration, this Revolving Note shall become immediately due
and payable, without presentation, demand, protest or notice of any kind, all of
which are hereby waived by the Borrower.
In the event this Revolving Note is not paid when due at any stated or
accelerated maturity, the Borrower agrees to pay, in addition to the principal
and interest, all costs of collection, including reasonable attorneys' fees, and
interest due hereunder thereon at the rates set forth above.
F-1
<PAGE>
Interest hereunder shall be computed as provided in the Agreement.
This Revolving Note is one of the Revolving Notes referred to in the
Agreement and is issued pursuant to and entitled to the benefits and security of
the Agreement to which reference is hereby made for a more complete statement of
the terms and conditions upon which the Revolving Loans evidenced hereby were or
are made and are to be repaid. This Revolving Note is subject to certain
restrictions on transfer or assignment as provided in the Agreement.
This Note and the Loans evidenced hereby may be transferred in whole or in
part only by registration of such transfer on the Register maintained by or on
behalf of the Borrower as provided in Section 13.1(c) of the Agreement.
All Persons bound on this obligation, whether primarily or secondarily
liable as principals, sureties, guarantors, endorsers or otherwise, hereby waive
to the full extent permitted by law the benefits of all provisions of law for
stay or delay of execution or sale of property or other satisfaction of judgment
against any of them on account of liability hereon until judgment be obtained
and execution issues against any other of them and returned satisfied or until
it can be shown that the maker or any other party hereto had no property
available for the satisfaction of the debt evidenced by this instrument, or
until any other proceedings can be had against any of them, also their right, if
any, to require the holder hereof to hold as security for this Revolving Note
any collateral deposited by any of said Persons as security. Protest, notice of
protest, notice of dishonor, diligence or any other formality are hereby waived
by all parties bound hereon.
F-2
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Revolving Note to be
made, executed and delivered by its duly authorized representative as of the
date and year first above written, all pursuant to authority duly granted.
WALTER INDUSTRIES, INC.
WITNESS:
______________________ By: _______________________________
Name: _____________________________
Title: ____________________________
F-3
<PAGE>
EXHIBIT F-2
Form of Term Note
Promissory Note
(Term Loan)
$---------------- --------, --------
------ --, ----
FOR VALUE RECEIVED, WALTER INDUSTRIES, INC., a Delaware corporation having
its principal place of business located in Tampa, Florida (the "Borrower"),
hereby promises to pay to the order of ___________________________________ , its
successors and registered assigns (the "Lender"), in its individual capacity, at
the office of NATIONSBANK, NATIONAL ASSOCIATION, as agent for the Lenders (the
"Agent"), located at One Independence Center, 101 North Tryon Street,
NC1-001-15-04, Charlotte, North Carolina 28255 (or at such other place or places
as the Agent may designate in writing) at the times set forth in the Credit
Agreement dated as of October 15, 1997 among the Borrower, the financial
institutions party thereto as lenders (collectively, the "Lenders"), the Agent
and certain financial institutions as managing agents (the "Agreement" -- all
capitalized terms not otherwise defined herein shall have the respective
meanings set forth in the Agreement), in lawful money of the United States of
America, in immediately available funds, the principal amount of
_____________________ DOLLARS ($______________), such amount of principal to be
payable on the respective dates and in the respective amounts provided for in
Sections 2.3(a) and 2.13 of the Agreement or such earlier date as may be
required pursuant to the terms of the Agreement, and to pay interest from the
date hereof on the unpaid principal amount hereof, in like money, at said
office, on the dates and at the rates provided in Article II of the Agreement.
All or any portion of the principal amount of Loans may be prepaid or required
to be prepaid as provided in the Agreement.
If payment of all sums due hereunder is accelerated under the terms of the
Agreement or under the terms of the other Loan Documents executed in connection
with the Agreement, the then remaining principal amount hereof and accrued but
unpaid interest thereon shall bear interest which shall be payable on demand at
the rates per annum set forth in the proviso to Section 2.4 of the Agreement.
Further, in the event of such acceleration, this Term Note shall become
immediately due and payable, without presentation, demand, protest or notice of
any kind, all of which are hereby waived by the Borrower.
In the event this Term Note is not paid when due at any stated or
accelerated maturity, the Borrower agrees to pay, in addition to the principal
and interest due hereunder, all costs of collection, including reasonable
attorneys' fees, and interest thereon at the rates set forth above.
