SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of
the Securities Exchange Act of 1934
EMCOR GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization) 11-2125338
(I.R.S. employer identification number)
101 Merritt Seven Corporate Park
Norwalk, Connecticut 06851-1060
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(203) 849-7800
Securities to be registered pursuant to Section 12(b) of the
Act:
None.
Securities to be registered pursuant to
Section 12(g) of the Act:
Common Stock, par value $.01 per share.
Item 1. BUSINESS
General
EMCOR Group, Inc. ("EMCOR" or the "Company") (formerly known
as JWP INC.) is a
leader in mechanical/electrical construction and maintenance
services. EMCOR's mechanical and
electrical services business units ("MES" or "MES Companies")
specialize in the design, distribution,
integration, installation and maintenance of complex mechanical
and electrical systems. Services are
provided to a broad range of commercial, industrial and
institutional customers through offices located in
major markets throughout the United States and 19 offices located
in Canada, the United Kingdom and
the Middle East.
The MES Companies provide mechanical and electrical services directly to end-users (including corporations, municipalities and other governmental entities, owner/developers and tenants of buildings) and, indirectly, by acting as subcontractor for construction managers, general contractors and other subcontractors.
The Company also owns and operates Jamaica
Water Supply Company, which is the
largest investor-owned water utility in New York State and serves
portions of Queens County and Nassau
County in New York State, and Sea Cliff Water Company, a water
utility which serves a small portion of
Nassau County. The Company has decided to sell both Jamaica
Water Supply Company and Sea Cliff Water Company as part of its
business restructuring plan (the "Restructuring").
As discussed in more detail below under "The
Restructuring and Chapter 11 Proceeding,"
since 1992 EMCOR has been engaged in an ongoing Restructuring of
its various businesses and recently
reorganized under Chapter 11 of the United States Bankruptcy Code
and is continuing to experience
losses. From August 1992 until February 1994, when it obtained
debtor-in-possession financing, EMCOR
did not have available credit facilities, and cash flow from
operations was inadequate to fund its operations
and service its debt and other obligations. Consequently, the
Company had to fund operations from
working capital and from the proceeds of sales of businesses and
other assets.
On December 15, 1994 (the "Effective Date"),
the Company emerged from Chapter 11 of
the Bankruptcy Code pursuant to its Third Amended Joint Plan of
Reorganization dated August 9, 1994,
as amended (the "Plan of Reorganization"), proposed by EMCOR and
its subsidiary, SellCo Corporation
("SellCo"). Under the Plan of Reorganization, prepetition
creditors of the Company (other than holders of
subordinated debt) received, in addition to certain notes of
EMCOR and SellCo, substantially all of the
common stock of EMCOR. Prepetition holders of the Company's
subordinated debt, preferred stock,
common stock and warrants of participation received warrants to
purchase common stock of EMCOR in
exchange for their debt and equity interests. See "The
Restructuring and Chapter 11 Proceeding -- Plan of
Reorganization."
EMCOR is a Delaware corporation, formed in 1987
to continue the business of its
predecessor, a New York corporation with the name JWP INC. The
Delaware corporation was also
originally named JWP INC. but changed its name to EMCOR Group,
Inc. on the Effective Date. The Company's executive offices are
located at 101 Merritt Seven Corporate Park, Norwalk, Connecticut
06851-1060, and its telephone number at those offices is (203)
849-7800.
Mechanical/Electrical Services
The MES Companies specialize in the design,
distribution, integration, installation and
maintenance of complex mechanical and electrical systems. The
wide range of the Company's MES
Companies are more particularly described below. The MES
Companies had total revenues of
approximately $2,195 million (approximately 70% of EMCOR's total
consolidated revenues) in 1993 and
approximately $1,314 million (approximately 96% of EMCOR's total
consolidated revenues) for the nine
months ended September 30, 1994.
Range of Mechanical and Electrical Services. The MES Companies are primarily involved in the design, integration, installation and maintenance of (i) distribution systems for electrical power (including power cables, conduits, distribution panels, transformers and generators), (ii) lighting systems and (iii) heating, ventilating, air conditioning, plumbing, process and high purity piping and clean air systems. EMCOR believes its mechanical and electrical services business is the largest of its kind in the United States and Canada and one of the largest in the United Kingdom.
Mechanical and electrical services are principally of three types: (1) large installation projects, with contracts generally in the multi-million dollar range, in connection with construction of industrial facilities, institutional and public works projects, commercial buildings and large blocks of space within commercial buildings; (2) smaller system installations involving renovation and retrofit work; and (3) maintenance and service.
The MES Companies' largest installation
projects have included those (i) for industrial
and institutional use (such as manufacturing, pharmaceutical and
chemical plants, refineries, research
facilities, water and wastewater treatment facilities, hospitals,
correctional facilities, schools, trading floors,
computer facilities and mass transit systems), (ii) for
commercial use (such as office buildings, convention
centers, shopping malls, hotels and resorts) and (iii) for
electrical utilities. These can be multi-year
projects ranging in size up to, and occasionally in excess of,
$50 million. The MES Companies also install
and maintain street, highway, bridge and tunnel lighting, traffic
signals, computerized traffic signal control
systems and signal control and communication systems for mass
transit in several metropolitan areas.
Major projects are performed pursuant to contracts with owners, such as corporations and municipalities and other governmental entities, general contractors, construction managers, as agents for owners of construction projects, owner-developers and tenants of commercial properties. Institutional and public works projects are frequently long-term, complicated projects requiring significant technical skills and financial strength to obtain the bid and performance bonds that are often a condition to the award of contracts for such projects.
Smaller projects, which are generally completed
in less than a year, involve the provision
of conventional mechanical and electrical services in industrial
plants, office buildings and commercial and
retail space in which the MES Companies install electrical
fixtures, provide electrical and air conditioning
systems for computer facilities, and install smaller heating, air
conditioning, and plumbing systems for
office and renovation projects. In this area, the MES Companies
are not necessarily dependent upon new
construction; demands for their services are frequently prompted
by the expiration of leases, changes in
technology and changes in the customer's plant or office layout
in the normal course of business.
The MES Companies also perform maintenance and
service work, under contract or on
an on-call basis, for exterior and interior lighting systems and
for air conditioning and heating systems in
plants and other large facilities, office buildings and
commercial enterprises. The MES Companies also
install refrigeration systems for restaurants, office cafeterias
and supermarkets. Contracts for maintenance
of mechanical and electrical systems range from one to several
years and are billed on a time and materials
basis or a fixed fee plus the cost of materials. In many of the
buildings in which the MES Companies
maintain lighting systems, they also install fixtures, move
outlets, rewire and perform other routine
electrical work. Maintenance and service operations often require
a number of employees to be
permanently located at the building or facility served.
In addition, the MES Companies operate fully
equipped sheet metal fabrication facilities
in the United States, providing and installing sheet metal for
both their own mechanical services businesses
and unrelated mechanical contractors; they also maintain welding
and piping fabrication shops for their
own mechanical operations.
Backlog. The MES Companies had a backlog, as
of September 30, 1994, of approximately
$1,060 million compared with a backlog of approximately $1,045
million as of December 31, 1993 and
approximately $1,600 million as of December 31, 1992.
Approximately $987 million of the September 30,
1994 backlog relates to mechanical and electrical subsidiaries
which the Company currently intends to
retain. Certain MES Companies experienced a reduction in their
backlog principally because of the
Company's weakened financial condition, which adversely affected
their ability to obtain new contracts, and
by reason of the continuing recession in the United States and
international construction markets. In
addition, one surety company that had provided performance and
payment bonds for the Dynalectric
Companies referred to below (which subsidiaries accounted for
approximately 21% of EMCOR's total
consolidated revenues for the nine months ended September 30,
1994) withdrew from that business in
January 1994. Performance and payment bonds provided by surety
companies are frequently a
precondition to the awarding of a mechanical or electrical
services contract. The Company recently
entered into an arrangement with a new bonding company, under
which bonds are now being made
available to this group of subsidiaries.
Employees. The MES Companies presently employ approximately 14,000 people, approximately 77% of whom are represented by various unions. The Company believes that its employee relations are generally satisfactory.
Competition. The business in which the MES
Companies engage is extremely competitive.
They compete with national, regional and local companies.
However, the Company believes that, at
present, it is the largest mechanical and electrical services
company in the United States and Canada and
one of the largest in the United Kingdom. Many of the MES
Companies compete on the basis of the quality of service, price,
performance and reliability. Their competitive position has been
adversely affected by the Company's weakened financial condition,
among other things, inasmuch as their surety
companies have become more selective in issuing bonds, especially
on larger, longer duration projects.
Supply of Water
Jamaica Water Supply Company ("JWS")
(substantially all the common stock of which is
owned by the Company) and Sea Cliff Water Company ("Sea Cliff")
(all the capital stock of which is
owned by JWS) (sometimes referred to herein collectively as the
"Water Companies") are regulated public
utilities that own and operate water supply systems on Long
Island, New York. JWS, the largest
investor-owned water utility in New York State, supplies water to
a densely populated residential area of
approximately 40 square miles in the Borough of Queens in The
City of New York (the "City") and in
southwestern Nassau County, an area with an aggregate population
of approximately 650,000. Sea Cliff
supplies water to a four square mile area on the north shore of
western Nassau County with a population
of approximately 20,000. The business of the Water Companies
consists of the purification, distribution
and sale of water for residential and commercial purposes
including water used for fire sprinkler systems
service and public protection fire service. The Water Companies
had total revenues of approximately $66.8
million (approximately 2% of EMCOR's total consolidated revenues)
in 1993 and approximately $50.5
million (approximately 2% of EMCOR's total consolidated revenues)
for the nine months ended September 30, 1994.