Interest hereunder shall be computed as provided in the Agreement.
F-2-1
<PAGE>
This Term Note is one of the Term Notes referred to in the Agreement and
is issued pursuant to and entitled to the benefits and security of the Agreement
to which reference is hereby made for a more complete statement of the terms and
conditions upon which the Term Loan evidenced hereby was made and is to be
repaid. This Term Note is subject to certain restrictions on transfer or
assignment as provided in the Agreement.
This Note and the Loans evidenced hereby may be transferred in whole or in
part only by registration of such transfer on the Register maintained by or on
behalf of the Borrower as provided in Section 13.1(c) of the Agreement.
All Persons bound on this obligation, whether primarily or secondarily
liable as principals, sureties, guarantors, endorsers or otherwise, hereby waive
to the full extent permitted by law the benefits of all provisions of law for
stay or delay of execution or sale of property or other satisfaction of judgment
against any of them on account of liability hereon until judgment be obtained
and execution issues against any other of them and returned satisfied or until
it can be shown that the maker or any other party hereto had no property
available for the satisfaction of the debt evidenced by this instrument, or
until any other proceedings can be had against any of them, also their right, if
any, to require the holder hereof to hold as security for this Term Note any
collateral deposited by any of said Persons as security. Protest, notice of
protest, notice of dishonor, diligence or any other formality are hereby waived
by all parties bound hereon.
F-2-2
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Term Note to be made,
executed and delivered by its duly authorized representative as of the date and
year first above written, all pursuant to authority duly granted.
WALTER INDUSTRIES, INC.
WITNESS:
______________________ By: _________________________________
______________________ Name: _______________________________
Title: ______________________________
F-2-3
<PAGE>
EXHIBIT G
Form(s) of Opinion(s) of Counsel to Credit Parties
See attached.
G-1
<PAGE>
EXHIBIT H
Compliance Certificate
NationsBank, National Association,
as Agent
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Telefacsimile: (704) 386-9923
NationsBank, National Association,
as Agent
400 North Ashley Drive
Tampa, Florida 33603
Attention: Corporate Banking Department
Telefacsimile: (813) 224-5948
Reference is hereby made to the Credit Agreement dated as of October 15,
1997 (the "Agreement") among Walter Industries, Inc., a Delaware corporation
(the "Borrower"), the Lenders (as defined in the Agreement), and NationsBank,
National Association, as Agent for the Lenders ("Agent"). Capitalized terms used
but not otherwise defined herein shall have the respective meanings therefor set
forth in the Agreement. The undersigned, a duly authorized and acting Authorized
Representative, hereby certifies to you as of __________ (the "Determination
Date") as follows:
1. Calculations:
[Insert as Appropriate]
2. No Default
A. Since __________ (the date of the last similar
certification), (a) the Borrower has not defaulted in the keeping,
observance, performance or fulfillment of its obligations pursuant
to any of the Loan Documents; and (b) no Default or Event of Default
specified in Article XI of the Agreement has occurred and is
continuing.
B. If a Default or Event of Default has occurred since
__________ (the date of the last similar certification), the
Borrower proposes to take the following action with respect to such
Default or Event of Default:__________________________
H-1
<PAGE>
____________________________________________________________________
___________________________________________________.
(Note, if no Default or Event of Default has occurred, insert
"Not Applicable").
The Determination Date is the date of the last required financial
statements submitted to the Lenders in accordance with Section 9.1 of the
Agreement.
IN WITNESS WHEREOF, I have executed this Certificate this _____ day of
__________, ____.
By:________________________________
Authorized Representative
Name:______________________________
Title:_____________________________
H-2
<PAGE>
EXHIBIT I
Form of Facility Guaranty for Subsidiaries
THIS GUARANTY AND SURETYSHIP AGREEMENT (the "Guaranty Agreement" or the
"Guaranty"), dated as of __________ __, ____, is made by each of the undersigned
(each a "Guarantor" and collectively the "Guarantors") to NATIONSBANK, NATIONAL
ASSOCIATION, a national banking association, as Administrative Agent,
Documentation Agent and Syndication Agent (the "Agent") for each of the lenders
now or hereafter party to the Credit Agreement (as defined below) (each a
"Lender" and collectively the "Lenders").
W I T N E S S E T H:
WHEREAS, the Agent and the Lenders have agreed to provide to Walter
Industries, Inc., a Delaware corporation (the "Borrower") two term loan
facilities, a revolving credit facility and letter of credit and swing line
subfacilities pursuant to the terms of that certain Credit Agreement dated as of
October 15, 1997 among the Borrower, the Agent and the Lenders (as from time to
time amended, modified or supplemented, the "Credit Agreement"); and
WHEREAS, each Guarantor is a direct or indirect Subsidiary of the
Borrower; and
WHEREAS, as a condition to entering into the Credit Agreement and
continuing to make any loans or advances or to issue letters of credit
thereunder, each Guarantor is required to guarantee to the Agent and the Lenders
payment of the Borrower's Liabilities (as hereinafter defined) in accordance
with the terms of this Agreement; and
WHEREAS, each Guarantor will materially benefit from the loans and
advances to be made, and the letters of credit to be issued, under the Credit
Agreement, and each Guarantor is willing to enter into this Guaranty to provide
an inducement for the Lenders and the Agent to continue to make loans and
advances, and to issue letters of credit, under the Credit Agreement.
NOW, THEREFORE, in order to induce the Lenders and the Agent to make loans
and advances to the Borrower, and to issue letters of credit for the account of
the Borrower, under the Credit Agreement, each Guarantor agrees as follows:
1. Definitions. All capitalized terms not otherwise defined herein shall
have the meanings ascribed to such terms in the Credit Agreement.
2. Guaranty. Each Guarantor hereby jointly and severally, unconditionally,
absolutely, continually and irrevocably guarantees to the Agent and the Lenders
the payment and performance in full of the Borrower's Liabilities (as defined
below). For all purposes of this Guaranty Agreement, "Borrower's Liabilities"
means: (a) the Borrower's prompt payment in full, when due or declared due and
at all such times, of all Obligations and all other amounts
I-1
<PAGE>
pursuant to the terms of the Credit Agreement, the Notes, and all other Loan
Documents executed in connection with the Credit Agreement heretofore, now or at
any time or times hereafter owing, arising, due or payable from the Borrower to
the Lenders, including without limitation principal, interest, premium or fee
(including, but not limited to, loan fees and attorneys' fees and expenses); and
(b) the Borrower's prompt, full and faithful performance, observance and
discharge of each and every agreement, undertaking, covenant and provision to be
performed, observed or discharged by the Borrower under the Credit Agreement and
all other Loan Documents executed in connection therewith. Each Guarantor's
obligations to the Agent and the Lenders under this Guaranty Agreement are
hereinafter collectively referred to as the "Guarantors' Obligations"; provided,
however, that the liability of each Guarantor with respect to the Guarantors'
Obligations shall not exceed at any time the Maximum Amount (as hereinafter
defined). The "Maximum Amount" means the greater of (X) the aggregate amount of
all Advances to such Guarantor made directly or indirectly with the proceeds of
Loans and not theretofore repaid by such Guarantor or (Y) 95% of (i) the fair
salable value of the assets of such Guarantor as of the date hereof minus (ii)
the total liabilities of such Guarantor (including contingent liabilities, but
excluding liabilities of such Guarantor under this Guaranty and any other Loan
Documents executed by such Guarantor) as of the date hereof; provided further,
however, that if the calculation of the Maximum Amount in the manner provided
above as of the date payment is required of such Guarantor pursuant to this
Guaranty would result in a greater positive number, then the Maximum Amount
shall be deemed to be such greater positive number.
Each Guarantor agrees that it is jointly and severally, directly and
primarily liable for the Borrower's Liabilities.
3. Payment. If the Borrower shall default in payment or performance of any
Borrower's Liabilities, whether principal, interest, premium, fee (including,
but not limited to, loan fees and attorneys' fees and expenses), or otherwise,
when and as the same shall become due, whether according to the terms of the
Credit Agreement, by acceleration, or otherwise, or upon the occurrence of any
other Event of Default under the Credit Agreement that has not been cured or
waived, then each Guarantor, upon demand thereof by the Agent or its successors
or assigns, will AS OF THE DATE OF THE AGENT'S DEMAND fully pay to the Agent,
for the benefit of the Lenders, subject to any restriction set forth in Section
2 hereof, an amount equal to all Guarantor's Obligations then due and owing.