As of September 30, 1994, the Water Companies
provided potable water to approximately
122,000 water service accounts, substantially all of whom are
metered and billed for the amount of water
actually used, and approximately 1,000 private fire protection
accounts for sprinkler connections billed on a
flat rate basis.
The Water Companies' primary sources of water
are ground water from wells located in
the New York counties of Queens and Nassau and surface water
obtained from the City. JWS has 93 wells
on 60 well sites, of which 67 wells are currently operable, and
Sea Cliff has two wells on two sites, both of
which are currently operable. Where appropriate, JWS has
installed treatment facilities at well sites to
remove volatile organic compounds prior to the water entering the
distribution system.
In an effort to reduce the cost of water to
City residents, the City provides JWS with an
exemption from the City's real property taxes and makes direct
revenue support payments to JWS for
water service. JWS also has an agreement with the City to
purchase up to 50 million gallons of water daily
from the City (to the extent available) at a cost of $1 per
million gallons; however, JWS expects to
purchase only approximately 30 million gallons daily. The $1 per
million gallons rate is substantially less
than both JWS' cost to pump and treat water from its wells and
the City's rate for commercial customers.
The agreement expires June 30, 1998, although it is cancellable
by either party on two years notice. The 30
million gallons of water JWS expects to purchase daily from the
City constitutes approximately 60 percent
of the average daily amount of water presently distributed by JWS
to its customers in Queens County. JWS
customers in Nassau County are served entirely from wells owned
and operated by JWS.
The Water Companies are subject to regulation
by the Public Service Commission of the
State of New York (the "Public Service Commission"). Since the
population of the areas served by the
Water Companies has been relatively stable, the amount of water
consumed by their customers has not and
is not expected to increase in any significant respect.
Consequently, cost increases due to inflation or
otherwise must be recovered through operating efficiencies or
increases in rates which are subject to
approval of the Public Service Commission. Until 1992, the Water
Companies had traditionally filed for
rate increases on an annual basis and had received approvals of
rate increases from the Public Service
Commission enabling them to maintain satisfactory operating
results. Pursuant to a settlement agreement
with respect to certain rate related proceedings, which agreement
became effective February 2, 1994, JWS
has agreed that, subject to limited specified exceptions, it will
not seek to have a general rate increase
become effective prior to January 1, 1997. JWS is also a party
to a certain condemnation proceeding. See
"Legal Proceedings--Jamaica Water Supply Company Rate Related
Proceedings and Related Litigation"
and "New York City Condemnation Proceeding."
The Water Companies are also subject to
regulation by various federal, state and local
agencies, including the Department of Environmental Conservation
of the State of New York, the New
York State and New York City Departments of Health, the New York
City Department of Environmental
Protection, the Nassau County Department of Health and the United
States Environmental Protection
Agency. The Company believes that the Water Companies are in
compliance with all applicable Federal,
state and local laws and regulations.
The Company has determined to sell the Water
Companies as part of its Restructuring
plan. See "The Restructuring and Chapter 11 Proceeding."
Other Discontinued Operations
Information Services. The Company's former
Information Services Group ("IS") was
principally engaged in providing computer and systems integration
services. It sold integrated multi-vendor
personal computer related products and services for medium and
large sized companies and other
organizations. In 1992, IS had total revenues of approximately
$1.7 billion. In March 1993, the Company
determined to dispose of its domestic IS business as part of its
Restructuring. In August 1993, the
Company sold substantially all the assets of its U.S. information
services subsidiary to ENTEX Information
Services, Inc. ("ENTEX"), a newly organized company owned by a
private investor and the management of
the U.S. information services subsidiary. As part of the
consideration for its sale, the Company's subsidiary
received warrants to buy up to 10% of the purchaser's common
stock for a nominal amount. Additionally,
ENTEX assumed substantially all the debt and other liabilities
and obligations relating to the ongoing
operations of the U.S. information services subsidiary; that
subsidiary retained certain lease obligations and
certain tax liabilities. The Company was also released from
approximately $210 million of its guarantees of
indebtedness and similar obligations of the subsidiary. In
October 1993, that subsidiary filed a voluntary
petition under Chapter 7 of the U.S. Bankruptcy Code. During the
period April 1993 through January
1994, the Company sold, in separate transactions, its information
services businesses in Canada, the United
Kingdom, Japan and Germany. The Company also carried on similar
information services businesses in
France and Belgium. In 1993, the French and Belgian businesses
filed petitions in their respective
countries' courts seeking relief from their creditors. These
businesses are in the process of being
liquidated.
Telephone Systems. The Company sold its
telephone systems business in November 1994
for approximately $11 million. This business was engaged in the
design, sale, installation and servicing of
telecommunication systems, including LEXAR PBX telephone systems
which the Company manufactured.
These systems are used to interconnect business and institutional
users with telephone lines of the
regulated telephone companies. In 1993, this telephone systems
business had total revenues of
approximately $49 million and for the nine months ended September
30, 1994 had total revenues of
approximately $38 million.
Other. In addition to the sale of certain
mechanical and electrical services business units
contemplated by its Restructuring plan, the Company intends to
dispose of the balance of its non-core
businesses. The non-core business units that continue to be held
for sale are principally the Water
Companies and the Company's remaining energy and environmental
related businesses.
The Company's principal remaining energy and
environmental related business constructs,
operates and maintains co-generation facilities for use in steam
enhanced oil recovery processes, industrial
plants, hotels, universities, hospitals and shopping centers.
EMCOR, through its subsidiaries, has built 16
co-generation facilities, operates 6 of them and owns, in whole
or in part, 3 of them. The EMCOR
subsidiary which owns co-generation facilities supplies utility
services to its customers under long-term
contracts. The other energy and environmental related business
unit collects methane gas at a landfill for
conversion into electrical energy which is sold to a utility.
THE RESTRUCTURING AND CHAPTER 11 PROCEEDING
Background of the Restructuring
For the year ended December 31, 1992, EMCOR
incurred a net loss of approximately
$600 million and negative cash flow from operations of
approximately $50 million. These losses and the
negative cash flow were brought on by several circumstances,
including rapid technology changes and price
wars in the IS business, the costs of integrating numerous
acquired MES and IS business units, and
weakened economic conditions in the United States, Canada and the
United Kingdom, particularly in the
construction industry, all of which combined to depress EMCOR's
operating margins and to create a
liquidity crisis. Consequently, EMCOR was unable to obtain an
increased revolving credit facility in the
summer of 1992. From September 1992 until February 14, 1994,
when EMCOR filed a consent to an
involuntary petition for reorganization under Chapter 11 of the
United States Bankruptcy Code that had
been filed against EMCOR on December 21, 1993, EMCOR did not have
available undrawn credit
facilities, and cash flow from operations was insufficient to
meet EMCOR's debt service obligations and
working capital requirements. Accordingly, EMCOR funded its
operations from working capital and the
proceeds of sales of business units and other assets. Shortly
after EMCOR consented to the order for
relief, EMCOR and substantially all of its domestic subsidiaries,
as guarantors, entered into a $35.0 million
debtor-in-possession credit facility (the "DIP Loan") with
Belmont Capital Partners II, L.P. ("Belmont")
which provided cash for EMCOR's working capital requirements.
In the second half of 1992, EMCOR developed an
asset disposition program to sell
certain operations that were determined to be non-core to its MES
and domestic IS businesses. It was
subsequently determined that the Water Companies which had been
identified for sale would not be sold
due to uncertainties caused by certain rate-related proceedings
and litigation. See "Legal Proceedings -
Jamaica Water Supply Company." As part of its ongoing
Restructuring plan, since 1992 EMCOR has sold
more than twenty businesses and certain other miscellaneous
assets, the proceeds of which were used to
repay certain indebtedness of the Company and for working
capital. In March 1993, EMCOR's Board of
Directors concluded that the personal computer industry did not
provide the stable operating environment
that EMCOR needed to restructure, and the decision was made to
sell the domestic IS business. Also, the
uncertainties regarding the Water Companies were resolved in
February 1994, and thereafter EMCOR
decided to proceed with the sale of the Water Companies.
In 1993, EMCOR's liquidity worsened. This cash
drain was a result of weakened
operating performance, the required infusion of working capital
into operating units, unusual legal,
accounting and financial advisory fees, and the funding of a cash
escrow account to provide collateral for
payment of claims under EMCOR's partial self-insurance program,
which was required because of
EMCOR's inability to obtain letters of credit for this purpose.