4. Unconditional Obligations. This is a guaranty of payment and not of
collection. The Guarantors' Obligations under this Guaranty Agreement shall be
joint and several, absolute and unconditional irrespective of the validity,
legality or enforceability of the Credit Agreement, the Notes or any other Loan
Document or any other guaranty of the Borrower's Liabilities, and shall not be
affected by any action taken under the Credit Agreement, the Notes or any other
Loan Document, any other guaranty of the Borrower's Liabilities, or any other
agreement between the Agent or the Lenders and the Borrower or any other Person,
in the exercise of any right or power therein conferred, or by any failure or
omission to enforce any right conferred thereby, or by any waiver of any
covenant or condition therein provided, or by any acceleration of the maturity
of any of the Borrower's Liabilities, or by the release or other disposal of any
security for any of the
I-2
<PAGE>
Borrower's Liabilities, or by the dissolution of the Borrower or the combination
or consolidation of the Borrower into or with another entity or any transfer or
disposition of any assets of the Borrower or by any extension or renewal of the
Credit Agreement, any of the Notes or any other Loan Document, in whole or in
part, or by any modification, alteration, amendment or addition of or to the
Credit Agreement, any of the Notes or any other Loan Document, any other
guaranty of the Borrower's Liabilities, or any other agreement between the Agent
or the Lenders and the Borrower or any other Person, or by any other
circumstance whatsoever (with or without notice to or knowledge of any
Guarantor) which may or might in any manner or to any extent vary the risks of
any Guarantor, or might otherwise constitute a legal or equitable discharge of a
surety or guarantor; it being the purpose and intent of the parties hereto that
this Guaranty Agreement and the Guarantors' Obligations hereunder shall be
absolute and unconditional under any and all circumstances and shall not be
discharged except by payment as herein provided.
5. Currency and Funds of Payment. Each Guarantor hereby guarantees that
the Guarantors' Obligations will be paid in lawful currency of the United States
of America and in immediately available funds, regardless of any law, regulation
or decree now or hereafter in effect that might in any manner affect the
Borrower's Liabilities, or the rights of the Agent or any Lender with respect
thereto as against the Borrower, or cause or permit to be invoked any alteration
in the time, amount or manner of payment by the Borrower of any or all of the
Borrower's Liabilities.
6. Events of Default. In the event that (a) there shall occur an Event of
Default under the Credit Agreement; (b) any default shall occur in the payment
of amounts due hereunder; or (c) any other default shall occur hereunder which
remains uncured or unwaived for a period of thirty (30) days (each of the
foregoing an "Event of Default" hereunder); then notwithstanding any collateral
available to the Agent or the Lenders from the Borrower or any Guarantor or any
other guarantor of the Borrower's Liabilities, or any other party, at the
Agent's election and without notice thereof or demand therefor, so long as such
Event of Default shall be continuing, the Guarantors' Obligations shall
immediately become due and payable.
7. Suits. Each Guarantor from time to time shall pay to the Agent for the
benefit of the Lenders, on demand, at the Agent's place of business set forth in
the Credit Agreement or such other address as the Agent shall give notice of to
the Guarantor, the Guarantors' Obligations as they become or are declared due,
and in the event such payment is not made forthwith, the Agent or the Lenders or
any of them may proceed to suit against any one or more or all of the
Guarantors. At the Agent's election, one or more and successive or concurrent
suits may be brought hereon by the Agent against any one or more or all of the
Guarantors, whether or not suit has been commenced against the Borrower, any
other guarantor of the Borrower's Liabilities, or any other Person and whether
or not the Agent or any Lender has taken or failed to take any other action to
collect all or any portion of the Borrower's Liabilities.
8. Set-Off and Waiver. Each Guarantor waives any right to assert against
the Agent and the Lenders as a defense, counterclaim, set-off or cross claim,
any defense (legal or equitable) or other claim which such Guarantor may now or
at any time hereafter have against the Borrower,
I-3
<PAGE>
the Agent or the Lenders, without waiving any additional defenses, set-offs,
counterclaims or other claims otherwise available to such Guarantor. If at any
time hereafter the Agent or any Lender employs counsel for advice or other
representation to enforce the Guarantors' Obligations that arise out of an Event
of Default, then, in any of the foregoing events, all of the reasonable
attorneys' fees arising from such services and all expenses, costs and charges
in any way or respect arising in connection therewith or relating thereto shall
be jointly and severally paid by the Guarantors to the Agent, for the benefit of
the Lenders, on demand.
9. Waiver; Subrogation.
(a) Each Guarantor hereby waives notice of the following events or
occurrences: (i) the Agent's acceptance of this Guaranty Agreement; (ii) the
Lenders' heretofore, now or from time to time hereafter loaning monies or giving
or extending credit to or for the benefit of the Borrower, whether pursuant to
the Credit Agreement, the Notes or the other Loan Documents, or any amendments,
modifications, or supplements thereto, or replacements or extensions thereof;
(iii) the Agent, the Lenders or the Borrower heretofore, now or at any time
hereafter, obtaining, amending, substituting for, releasing, waiving or
modifying the Credit Agreement, the Notes or any other Loan Documents; (iv)
presentment, demand, notices of default, non-payment, partial payment and
protest; (v) the Agent or the Lenders heretofore, now or at any time hereafter
granting to the Borrower (or any other party liable to the Lenders on account of
the Borrower's Liabilities) any indulgence or extensions of time of payment of
the Borrower's Liabilities; and (vi) the Agent or the Lenders heretofore, now or
at any time hereafter accepting from the Borrower or any other person, any
partial payment or payments on account of the Borrower's Liabilities or any
collateral securing the payment thereof or the Agent settling, subordinating,
compromising, discharging or releasing the same in whole or in part. Each
Guarantor agrees that the Agent and each Lender may heretofore, now or at any
time hereafter do any or all of the foregoing in such manner, upon such terms
and at such times as the Agent and each Lender, in its sole and absolute
discretion, deems advisable, without in any way or respect impairing, affecting,
reducing or releasing such Guarantor from the Guarantors' Obligations, and each
Guarantor hereby consents to each and all of the foregoing events or
occurrences.
(b) Each Guarantor hereby agrees that payment or performance by such
Guarantor of the Guarantors' Obligations under this Guaranty Agreement may be
enforced by the Agent on behalf of the Lenders upon demand by the Agent to such
Guarantor without the Agent being required, each Guarantor expressly waiving any
right it may have to require the Agent, to (i) prosecute collection or seek to
enforce or resort to any remedies against the Borrower or any other Guarantor or
any other guarantor of the Borrower's Liabilities, IT BEING EXPRESSLY
UNDERSTOOD, ACKNOWLEDGED AND AGREED TO BY EACH GUARANTOR THAT DEMAND UNDER THIS
GUARANTY AGREEMENT MAY BE MADE BY THE AGENT, AND THE PROVISIONS HEREOF ENFORCED
BY THE AGENT, EFFECTIVE AS OF THE FIRST DATE ANY EVENT OF DEFAULT OCCURS AND IS
CONTINUING UNDER THE CREDIT AGREEMENT, or (ii) seek to enforce or resort to any
remedies with respect to any security interests, Liens or encumbrances granted
to the Agent by the Borrower or any other Person on account of the Borrower's
Liabilities or any guaranty thereof. Neither the Agent nor
I-4
<PAGE>
any Lender shall have any obligation to protect, secure or insure any of the
foregoing security interests, Liens or encumbrances on the properties or
interests in properties subject thereto. The Guarantors' Obligations shall in no
way be impaired, affected, reduced, or released by reason of the Agent's or any
Lender's failure or delay to do or take any of the acts, actions or things
described in this Guaranty Agreement including, without limiting the generality
of the foregoing, those acts, actions and things described in this Section 9.
(c) Each Guarantor further agrees with respect to this Guaranty Agreement
that such Guarantor shall have no right of subrogation, reimbursement or
indemnity, nor any right of recourse to security for the Borrower's Liabilities
until such time as all of the Obligations of the Borrower are fully, finally and
irrevocably paid and satisfied.