In August 1993, EMCOR concluded that it should
be reorganized around a smaller
domestic and international MES business that would be less
volatile, require less capital and bonding, be
easier to control and manage and result in significantly lower
overhead costs. A number of factors were
considered in determining which MES units to retain and which to
sell. Subsidiaries that were to be
retained generally had lower bonding and capital requirements,
generated better cash flow from recurring
maintenance and service revenues to service EMCOR's debt,
operated in markets where growth potential
existed, had the management infrastructure to support systems and
offered the opportunity for growth and
for better returns on net assets. EMCOR determined that the
international MES companies should be
retained to provide access to markets which could provide better
margins and serve as a buffer from U.S.
business cycles.
In the fall of 1993, EMCOR announced that it
had reached an agreement in principle
with holders of its senior debt to restructure its business and
capitalization and, subject to documentation
of such agreement, intended to file a prepackaged plan of
reorganization. However, on December 21,
1993, an involuntary petition for a reorganization under Chapter
11 of the United States Bankruptcy Code,
11 U.S.C. section 101 et seq. ("Bankruptcy Code") was filed against
EMCOR in the United States Bankruptcy
Court for the Southern District of New York ("Bankruptcy Court")
by three subordinated debenture
holders. On February 14, 1994, EMCOR filed a consent to the
involuntary petition and an order for relief
was entered. Under Sections 1107 and 1108 of the Bankruptcy
Code, EMCOR continued to operate its
businesses as a debtor-in-possession and filed the Plan of
Reorganization on August 9, 1994. The Plan of
Reorganization as amended was confirmed by order of the
Bankruptcy Court dated September 30, 1994
(the "Confirmation Order"). The Confirmation Order was
subsequently amended on December 8, 1994
and a post-confirmation modification of the Plan of
Reorganization was entered on December 13, 1994.
Plan of Reorganization
Pursuant to the Plan of Reorganization, on the
Effective Date EMCOR issued, or
reserved for issuance, to prepetition creditors of EMCOR (other
than holders of EMCOR's subordinated
debentures and notes), in exchange for approximately $525.7
million of EMCOR senior bank and
institutional indebtedness and substantially all other general
unsecured claims (both allowed and disputed)
against EMCOR, and to Belmont, which made the DIP Loan, as
Additional Interest (as defined herein),
the following securities: (i) 9,424,083 shares of newly
authorized common stock of the Company ("New
Common Stock") (constituting 100% of the issued and outstanding
shares as of the Effective Date); (ii)
approximately $62.2 million principal amount of 7% Senior Secured
Notes, Series A, due 1997 of the
Company ("Series A Notes") issued on the Effective Date and up to
a maximum of $8.8 million additional
principal amount of Series A Notes which are reserved for
issuance to holders of general unsecured claims
and to Belmont upon resolution of disputed and unliquidated
prepetition general unsecured claims
(assuming such claims are ultimately allowed in full); (iii)
approximately $11.9 million principal amount of
7% Senior Secured Notes, Series B, due 1997 ("Series B Notes");
(iv) approximately $62.8 million principal
amount of 11% Notes, Series C, due 2001 of the Company ("Series
C Notes"); and (v) approximately $48.1
million principal amount of 12% Subordinated Contingent Payment
Notes due 2004 of SellCo (the "SellCo
Notes"). The entire $11.9 million principal amount of Series B
Notes and approximately $4.1 million
principal amount of the Series A Notes issued on the Effective
Date were immediately redeemed on that
date at their face amount in accordance with their terms from the
proceeds realized from the sale and
liquidation of certain subsidiaries, the stock of which would
have been pledged as part of the collateral
securing the Series B Notes had such subsidiaries not been sold
(and an additional $600,000 of such
proceeds was reserved for prepayment of certain of the Series A
Notes reserved for disputed and
unliquidated claims). The Series A, Series B, Series C and
SellCo Notes are hereinafter collectively
referred to as the "New Notes." See "Management's Discussion and
Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources" for a
description of the principal terms of the
New Notes.
In accordance with the Plan of Reorganization,
SellCo was organized as a wholly-owned
subsidiary of EMCOR for the purpose of holding the shares of
capital stock of all subsidiaries of EMCOR
that are earmarked for sale or liquidation, other than five other
EMCOR subsidiaries (the "Other Non-
Core Subsidiaries") also earmarked for sale or liquidation. The
net proceeds realized from the sale of the
stock or assets of the SellCo Subsidiaries ("Net Sales Proceeds")
and the Other Non-Core Subsidiaries are
required to be applied first to the prepayment of the Series A
Notes (subject to the rights of the Lenders
under EMCOR's New Credit Agreements discussed below under "New
Credit Facility" to receive the first
$15.0 million of proceeds of the sale of stock or assets of the
Water Companies). Thereafter, Net Sales
Proceeds are to be applied to the prepayment of the SellCo Notes.
Neither EMCOR nor MES has
guaranteed payment of the SellCo Notes. However, in accordance
with the Plan of Reorganization,
EMCOR has issued to SellCo its 8% senior promissory note in the
principal amount of approximately
$5,464,000 (the "EMCOR Supplemental SellCo Note") which matures
on the earlier of (i) the tenth
anniversary of the Effective Date or (ii) one day prior to the
date on which the SellCo Notes are deemed
cancelled as described in the following sentence. If at any time
after the fifth anniversary of the Effective
Date and prior to the maturity date of the SellCo Notes the value
of the consolidated assets of SellCo and
its subsidiaries (excluding the EMCOR Supplemental SellCo Note)
is determined by independent appraisal
to be less than $250,000, the balance of the SellCo Notes (not
theretofore paid from Net Sales Proceeds
and the proceeds of the EMCOR Supplemental SellCo Note which will
have become due and payable) will
be deemed cancelled. Thus, EMCOR's liability with respect to the
SellCo Notes is limited to the
$5,464,000 principal amount of, plus accrued interest on, the
EMCOR Supplemental SellCo Note. Interest
on the EMCOR Supplemental SellCo Note is payable upon maturity.
The terms of the New Notes, copies of which
together with their related Indentures are
filed as Exhibits to this Registration Statement and incorporated
herein by reference, have been designed
to minimize the Company's cash flow requirements for debt service
following the Effective Date. Interest
on all of the New Notes is payable only by the issuance of
additional New Notes until their maturity, in the
case of the Series A Notes and SellCo Notes, and for the period
of 18 months from the Effective Date, in
the case of the Series C Notes. The New Notes do not require any
amortization of principal prior to their
maturity, except in the case of the Series A Notes and the SellCo
Notes to the extent of proceeds from the
sale of net assets not required to be applied to the prepayment
of loans outstanding under the New Credit
Agreements discussed below under "New Credit Facility" and except
in the case of the Series A Notes that
an additional approximately $5.9 million principal amount of
Series A Notes (less any additional
prepayments from proceeds from sales of assets after the
Effective Date) is required to be redeemed on
the second anniversary of the Effective Date. In addition, if
EMCOR sells certain securities or has Excess
Cash (as defined), it must apply such proceeds to prepayment of
the Series A Notes.
The Amended and Restated Certificate of
Incorporation of EMCOR filed on December
15, 1994 pursuant to the Plan of Reorganization authorizes a
single class of 13,700,000 shares of New
Common Stock, of which (i) 9,000,000 shares were or will be
issued pursuant to the Plan of Reorganization
to prepetition creditors of EMCOR (other than holders of EMCOR's
subordinated debt); (ii) 1,000,000
shares were reserved for issuance under the Company's 1994
Management Stock Option Plan, (iii)
1,450,000 shares were reserved for issuance upon exercise of the
New Warrants (as defined below) issued
pursuant to the Plan of Reorganization as described below; (iv)
424,083 shares were issued to Belmont as
Additional Interest as described below; and (v) 56,544 shares
were reserved for issuance upon exercise of
the New Warrants issued to Belmont as Additional Interest.
Pursuant to the Plan of Reorganization, the
Company issued to the holders of $7,040,000
principal amount of its prepetition 7-3/4% Convertible
Subordinated Debentures due 2012 and $9,600,000
principal amount of its prepetition 12% Subordinated Notes due
1996, their pro rata share of each of two
series of five-year warrants to purchase shares of New Common
Stock, namely, 600,000 Series X Warrants
and 600,000 Series Y Warrants (which together with the Series Z
Warrants described below are referred to
herein as the "New Warrants"), with an exercise price of $12.55
per share and $17.55 per share,
respectively. In addition, the Company issued or will issue to
prepetition holders of other contingent and
statutory subordinate claims and to holders of EMCOR's
prepetition common stock, preferred stock and
warrants of participation, as well as to the plaintiffs in a
shareholder class action lawsuit, their pro rata
share of 250,000 Series Z Warrants to purchase shares of New
Common Stock, which Series Z Warrants
have an exercise price of $50 per share and must be exercised
within two years of their issuance.