10. Effectiveness; Enforceability. This Guaranty Agreement shall be
effective as of the date of the initial Advance under the Credit Agreement, and
shall continue in full force and effect until the Borrower's Obligations (other
than obligations in the nature of continuing indemnities and liability for
expenses which are not yet due and payable, which shall survive as an obligation
guarantied by the Guarantors hereunder notwithstanding any termination hereof)
are fully, finally and irrevocably paid and satisfied, the Lenders shall be
under no further obligation to advance funds or issue Letters of Credit and
there shall be no Letters of Credit outstanding. The Agent shall give each
Guarantor written notice of such termination at each Guarantor's address set
forth below such Guarantor's execution hereof on the signature pages of this
Guaranty or such other address for the Guarantor as such Guarantor shall give
notice to the Agent in the manner provided for the giving of notices under the
Credit Agreement (the "Guarantor's Address"). This Guaranty Agreement shall be
binding upon and inure to the benefit of each Guarantor, the Agent and the
Lenders and their respective successors and assigns. Notwithstanding the
foregoing, no Guarantor may, without the prior written consent of the Agent,
assign any rights, powers, duties or obligations hereunder. Any claim or claims
that the Agent and the Lenders may at any time hereafter have against any
Guarantor under this Guaranty Agreement may be asserted by the Agent or any
Lender by written notice directed to any one or more or all of the Guarantors at
the applicable Guarantor's Address.
11. Representations and Warranties. Each Guarantor warrants and represents
to the Agent for the benefit of the Lenders that it is duly authorized to
execute, deliver and perform this Guaranty Agreement, that this Guaranty
Agreement is legal, valid, binding and enforceable against such Guarantor in
accordance with its terms except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles; and that
such Guarantor's execution, delivery and performance of this Guaranty Agreement
do not violate or constitute a breach of any of its charter or governance
documents or any agreement to which such Guarantor is a party, or any law,
order, rule, regulation, decree or award of any applicable Governmental
Authority or arbitral body.
I-5
<PAGE>
12. Expenses. Each Guarantor agrees to be liable for the payment of all
reasonable fees and expenses, including attorney's fees, incurred by the Agent
or any Lender in connection with the enforcement of this Guaranty Agreement.
13. Reinstatement. Each Guarantor agrees that this Guaranty Agreement
shall continue to be effective or be reinstated, as the case may be, at any time
payment received by the Agent under the Credit Agreement or any other Loan
Document or this Guaranty Agreement is rescinded or must be restored for any
reason.
14. Counterparts. This Guaranty Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall constitute one and
the same instrument.
15. Reliance. Each Guarantor represents and warrants to the Agent, for the
benefit of the Agent and the Lenders, that: (a) such Guarantor has adequate
means to obtain from Borrower, on a continuing basis, information concerning
Borrower and Borrower's financial condition and affairs and has full and
complete access to Borrower's books and records; (b) such Guarantor is not
relying on the Agent, any Co-Agent or any Lender, its or their employees, agents
or other representatives, to provide such information, now or in the future; (c)
such Guarantor is executing this Guaranty Agreement freely and deliberately, and
understands the obligations and financial risk undertaken by providing this
Guaranty; (d) such Guarantor has relied solely on the Guarantor's own
independent investigation, appraisal and analysis of Borrower and Borrower's
financial condition and affairs in deciding to provide this Guaranty and is
fully aware of the same; and (e) such Guarantor has not depended or relied on
the Agent, any Co-Agent or any Lender, its or their employees, agents or
representatives, for any information whatsoever concerning Borrower or
Borrower's financial condition and affairs or other matters material to such
Guarantor's decision to provide this Guaranty or for any counselling, guidance,
or special consideration or any promise therefor with respect to such decision.
Each Guarantor agrees that neither the Agent, any Co-Agent nor any Lender has
any duty or responsibility whatsoever, now or in the future, to provide to any
Guarantor any information concerning Borrower or Borrower's financial condition
and affairs, other than as expressly provided herein, and that, if such
Guarantor receives any such information from the Agent, any Co-Agent or any
Lender, its or their employees, agents or other representatives, such Guarantor
will independently verify the information and will not rely on the Agent, any
Co-Agent or any Lender, its or their employees, agents or other representatives,
with respect to such information.
16. Governing Law.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED,
AND TO BE FULLY PERFORMED, IN SUCH STATE.
I-6
<PAGE>
(b) EACH PARTY HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS
THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN
ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF HILLSBOROUGH, STATE OF
FLORIDA, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF
THIS AGREEMENT, 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) EACH PARTY AGREES THAT SERVICE OF PROCESS MAY BE MADE 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 GUARANTOR'S ADDRESS (AS HEREIN
DEFINED) FOR EACH GUARANTOR AND AT THE ADDRESS OF SUCH OTHER PARTY
PROVIDED IN SECTION 12.02 OF THE CREDIT AGREEMENT OR BY ANY OTHER METHOD
OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE
OF FLORIDA.
(d) NOTHING CONTAINED IN SUBSECTIONS (b) OR (c) HEREOF SHALL
PRECLUDE ANY PARTY FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS IN THE
COURTS OF ANY PLACE WHERE ANY OTHER PARTY OR ANY OF SUCH PARTY'S PROPERTY
OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE
APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH PARTY HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN
RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, THE JURISDICTION OF ANY
OTHER COURT OR COURTS WHICH NOW OR HEREAFTER, BY REASON OF ITS PRESENT OR
FUTURE DOMICILE, OR OTHERWISE, MAY BE AVAILABLE TO IT.
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN
CONNECTION WITH THE FOREGOING, EACH PARTY HEREBY AGREES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY AND EACH PARTY HEREBY WAIVES,
TO THE EXTENT PERMITTED
I-7
<PAGE>
BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY HAVE THAT EACH ACTION OR
PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
IN WITNESS WHEREOF, the parties have duly executed this Guaranty Agreement
on the day and year first written above.
GUARANTORS:
WITNESS: By:______________________________________
Name:____________________________________
______________________ Title:___________________________________
______________________ Address for Notices:
_________________________________________
_________________________________________
_________________________________________
Telefacsimile: / -
WITNESS: By:______________________________________
Name:____________________________________
______________________ Title:___________________________________
______________________ Address for Notices:
_________________________________________
_________________________________________
_________________________________________
Telefacsimile: / -
I-8
<PAGE>
AGENT:
NATIONSBANK, NATIONAL ASSOCIATION,
as Agent for the Lenders
By:______________________________________
Name:_________________________________
Title:________________________________
I-9
CONTACT: David L. Townsend
Walter Industries, Inc.
(813) 871-4448
FOR IMMEDIATE RELEASE
WALTER INDUSTRIES TO ACQUIRE
APPLIED INDUSTRIAL MATERIALS CORPORATION
Tampa, FL, September 22, 1997 -- Walter Industries, Inc. (Nasdaq: WLTR)
announced today that it has signed a definitive agreement to acquire privately
held Applied Industrial Materials Corporation ("AIMCOR"), a leading
international provider of products and outsourcing services to both the
petroleum industry and steel, foundry and aluminum industries. The purchase
price is approximately $400 million, to be funded through new bank credit
facilities underwritten by NationsBank. The transaction has been approved by the
boards of directors of both companies and is expected to close during Walter
Industries' fiscal second quarter ending November 30, subject to review under
the provisions of the Hart-Scott-Rodino Antitrust Improvements Act.
"The acquisition of AIMCOR is consistent with our stated goal of
increasing returns for our shareholders by strengthening the balance of our
homebuilding and industrial businesses," said Kenneth E. Hyatt, Walter
Industries' Chairman and Chief Executive Officer. "It affords us an excellent
opportunity to enhance our industrial operations and overall profitability.
Given the timing of the transaction, we expect AIMCOR to be slightly accretive
to net earnings in our current fiscal year, with increasing contributions
anticipated in subsequent years."
AIMCOR, headquartered in Stamford, Connecticut, currently generates
approximately $450 million in revenues and $50 million in operating income
annually. It has approximately 440 employees worldwide.
AIMCOR's Carbon Products Group (84% of revenues) is the world's largest
marketer and distributor of petroleum cokes ("petcoke"), shipping more than
seven million tons annually, and an integrated supplier of value-added services
from the production source to the company's global customer base. A by-product
of oil refining, petcoke is a competitively priced fuel and carbon source used
in numerous industrial applications, including the manufacture of steel and
cement. In its most refined form, as calcined coke, it is used as the primary
ingredient in anodes for the smelting of aluminum. The refining industry's trend
toward outsourcing of non-core operations has driven AIMCOR to undertake
increasing in-refinery services, warehousing, and terminal operations which add
value to the petcoke it ultimately markets and distributes.
- more -
<PAGE>
- 2 -
AIMCOR's Metals Group, with operating facilities in Canada, Mexico and the
U.S., produces and markets a variety of ferroalloys, metals and specialty
materials that are used primarily as alloying agents, fluxing agents and/or
performance improvement additives by the steelmaking and metal-casting
industries.
Mr. Hyatt commented: "We were attracted to AIMCOR because of its
prominence in niche markets, value-added services, long-term relationships with
major refineries, and favorable industry dynamics which are expected to support
continued earnings growth in the company's global businesses."