The Plan of Reorganization also authorized the
issuance of additional Series A, Series B,
Series C and SellCo Notes, New Common Stock and New Warrants to
Belmont, the debtor-in-possession
lender to the Company, in respect of additional interest required
to be paid under the terms of the
Company's DIP Loan. The Company agreed, upon the making of the
DIP Loan by Belmont, that Belmont
would be entitled to "Additional Interest" upon the maturity of
the loan which, depending on the length of
time the loan was outstanding, could have ranged from 1% to 5.5%
of each type of consideration issued
pursuant to the Plan of Reorganization. The actual Additional
Interest paid or payable to Belmont was
4.5% of each type of security issued pursuant to the Plan of
Reorganization; the Additional Interest
amount paid or payable to Belmont presently consists of
approximately (i) $2.8 million of Series A Notes,
(ii) $2.8 million of Series C Notes, (iii) $2.2 million of SellCo
Notes, (iv) 424,000 shares of New Common
Stock and (v) $535,000 in cash in lieu of Series B Notes which
would have been issued to Belmont as
Additional Interest had the Series B Notes not been redeemed on
the Effective Date. In addition, it is
estimated that an additional $100,000 of Series A Notes will be
issued to Belmont as Additional Interest
upon the resolution of disputed claims. Approximately 28,000
Series X Warrants, 28,000 Series Y
Warrants and 12,000 Series Z Warrants will also be issued to
Belmont as Additional Interest.
Management Incentives
Pursuant to the Plan of Reorganization, the
Company adopted the 1994 Management
Stock Option Plan (the "1994 Plan"), as of the Effective Date to
foster and promote the long-term financial
success of the Company following its emergence from its Chapter
11 proceeding by promoting an equity
incentive to executive officers and a select group of key
employees. The 1994 Plan provides for the grant
of options ("New Stock Options") to acquire up to 1,000,000
shares of New Common Stock to eligible
participants. Frank T. MacInnis, President and Chief Executive
Officer of the Company, received an
option to purchase 200,000 shares of New Common Stock under the
1994 Plan pursuant to his employment
agreement with the Company dated April 18, 1994. The 1994 Plan
is conditioned upon approval by the
stockholders of EMCOR. See Item 6, Executive Compensation -
"Employment Contracts and Termination
of Employment and Change of Control Arrangements" and "1994
Management Stock Option Plan" below.
Structure of EMCOR
After completing the asset sales which are an
integral part of the Restructuring, EMCOR
will be a smaller company, although remaining international in
scope, engaged principally in the MES
business. EMCOR's corporate headquarters are located in Norwalk,
Connecticut. The Norwalk corporate
headquarters focuses on corporate direction and strategy, handles
the legal and financial requirements for
EMCOR, and provides financial reporting, risk management,
treasury, tax, and human resources policy and
compliance functions and financial and operating controls. The
Norwalk office also oversees the
management of the businesses earmarked for sale and manages the
sale process.
The corporate structure of EMCOR reflects the
purposes of the Restructuring. EMCOR
continues to be a holding company, the direct subsidiaries of
which are (i) MES Holdings Corporation
("MES"), a holding company for all MES operating subsidiaries
(other than the Dynalectric Companies)
which are to be retained by EMCOR, (ii) Dyn Specialty Contracting
Inc., which with its five subsidiaries
(collectively, the "Dynalectric Companies") consists of a group
of mechanical and electrical companies
which are also to be retained by EMCOR but were not transferred
to MES in order to accommodate the
surety company providing performance and payment bonds for the
Dynalectric Companies, (iii) SellCo, the
holding company for most of the other subsidiaries of EMCOR,
direct or indirect, which constitute
substantially all businesses offered for sale by EMCOR, and (iv)
the five Other Non-Core Subsidiaries
which are also being liquidated or held for sale. The North
American MES business continues to operate
on a decentralized basis, with day-to-day operations managed by
the business units. EMCOR's European,
Middle Eastern and Far Eastern operations are managed by Drake &
Scull, a subsidiary of MES, which has its corporate office in
London.
1. MES. The following table lists the names, principal markets and principal business of the principal MES units which are to be retained by EMCOR through its ownership of MES Holdings
Corporation. Name Market Principal Business Comstock Canada Canada Mechanical/Electrical |
Hyre Electric Co. of Indiana, Inc.Mid-West Electrical
Forest Electric Corp. New York City Electrical
Gibson Electric Company, Inc. Chicago/MidWest Electrical
Gowan, Inc. Southwest Mechanical
Hansen Mechanical Contractors, Inc. Las Vegas Mechanical
Heritage Air Systems, Inc. New York Mechanical
J.C. Higgins Corp. Boston Mechanical
Penguin Air Conditioning Corp. New York City Mechanical
The Drake & Scull Companies United Kingdom/
Middle East/
Far East Mechanical/Electrical
Trautman & Shreve, Inc. Denver Mechanical
University Mechanical and
Engineering Contractors.. National Mechanical
Welsbach Electric Corp.. . New York City Electrical
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Zack Power and Industrial Company Mid-West
and East Boiler/Mechanical
2. Dynalectric Companies. The following table lists the names, principal markets and principal business of the Dynalectric Companies which are also to be retained by EMCOR.
Name Market Principal Business
Dyn Specialty Contracting, Inc.* National Electrical
Dynalectric Company National Electrical
Dynalectric Company of Nevada, Inc. Nevada Electrical
Contra Costa Electric, Inc. Northern
California Electrical
Kirkwood Electric Company Los Angeles Electrical
|
* Dyn Specialty Contracting, Inc. is a direct wholly owned subsidiary of EMCOR and owns all of the capital stock of the other Dynalectric Companies.
New Credit Facility
On December 14, 1994, the Company and certain
of its subsidiaries entered into two
Credit Agreements with Belmont and other lenders (collectively,
the "Lenders") providing the Company
and certain of its subsidiaries with working capital facilities
up to an aggregate of $45 million which
became available upon the Effective Date. The Lenders include
Albert Fried & Co., a broker/dealer firm
of which Albert Fried, a Director of the Company, is the Managing
Partner, and Kevin C. Toner, a
Director of the Company. See Item 7. "Certain Relationships and
Related Transactions." One of the
Credit Agreements is among the Company, MES, certain direct and
indirect subsidiaries of MES (the
"MES Subsidiaries"), as Guarantors, and the Lenders (the "MES
Credit Agreement") and provides the
Company and MES with revolving credit loans (the "MES Loans") in
an aggregate amount that shall not
exceed at any time $35 million. The other Credit Agreement is
among the Company, Dyn Specialty
Contracting, Inc. ("Dyn"), the subsidiaries of Dyn (the "Dyn
Subsidiaries"), as Guarantors, and the Lenders
(the "Dyn Credit Agreement", and together with the MES Credit
Agreement, the "New Credit
Agreements") and provides Dyn with revolving credit loans (the
"Dyn Loans", and together with the MES
Loans, the "Loans") in an aggregate amount that shall not exceed
at any time $10 million. The Loans bear
interest on the principal amount thereof at the rate of 15% per
annum, and mature on the date which is
eighteen months after the date of the New Credit Agreements.
The MES Loans are guaranteed by the MES
Subsidiaries and are secured by, among
other things, substantially all of the assets of the Company, MES
and the U.S. MES Subsidiaries, including
their respective accounts receivable, inventories, general
intangibles and equipment and the capital stock of
the U.S. MES Subsidiaries and of Dyn (but not the stock of MES,
Dyn, SellCo, SellCo's Subsidiaries or the
Other Non-Core Companies) and the proceeds of the sale of stock
or assets of the Water Companies to
the extent of the first $15 million of such proceeds, subject to
the rights to such proceeds of the Lenders
under the Dyn Credit Agreement. The Dyn Loans are guaranteed by
the Dyn Subsidiaries and are
secured by substantially all of the assets of Dyn and the Dyn
Subsidiaries, including their respective
accounts receivable, inventories, general intangibles and
equipment and the capital stock of Dyn and the
Dyn Subsidiaries and the proceeds of the sale of stock or assets
of the Water Companies to the extent of
the first $15 million of such proceeds, subject to the rights to
such proceeds of the Lenders under the MES
Credit Agreement. The Dyn Loans are also secured by the
collateral securing the MES Loans, subject to
the rights to such collateral of the Lenders under the MES Credit
Agreement.
The proceeds of the MES Loans were used to
repay amounts under the DIP Loan and to
pay fees and expenses in connection with the MES Loans and the
Plan of Reorganization and will be used
for the general working capital of MES, the MES Subsidiaries and
the Company. The proceeds of the
Dyn Loans were used to pay fees and expenses in connection with
the Dyn Loans and will be used for the
general working capital of Dyn and the Dyn Subsidiaries.
Each of the New Credit Agreements contain
various affirmative and negative covenants.
The negative covenants limit the Company's, MES', Dyn's and their
subsidiaries' ability to take certain
actions without the Lenders' approval. Such actions include,
among other things: (i) merger or
consolidation, (ii) incurrence of indebtedness, (iii) placing of
liens upon their property, (iv) making of
loans, investments or guarantees and (v) transfer of assets. The
negative covenants require MES, Dyn and their subsidiaries to
maintain their backlogs and work-in-progress at not less than
specified levels and to prevent their losses from operations from
exceeding specified amounts in any month. The MES Credit
Agreement also requires the Company, MES, Dyn and their
subsidiaries to maintain certain financial
coverage ratios.
Item 2. FINANCIAL INFORMATION
SELECTED HISTORICAL FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected financial data should be read in conjunction with the Consolidated Financial Statements, the related notes thereto and the independent auditors' reports thereon, appearing elsewhere in this report. See Note A to the Consolidated Financial Statements regarding the basis of presentation, pre-consent date bankruptcy claims subject to compromise and the Company's emergence from bankruptcy.
Income Statement Data (a)
Nine Months Ended
September 30,
Year Ended December 31,
1994 1993 1993 1992 1991 1990 1989
(unaudited)
Revenues $ 1,313,450 $1,713,596 $2,194,735 $2,404,577 $2,318,112 $2,057,607 $1,547,618
Gross profit 121,120 146,275 151,177 243,854 344,551 331,400 271,960
(Loss) income from
continuing operations (29,296) (50,446) (113,991) (363,515) 4,712 28,649 32,206
Income (loss) from
discontinued
operations 9,386 (49) (9,087) (253,230) 24,263 21,600 14,403
Cumulative effect of
change in method
of accounting:
-Income taxes - - - 4,315 - - -
-Post-employment
benefits (2,100) - - - - - -
Net (loss) income $ (22,010) $ (50,495) $ (123,078) $ (612,430) $ 28,975 $ 50,249 $ 46,609
(Loss) income per
share (b)
Continuing operations (0.72) (1.27) (2.84) (9.00) 0.10 0.75 0.91
Discontinued
operations 0.23 - (0.22) (6.24) 0.63 0.57 0.40
Cumulative effect of
change in method of
accounting:
-Income taxes
-Post-employment - - - 0.11 - - -
benefits (0.05) - - - -
Net (loss) income per
share $ (0.54) $ (1.27) $ (3.06) $(15.13) $ 0.73 $ 1.32 $ 1.31
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Balance Sheet Data
As of As of December 31,
September 30,
1994 1993 1992 1991 1990 1989
Shareholders' (deficit)
equity (c) $(323,937) $ (302,262) $(175,979) $ 456,136 $ 370,513 $ 311,939
Total assets $ 829,202 $ 806,442 $ 907,584 $2,233,827 $1,476,012 $1,242,503
Notes payable $ 7,652 $ 172 $ 6,452 $ 110,600 $ 62,500 $ 77,700
Debtor-in-possession note
payable $ 25,000 - - - - -
Long-term debt, including
current maturities $ 4,082 $ 4,465 $ 6,040 $ 463,071 $ 381,323 $ 326,717
Debt in default - $ 501,007 $ 501,007 - - -
Pre-consent date
bankruptcy claims subject
to compromise (d) $ 622,859 - - - - -
Capital lease obligations $ 2,342 $ 2,561 $ 3,935 $ 26,995 $ 29,973 $ 28,444
Redeemable preferred stock - - - $ 5,242 $ 5,771 $ 5,967
________________________
(a) Income statement data has been reclassified for all periods presented to reflect the Company's
information services and water supply businesses as discontinued operations (See Note L to the
Consolidated Financial Statements).
(b) Adjusted to reflect a three-for-two stock split effected July 16, 1990 and a three-for-two stock split effected
June 12, 1989.
(c) No cash dividends on the Company's common stock have been paid during the past five years.
(d) Balance sheet at September 30, 1994 reflects the reclassification of several liability accounts to pre-consent
date bankruptcy claims subject to compromise (see Note D to the Consolidated Financial Statements).
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UNAUDITED PRO FORMA FINANCIAL INFORMATION
The unaudited Pro Forma Consolidated Balance Sheet as of
September 30, 1994 and the unaudited Pro
Forma Consolidated Statement of Operations for the nine months
ended September 30, 1994 set forth below
have been prepared using the principles of Fresh Start Accounting
as required by the American Institute of
Certified Public Accountants' Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization
under the Bankruptcy Code" and are based on the historical
consolidated financial statements of the Company,
adjusted to give effect to the Company's Plan of Reorganization.
The unaudited Pro Forma Consolidated
Balance Sheet reflects adjustments as if the Plan of
Reorganization had become effective on September 30, 1994
and also gives effect to other adjustments described therein.
The unaudited Pro Forma Consolidated Statement
of Operations for the nine months ended September 30, 1994
reflects adjustments as if the Plan of
Reorganization had become effective on January 1, 1994. The
allocation period remains open subject to further
adjustments by the Company based on information to be received.
The pro forma financial information should be read in conjunction with the historical consolidated financial statements, including the notes thereto, and Management's Discussion and Analysis of Financial Condition and Results of Operations contained herein. The pro forma financial information does not purport to be indicative of the financial position that would have existed or results that actually would have been obtained had the Plan of Reorganization become effective on September 30, 1994 or that may be expected in the future.
The pro forma data should be read together with the other
information contained herein under the headings
"Selected Historical Financial Data," and in Item 2 hereto,
"Management Discussion and Analysis of Financial
Condition and Results of Operations" for the three years ended
December 31, 1993 and "Management
Discussion and Analysis of Financial Condition and Results of
Operations" for the nine months ended September
30, 1994 and the Consolidated Financial Statements of the Company
and related notes thereto as of September
30, 1994, December 31, 1993 and December 31, 1992 and for the
nine months ended September 30, 1994 and
for the three years ended December 31, 1993.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1994
(IN THOUSANDS)
(Unaudited)
Pro Forma Adjustments To Record Plan Confirmation
Historical Debt Discharge & FreshStart ProForma
Exchange of Stock (Note (b)) Adjustments Reorganized
(Note (g)) (Note (h))
Assets (In thousands)
Current Assets
Cash and cash equivalents $39,699 - - $39,699
Accounts receivable, net 460,059 (11,472) - 448,587
Costs and estimated earnings in
excess of billings on uncompleted
contracts 73,482 (5,572) (7,097) 60,813
Inventories 7,571 - - 7,571
Prepaid expenses and other 9,170 (100) - 9,070
Net assets held for sale 75,593 (75,593) - -
Total Current Assets 665,574 (92,737) (7,097) 565,740
Investments, Notes and Other Long-Term
Receivables 12,504 (6,740) - 5,764
Property, Plant and Equipment, net 36,262 (303) (690) 35,269
Sellco and Other Net Assets Held
for Sale - 60,732 10,212 70,944
(i)
Other Assets
Excess of cost of acquired businesses
over net assets, less amortization 57,820 - (57,820) -
Miscellaneous 57,042 (8,508) (3,763) 44,771
114,862 (8,508) (61,583) 44,771
Total Assets $829,202 ($47,556) ($59,158) $722,488
Liabilities and Shareholders'
(Deficit) Equity
Current Liabilities
Notes payable $7,652 - - $7,652
Debtor-in-possession note payable 25,000 - (25,000) -
New working capital facility (a) - - 25,000 25,000
Current maturities of long-term debt
and capital lease obligations 2,420 (558)(c) - 1,862
Accounts payable 203,943 (7,673) - 196,270
Billings in excess of costs and
estimated earnings on uncompleted
contracts 127,541 (1,411) - 126,130
Other accrued expenses and
liabilities 126,726 (11,786) 850 115,790
Total Current Liabilities 493,282 (21,429) 850 472,704
Long-Term Debt 2,362 68,291(c) (10,568) 60,085
Other Long-Term Obligations 34,636 (11) 3,000 37,625
Pre-consent Date Liabilities Subject to
Compromise 622,859 (622,859)(c)(d) - -
Series A and B Senior Notes - 75,677 (c) (4,733) 70,944
Shareholders' (Deficit) Equity
Old Series A Preferred Stock 20,905 (20,905)(e) - -
Old Common Stock 4,073 (4,073)(e) - -
New Common Stock - 94 (e) - 94
Old Warrants of Participation 576 (576)(e) - -
New Warrants - - 2,179 2,179
Capital Surplus 204,591 25,459 (151,193) 78,857
Cumulative translation adjustment (5,733) - 5,733 -
(Deficit) (548,349) 452,775(f) 95,574 -
Total Shareholders' (Deficit) Equity (323,937) 452,774 (47,707) 81,130
Total Liabilities & Shareholders'
(Deficit) Equity $829,202 ($ 47,556) ($59,158) $722,488
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See Notes to Pro Forma Consolidated Balance Sheet
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(Unaudited)
The following notes set forth an explanation of the assumptions used in preparing the unaudited Pro Forma Consolidated Financial Statements. All amounts are in thousands, except per share data.
(a) Excludes any additional borrowings subsequent to September 30, 1994 under the Company's post-confirmation domestic working capital facilities.
(b) Reflects adjustments relating to discharge of debt and exchange of newly issued debt and equity securities pursuant to the Plan of Reorganization as well as the reclassification of the assets and liabilities of SellCo and other businesses held for sale. Adjustment amounts also reflect the recording of the estimated discounted value of the $48.1 million principal amount of SellCo Notes. The SellCo Notes are subject to cancellation at any time after five years if the value of the consolidated assets of SellCo and its subsidiaries is determined by independent appraisal to be less than $250,000; accordingly, the SellCo Notes are not classified as a liability in the accompanying Unaudited Pro Forma Consolidated Balance Sheet.