AIMCOR will join other industrial businesses of Walter Industries which
offer proprietary products and leading market positions. These include: United
States Pipe and Foundry Company, the nation's leading manufacturer of ductile
iron pressure pipe; Sloss Industries, a furnace coke, foundry coke and specialty
chemicals company; and JW Aluminum Company, a provider of value-added specialty
aluminum products.
"Beyond its considerable product and marketing strengths, AIMCOR's
high-caliber management will be an excellent fit with Walter Industries," said
Mr. Hyatt. "They have assembled a strong and aggressive team of seasoned
professionals averaging 20 years of industry experience and 15 years with the
company. We look forward to combining our manufacturing expertise and capital
resources to help them further grow their businesses. AIMCOR will function as an
autonomous subsidiary within Walter Industries in keeping with the
entrepreneurial focus of each of our operating units."
Peter Scott-Hansen, AIMCOR's Chief Executive Officer, President of its
Carbon Products Group and a pioneering influence in the development of the
worldwide petcoke market, said: "As a proven leader in a broad range of niche
industrial markets, Walter Industries offers an excellent environment for
AIMCOR's continued growth and development. We are delighted to become part of
the Walter Industries organization and look forward to contributing to the
company's operating and earnings expansion."
NationsBank, as Agent, is expected to arrange an $800 million financing
package, comprised of a $350 million Revolving Credit Facility and a $450
million Term Loan Facility. These credit facilities will be used to fund the
AIMCOR purchase, retire existing bank debt, and provide for Walter Industries'
ongoing working capital needs.
- more -
<PAGE>
- 3 -
Note to Editor: Walter Industries, Inc., based in Tampa, Florida, is a
diversified, multi- subsidiary company with major interests in
homebuilding/financing and industrial operations. Walter Industries and its
subsidiaries employ 7,600 at manufacturing facilities and sales offices
throughout the United States. In its most recent fiscal year ended May 31, 1997,
Walter Industries generated revenues of $1.5 billion and $144.7 million of
operating income.
The preceding contains certain forward-looking statements which reflect
the current views of Walter Industries, Inc. with respect to future events and
are subject to risks and uncertainties that could cause actual results to differ
materially from those contemplated in such forward-looking statements. Among
those factors which could cause actual results to differ materially are the
degree to which Walter Industries is leveraged, risks of business downturn, and
other risk factors listed from time to time in the Company's SEC reports.
# # # # #
CONTACT: David L. Townsend
Walter Industries, Inc.
(813) 871-4448
FOR IMMEDIATE RELEASE
WALTER INDUSTRIES COMPLETES AIMCOR ACQUISITION
Tampa, FL, October 16, 1997 -- Walter Industries, Inc. (Nasdaq: WLTR)
announced today that it has completed its previously announced acquisition of
privately held Applied Industrial Materials Corporation ("AIMCOR"), a leading
international provider of products and outsourcing services to the petroleum
industry and steel, foundry and aluminum industries. The purchase price was
approximately $400 million and was funded through new bank credit facilities
underwritten by NationsBank.
Kenneth E. Hyatt, Walter Industries' Chairman and Chief Executive Officer,
said: "We welcome the management and employees of AIMCOR as they become part of
the Walter Industries team. We look forward to working with them to maximize
AIMCOR's potential and its contribution to our company. AIMCOR represents an
excellent opportunity to increase returns for our shareholders by accelerating
the earnings momentum from our balanced mix of homebuilding and industrial
businesses."
AIMCOR, headquartered in Stamford, Connecticut, is the world's largest
marketer and distributor of petroleum cokes, shipping more than seven million
tons annually. The company is also an integrated supplier of value-added
services from the production source to the company's global customer base.
Additionally, AIMCOR produces and markets ferroalloys, metals and specialty
materials used primarily as alloying agents, fluxing agents, and/or performance
improvement additives by the steelmaking and metal-casting industries. AIMCOR
currently generates more than $450 million in revenues and $50 million in
operating income annually.
Note to Editor: Walter Industries, Inc., based in Tampa, Florida, is a
diversified, multi-subsidiary company with major interests in
homebuilding/financing and industrial operations. Walter Industries and its
subsidiaries employ 7,600 at manufacturing facilities and sales offices
throughout the United States. In its most recent fiscal year ended May 31, 1997,
Walter Industries generated revenues of $1.5 billion and $144.7 million of
operating income.
# # # # #