(c) Reflects the discharge of old debt and issuance of new debt under the Plan as follows:
Restructure Pro
Historical Discharge/ Forma
Carrying Amount Exchange Balance*
Senior Notes Payable under Revolving Credit $155,795 $(155,795) -
Facility
Senior Notes Payable under various indentures 328,572 (328,572) -
Subordinated Note Payable 9,600 (9,600) -
Convertible Subordinated Debentures 7,040 (7,040) -
Total Debt in Default $501,007 $(501,007) -
Other Senior Notes (included in
current maturities of long-term debt) $558 $(558) -
New 7% Series A Senior Secured Notes - $63,785(1) $63,785
New 7% Series B Senior Secured Notes - $11,892 $11,892
New 11% Series C Notes (included in long-term
debt) - $62,827 $62,827
New 8% Supplemental SellCo Note (included in long-
term debt) - $5,464 $ 5,464
___________________
* The pro forma adjustments to the recorded debt balances reflect the differences between the historical
carrying amounts of the old debt securities and the face amount of the new debt securities issued pursuant
to the Plan of Reorganization before fresh-start adjustments.
(1) The amount of Series A Notes to be issued are based upon an assumed total of $100.0 million of prepetition
general unsecured claims after settlement of disputed and unliquidated prepetition general unsecured claims.
|
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(Unaudited) (Continued)
(d) Reflects reduction of recorded amounts of accrued interest, insurance reserves, other impaired liabilities and unexpired leases rejected by the Company during its bankruptcy proceedings as follows:
Accounts Accrued Long-term
Payable Expenses Liabilities Total
Accrued interest $ - $43,315 $ - $ 43,315
Insurance reserves - 9,600 26,800 36,400
Amount due to JWP Information Services,
Inc. - 24,933 - 24,933
Foreign debt guarantees - 6,037 - 6,037
Stock price guarantees - 5,118 - 5,118
Preferred dividends in arrears - 2,257 - 2,257
Unexpired leases - - 1,718 1,718
Director's retirement benefits - - 975 975
Other impaired claims 400 699 - 1,099
Total $400 $91,959 $29,493 $121,852
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(e) Reflects the elimination of the recorded book value of old common stock, old preferred stock and warrants of participation upon consummation of the Plan of Reorganization and the issuance of 1,518,000 New Warrants and 9,424,083 shares of New Common Stock, $.01 par value.
(f) The deficit was reduced by the net reduction in debt due to the discharge of old debt and issuance of new debt instruments, as well as the reduction of recorded amounts of impaired liabilities as described in Note (d).
(g) The Company has accounted for its reorganization using fresh-start reporting. Accordingly, all assets and liabilities are restated to reflect their reorganized value, which approximated estimated fair value at the date of confirmation of the Company's Plan of Reorganization, assuming a reorganization equity value of $81,130 including $2,179 allocated to the New Warrants on the basis of a valuation made with the assistance of the Company's financial advisor. The value of the new debt securities are discounted to reflect market interest rates.
(h) The Company has a net operating loss carryforward for U.S. income tax purposes which approximates $500 million and which expires in years through 2008. The pro forma financial statements assume that the amount of net operating loss carryforwards available to offset post-confirmation taxable income will be subject to restrictions and substantial reductions governed by Section 382 of the Internal Revenue Code.
Additionally, the pro forma financial statements assume that any net deferred tax asset which may be recognized for financial reporting purposes will be offset by a valuation allowance of the same amount, which valuation allowance would be attributable to the uncertainty of the realization of the net operating loss carryforward.
(i) Principal subsidiaries of SellCo and Other Net Assets Held For Sale:
Principal SellCo Subsidiaries
University Cogeneration, Inc.
General Energy Development, Inc.
Sea Cliff Water Company
Jamaica Water Securities Corp.
Jamaica Water Supply Company
Wachtel Duklauer & Fein, Incorporated
Superior Engineering Corporation
University Mechanical Contractors, Inc. (Washington)
JWP Brandt Engineering Co., Inc.
Other Non-Core Subsidiaries
Maris Equipment Company
JWP Pacific International, Inc.
University Energy Services of California, Inc.
JWP Energy Products, Inc.
JWP Telecom, Inc.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
(In thousands, except per share data)
(Unaudited)
Pro Forma Adjustments
Operations Other
Historical Sold, or Held Pro Forma Pro Forma
for Sale (Note (a)) Adjustments Reorganized
Revenues $1,313,450 ($138,308) - $1,175,142
Cost and Expenses
Cost of sales 1,192,330 (122,539) - 1,069,791
Selling, general
and administrative 133,758 (23,132) (3,355)(b) 107,271
Reorganization charges 10,100 - (10,100)(c) -
1,336,188 (145,671) (13,455) 1,177,062
Operating (Loss) Income (22,738) 7,363 13,455 (1,920)
Interest expense, net 1,184 (108) 9,861(d) 10,937
(Loss) on sale of businesses (532) - 532(e) -
Other expenses 4,092 - - 4,092
(Loss) Before Income Taxes (28,546) 7,471 4,126 (16,949)
Provision for income taxes 750 - - 750
(Loss) From
Continuing Operations (29,296) 7,471 4,126 (17,699)
Income From
Discontinued Operations 9,386 (9,386) - -
Cumulative Effect of
Accounting Change (2,100) - - (2,100)
Net (Loss) ($22,010) ($1,915) $4,126 ($19,799)
(Loss) Income Per Share (f)
Continuing operations $(0.72) $(0.44)
Discontinued operations 0.23 -
Cumulative effect of
accounting change (0.05) (0.05)
$(0.54) $(0.49)
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See Notes to Pro Forma Consolidated Statement of Operations
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1994
(Unaudited)
(a) Reflects adjustments to the Company's historical consolidated statement of operations to eliminate revenues, cost and expenses, interest and losses on sale or disposal attributable to businesses sold or held for sale including retained assets and liabilities of businesses which are not to be continued ("Closeouts") and are not classified as net assets held for sale in the historical financial statements.
(b) Reflects the following adjustments to selling, general
and administrative expenses:
(In thousands)
To eliminate amortization of goodwill and
other intangibles $(2,780)
To reduce depreciation expense as a
result of fair market value
adjustment to fixed assets (575)
$(3,355)
(c) To eliminate legal, consulting and other professional
fees arising from shareholder litigation, debt
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restructuring and the restatement of the Company's historical financial statements.
(d) Reflects the following adjustments to interest expense:
(In thousands)
To eliminate interest expense
related to exchanged debt $(1,500)
To record interest expense on 11%
Series C Notes based upon the pro
forma discounted carrying value and
assuming a discount rate of 14% 5,744
To record interest expense on
8% Supplemental SellCo
Note based upon the pro forma
carrying value and
assuming a discount rate of 14% 442
To record interest expense
on post-confirmation working
capital credit facility assuming
an average of $30 million outstanding at 15% 3,375
To record amortization of debt issuance costs
on post confirmation working capital
credit facility 1,800
$9,861
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Interest expense on the 7% Series A and Series B Senior Notes is not included as a component of interest expense as amounts will be paid from the sale of stock or assets of subsidiaries of SellCo and other net assets held for sale.
(e) To eliminate loss on sale of businesses.
(f) Pro forma net loss per common share is calculated based upon the number of shares of current common stock outstanding at September 30, 1994.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company's new capital structure, as discussed below,
is the result of the consummation of its Plan
of Reorganization. See "Selected Historical Financial Data" and
"Unaudited Pro Forma Financial
Information". Accordingly, the financial condition and results
of operations of the Company after giving effect
to the Plan of Reorganization and the transactions contemplated
therein will not be comparable to the historical
financial condition or results of operations of the Company. The
following Management's Discussion and
Analysis of the Company's historical financial condition and
results of operations should be read in light of the
foregoing.
The Company, since 1992, has been experiencing losses and
has been engaged in an ongoing
restructuring of its various businesses and recently reorganized
under Chapter 11 of the United States
Bankruptcy Code. From August 1992 until February 1994, when the
Company obtained debtor-in-possession
financing, the Company did not have available credit facilities,
and cash flow from operations was inadequate
to fund its operations and service its debts and other
obligations. Consequently, during that period, the
Company had to fund its operations from working capital and from
the proceeds of sales of businesses and other
assets. On December 21, 1993, an involuntary petition for
reorganization under Chapter 11 was filed against
the Company by three creditors. On February 14, 1994, the
Company filed a consent to the involuntary petition
and an order for relief was entered.
On December 15, 1994, the Effective Date of its Plan of
Reorganization, JWP INC. emerged from
Chapter 11 pursuant to the Plan of Reorganization proposed by the
Company and its subsidiary SellCo. Under
the Plan of Reorganization, prepetition creditors of the Company
(other than holders of subordinated debt)
received, in addition to certain notes of the Company and SellCo,
substantially all of the New Common Stock
of the Company. The prepetition holders of the Company's
subordinated debt, common and preferred stock
and warrants of participation received warrants to purchase new
common stock of the Company in exchange
for their debt and equity interests. At that time, the Company
also obtained new credit facilities. See
"Liquidity and Capital Resources" for additional discussion with
respect to the Company's Plan of Reorganization and new credit
facilities.
Prior to the commencement and during the continuation of the Company's Chapter 11 proceeding, the Company experienced significant constraints in its surety bonding line that adversely affected its operations. The surety bonding companies that provide bid and performance bonds for the Company have reviewed and continue to review bond requests on a case-by-case basis. The Company's surety bonding companies have become more selective in issuing bonds for large construction projects, typically in excess of $10.0 million, and those with a duration of more than three years. The surety bonding companies will generally not bond new projects for non- core businesses that the Company intends to sell.
In addition, a surety bonding company that was a primary source of surety bonds for the Dynalectric Companies terminated its surety business as of January 1994. As a result, these subsidiaries were without any surety bonding facilities for most of 1994. In November 1994, the Company entered into an arrangement with a new surety bonding company to provide surety bonds for those MES subsidiaries that were without bonding facilities. For the nine months ended September 30, 1994, these subsidiaries comprised approximately 21% of the revenues of the mechanical and electrical subsidiaries the Company plans to retain. The absence of available surety bonding for these subsidiaries resulted in a significant reduction in their backlog, since surety bonds are frequently a condition to the award of a mechanical or electrical contract. The new surety bonding arrangement should allow these subsidiaries to obtain new contracts thereby increasing backlog.
Results of Operations: Nine Months Ended September 30, 1994 Compared to Nine Months Ended September 30, 1993
Revenues for the nine months ended September 30, 1994 and
1993 were $1,313.5 million and $1,713.6
million, respectively. For the nine months ended September 30,
1994, the Company incurred a net loss of $22.0
million or $0.54 per share compared to a net loss of $50.5
million or $1.27 per share for the nine months ended
September 30, 1993. For the nine months ended September 30,
1994, the loss from continuing operations was
$29.3 million or $0.72 per share compared to a loss of $50.4
million or $1.27 per share from continuing
operations in the year earlier period. For the nine months ended
September 30, 1994, the income from
discontinued operations was $9.4 million or $0.23 per share
compared to a loss of $0.05 million from
discontinued operations for the nine months ended September 30,
1993.
The loss from continuing operations for the nine months ended September 30, 1994 includes: a gain of $1.9 million or $0.05 per share from the settlement of a construction claim; a loss of $4.1 million or $0.10 per share due to the write down of an investment; a loss of $4.5 million or $0.11 per share for the write down on certain long-term construction projects; and a loss of $0.5 million or $0.01 per share for severance of certain employees. Additionally, the net loss for the nine months ended September 30, 1994 includes a charge of $2.1 million or $0.05 per share as a result of the adoption of Statement of Accounting Financial Standards No. 112, "Employers' Accounting for Post-employment Benefits". The loss from continuing operations in the amount of $50.4 million for the nine months ended September 30, 1993 included interest expense on debt in default of approximately $31.9 million. The Company ceased accruing interest on debt in default in December 1993 upon the filing of an involuntary bankruptcy petition against the Company. Accordingly, no interest expense on debt in default is included in the Consolidated Statements of Operations for the nine months ended September 30, 1994. A net gain of $2.6 million or $0.06 per share resulted from the sale during the nine month period ended September 30, 1993 of substantially all of the assets of Software House, Inc., a subsidiary of the Company, and certain other assets.
The Company incurred an operating loss of $22.7 million for the nine months ended September 30, 1994 compared with an operating loss of $15.5 million for the comparable nine month period in 1993. The increase in the operating loss for the first nine months of 1994 was principally due to write downs of long-term construction projects, as discussed above, and a $1.8 million increase in professional fees which includes legal, consulting and other fees in connection with the Company's Chapter 11 bankruptcy proceeding, as well as $0.5 million of debt issuance costs incurred in obtaining debtor-in-possession financing and an increase in insurance costs.
Mechanical /Electrical Services
Revenues of the mechanical/electrical services business
units for the nine months ended September 30,
1994 decreased by 23.3% to $1,313.5 million from $1,713.6 million
for the first nine months of 1993. Operating
income of the mechanical/electrical services business (before
deduction of general corporate and other expenses
discussed below) for the nine months ended September 30, 1994 and
1993 was $0.1 million and $1.3 million,
respectively. In connection with the Company's restructuring
plan, certain mechanical and electrical business
units have been sold or identified for sale. The operating
results of these units are included in the operating
results discussed herein. Revenues of the mechanical/electrical
units sold or held for sale for the nine months
ended September 30, 1994 and 1993 were $121.0 million and $287.5
million, respectively. Such units incurred
an operating loss of $9.5 million for the nine months ended
September 30, 1994 compared to an operating loss
of $2.1 million in the year earlier period. Revenues of certain
retained assets and liabilities of businesses
previously sold or closed which are not classified as net assets
held for sale for the nine months ended
September 30, 1994 and 1993 were $17.3 million and $28.4 million,
respectively. Such units incurred operating
income of $2.2 million for the nine months ended September 30,
1994 compared to an operating loss of $0.8
million in the year earlier period.
The decrease in revenues for the nine months ended
September 30, 1994 was partially attributable to
the disposition of certain businesses held for sale and the
downsizing of certain other businesses. Revenues for
the nine months ended September 30, 1994 relating to businesses
which the Company plans to retain, decreased
by approximately 15% when compared to the year earlier period.
This decrease resulted primarily from those
business units operating in the West and Midwestern United States
and in Eastern Canada. These units
experienced difficulties in obtaining new construction contracts
because of, among other things, continued poor
market conditions and the inability of certain U.S. subsidiaries
to obtain surety bonds to secure new work during
1994 because their surety bonding company ceased to engage, as of
January 1, 1994, in the business of issuing
surety bonds.
The operating results for the nine months ended September
30, 1994 and 1993 reflect, among other
things, the continued negative impact of the recession in the
construction industry and oversupply in the
commercial real estate market which has caused intense
competition for new commercial work. As a result of
the reduction of work in the commercial real estate market, many
of the Company's mechanical/electrical
services business units pursued and secured work in the
institutional and public works markets, typically for
federal, state and municipal government agencies. This work was
often characterized by lower margins and
different contract practices than in the commercial real estate
market. In addition, the continued recession in
the construction industry resulted in lower margins on all
available work than had been obtained in previous
years. Certain of these business units had limited experience in
these institutional and public works projects,
and, as a result, incurred losses, particularly on certain large,
long-term projects. Operating margins in 1994 and
1993 were also adversely affected by the continuing recessions in
the United Kingdom and Canada.
Selling, general and administrative ("SG&A") expenses,
excluding general corporate and other expenses,
for the nine months ended September 30, 1994 and 1993 were $121.1
million and $145.0 million, respectively.
The amount of SG&A expenses for the first nine months of 1994 was
lower than for the comparable period in
1993 as a result of the implementation of the Company's
downsizing plans and the disposition of certain
businesses.
At September 30, 1994, the mechanical/electrical services
business backlog was approximately $1,060.0
million compared to approximately $1,045.0 million at December
31, 1993. Such backlog included $986.7 million
at September 30, 1994 and $954.2 million at December 31, 1993
relating to companies which the Company
currently intends to retain. The Company's backlog in the United
States declined by $76.7 million between
December 31, 1993 and September 30, 1994, whereas its backlog in
the United Kingdom and Canada increased
by $82.3 million and $16.5 million, respectively, during that
same period. The Company's United Kingdom and
Canadian subsidiaries received major long-term contracts during
the second and third quarters of 1994. During
the nine months ended September 30, 1994, the Company experienced
a reduction in backlog in most of the U.S.
regions it serves. The decline was attributable to the
downsizing of the Company's operations, the Company's
weakened financial condition which adversely affected its ability
to obtain new surety bonds and contracts and
the inability of the Dynalectric Companies to obtain surety bonds
because their surety bonding company ceased
to engage, as of January 1, 1994, in the business of issuing
surety bonds. In addition, during that period the
Company's surety bonding companies reviewed and continue to
review requests for surety bonds on a case-by-
case basis. The Company's surety bonding companies have become
more selective in issuing surety bonds for
large construction projects, typically in excess of $10.0
million, and those construction projects with a duration
of more than three years. The Company's surety bonding companies
will generally not bond new projects for
certain non-core businesses which the Company has identified for
sale. Surety bonds are frequently a condition
to the award of a mechanical or electrical contract. Prospects
for a recovery in the commercial office building
market in both North America and the United Kingdom remain poor
for the immediate future.
Included in the Consolidated Balance Sheet as of September 30, 1994 under the caption "Excess of cost of acquired businesses over net assets, less amortization" is $57.8 million of goodwill. Such goodwill relates to the mechanical/electrical services business units which the Company currently intends to retain. Management believes that such goodwill has not been permanently impaired. However, if the Company were to decide to sell these units, the write-off of goodwill and other write-offs might be required depending upon then existing market conditions and the future business prospects of the retained units.
General Corporate and Other Expenses
General corporate expenses for the nine months ended September 30, 1994 and 1993 were $12.8 million and $16.8 million, respectively. General corporate expenses for the nine months ended September 30, 1993 include approximately $7.5 million related to legal, consulting and other professional fees arising from the shareholder litigation, the debt restructuring and the restatement of the Company's 1991 and 1990 financial statements. Legal and other professional fees for 1994 incurred as a result of the bankruptcy proceeding are reflected under the caption "Reorganization charges" in the Consolidated Statements of Operations. These expenses for the nine months ended September 30, 1994 were approximately $10.1 million. The higher amount of general corporate expenses, exclusive of legal, consulting and other professional fees, in 1994 is also attributable to debt issuance costs related to the Company's debtor-in-possession credit facility, severance paid to terminated employees and an increase in insurance costs. Net interest expense for the nine months ended September 30, 1994 was $1.2 million compared to $37.8 million in the year earlier period. The Company ceased accruing interest expense related to debt in default on December 21, 1993, the date on which an involuntary bankruptcy petition was filed against the Company.
Discontinued Operations
In April 1992, the Company announced its intention to
sell its water supply business. However, in July
1993, the Company's Board of Directors decided not to proceed
with the sale due to the then pending rate
related proceedings and litigation. In December 1993, the
Company's subsidiary JWS entered into an agreement
that became effective on February 2, 1994 upon approval by the
New York State Public Service Commission with
respect to the rate related proceedings and litigation thereby
eliminating significant uncertainties relating to the
Company's water supply business. Accordingly, the Company
reinstated its plan of divestiture in the first quarter
of 1994 and recently has retained investment bankers to assist in
the sale of its water supply business. The
Consolidated Financial Statements reflect the water supply
business as a discontinued operation for all periods
presented. See Note T to the Consolidated Financial Statements
and "Legal Proceedings" regarding the
aforementioned rate related proceedings and litigation as well as
the status of a proceeding initiated in 1988 by
The City of New York with respect to the possible condemnation of
the water distribution system of JWS that
is located in New York City and a proceeding initiated by holders
of the Company's warrants of participation.
In 1993, the Company sold substantially all of its information services businesses.
Revenues and income from discontinued operations, excluding the $7.6 million loss from disposal of its information services businesses, for the nine months ended September 30, 1994 and 1993 were as follows (in thousands):
Nine Months Ended
September 30,
1994 1993
Revenues: (Unaudited)
Water Supply $50,452 $ 51,034
Information Services - 860,308
$50,452 $911,342
Income:
Water Supply $ 9,386 $ 9,364
Information Services - (1,779)
$ 9,386 $ 7,585
|
The water supply business operating results are impacted by seasonal factors. Its revenues are generally higher in the second and third quarters which reflects the warmer weather conditions in the Northeast United States.
Results of Operations: 1993 Compared to 1992 and 1992 Compared to 1991
Revenues for the years ended December 31, 1993, 1992 and 1991 were $2.2 billion, $2.4 billion and $2.3 billion, respectively. The net loss for the years ended December 31, 1993 and 1992 was $123.1 million or $3.06 per share and $612.4 million or $15.13 per share, respectively, compared to net income of $29.0 million or $0.73 per share in 1991. The Company's net loss from continuing operations for the years ended December 31, 1993 and 1992 was $114.0 million or $2.84 per share and $363.5 million or $9.00 per share, respectively, compared to net income from continuing operations of $4.7 million or $0.10 per share in 1991.
The net loss or income from continuing operations
for the years ended December 31, 1993, 1992
and 1991 includes net interest expense of $50.2 million, $44.2
million and $43.9 million, respectively. The
increase in interest expense in 1993 primarily reflects accruals
for penalty interest on debt in default. The net
loss from continuing operations for the year ended December 31,
1993 includes a net gain on businesses sold
or held for sale of $1.0 million. The net loss or income from
continuing operations for the years ended
December 31, 1992 and 1991 includes losses on businesses sold and
held for sale of $76.1 million and $6.6
million, respectively.
The net loss from discontinued operations for the
years ended December 31, 1993 and 1992 was
$9.1 million or $0.22 per share and $253.2 million or $6.24 per
share, respectively, compared to net income of
$24.3 million or $0.63 per share in 1991. The loss from
discontinued operations for the year ended December
31, 1993 reflects a charge of $8.1 million related to an
adjustment in the carrying value of liabilities as a result
of the bankruptcy filing under Chapter 7 of the U.S. Bankruptcy
Code by the Company's subsidiary that
formerly carried on the Company's U.S. information services
business. The loss from discontinued operations
in 1993 also includes a charge of $7.4 million to write down the
net assets of the Company's water supply
business to estimated net realizable value.
The net loss in 1992 reflects (i) a continuing slump
in the Company's mechanical/electrical services
business, principally attributable to a downturn in commercial
construction; (ii) intense competition in the
Company's information services business; (iii) restructuring
charges related to the planned disposition or
downsizing of (a) the information services businesses, (b)
non-core businesses and (c) certain
mechanical/electrical operations; (iv) significant provisions for
losses on accounts receivable and inventories; (v)
a provision for losses on net assets held for sale; and (vi)
expenses associated with the shareholder litigation,
the Company's efforts to restructure its debt through a
consensual arrangement and the restatement of the
Company's financial statements.
A significant portion of the 1992 loss, particularly
with respect to losses on accounts receivable and
write-down of inventories, arose as a result of management's
review conducted in connection with the
preparation of the Company's year end 1992 financial statements.
As a result of such review, the Company
recorded significant write-offs and losses in 1992 for impairment
of goodwill and other intangibles, for the
establishment of asset valuation and restructuring reserves
associated with net assets held for sale and as a result
of the decision to discontinue the information services business.
The net loss for 1993 reflects the continued impact of the recession and the downturn in commercial real estate construction both in North America and the United Kingdom. The net loss includes a $38.5 million provision for estimated losses on uncompleted construction contracts and approximately $12.0 million of legal, consulting and other professional fees arising from the shareholder litigation and debt restructuring efforts. Additionally, the 1993 loss includes one-time charges to discontinued operations, discussed above, with respect to the write-down of the net assets of the Company's water supply business to estimated net realizable value and the loss related to the bankruptcy filing of the Company's subsidiary which formerly carried on its U.S. information services business.
SG&A expenses were $216.7 million in 1993, $440.7
million in 1992 and $286.9 million in 1991. The
higher amount of SG&A expenses in 1992 includes a provision of
$100.4 million for losses on accounts and other
receivables (See "Mechanical/Electrical Services" below), an
increase in general corporate expenses of $29.2
million and $13.6 million applicable to the write-off of
goodwill. General corporate expenses were $26.4 million
in 1993 compared to $48.4 million in 1992 and $19.2 million in
1991. (See "General Corporate and Other
Expenses"). A reduction of SG&A expenses was realized in 1993 as
a result of the implementation of the
Company's restructuring.
Mechanical/Electrical Services
Revenues of the mechanical/electrical services
business units for the year ended December 31, 1993
decreased 8.7% to $2.2 billion from $2.4 billion in 1992.
Revenues in 1991 were $2.3 billion. Operating losses
(before deduction of general corporate and other expenses
discussed below) for the years ended December 31,
1993 and 1992 was $39.1 million and $187.2 million, respectively,
compared to operating income of $76.9 million
for the year ended December 31, 1991. In connection with the
Company's restructuring plan, certain
mechanical/electrical business units have been sold or identified
for sale. The operating results of such business
units are included in the aforementioned operating results.
Revenues of the mechanical/electrical business units
sold or held for sale for the years ended December 31, 1993, 1992
and 1991 were $257.9 million, $526.9 million
and $501.7 million, respectively. For the years ended December
31, 1993 and 1992, such business units had
operating losses of $11.8 million and $41.2 million,
respectively, compared to operating income of $15.3 million
in 1991.
The operating results in both 1993 and 1992 reflect,
among other things, the continued negative
impact of the recession in the construction industry and
oversupply in the commercial real estate market which
has caused intense competition for new commercial work. As a
result of the reduction of commercial work,
many of the Company's mechanical/electrical services business
units pursued and secured work in the
institutional and public works markets, typically for federal,
state and municipal government agencies. This work
was often characterized by lower margins and different contract
practices than in the commercial real estate
market. In addition, the continued recession in the construction
industry resulted in lower margins on all
available work than had been obtained in previous years. Certain
of these business units had limited experience
in these institutional and public works projects and, as a
result, incurred losses on certain large long-term
contracts.
The operating loss in 1993 includes $13.0 million of
losses incurred by the Company's business units
in the U.S. Midwest. Such losses primarily consist of job
write-downs and provisions for loss contingencies on
certain completed large industrial and municipal projects. In
the fourth quarter of 1993, certain of the
Company's mechanical business units in its U.S. Western region
recorded charges of approximately $13.1
million for estimated losses on certain large uncompleted
municipal projects. The losses were primarily
attributable to adverse weather conditions, management turnover,
inadequate estimating of job costs and labor
problems. Operating margins in 1993 were also adversely affected
by approximately $7.6 million of losses in the
United Kingdom and Canada. Such losses reflect, among other
things, the continuing recessions in the United
Kingdom and Canada, downsizing costs in the United Kingdom and
the inadequacy of available bonding in
Canada which has adversely affected the Canadian subsidiary's
ability to obtain new contracts.
The operating loss for the year ended December 31,
1992 includes a provision for losses on accounts
and other receivables of $100.4 million due in part to the impact
of the recession on the financial condition of
customers of the Company's mechanical/electrical services
business units. Additionally, the Company's
financial condition and negative cash flow adversely impacted its
ability to settle claims and unapproved change
orders on a favorable basis. The operating loss for the year
ended December 31, 1992 also includes
restructuring charges of $38.7 million for the downsizing of the
Company's North America mechanical/electrical
services operations, $13.6 million applicable to the write-off of
goodwill and a charge of $15.6 million relating
the write-off of small tool inventory. Small tools are located
at numerous construction sites and generally have
short lives. Accordingly, the Company made the decision to
write-off its small tool inventory because of the
difficulty and expense associated with taking periodic physical
inventories required to maintain the tools as an
asset.
At December 31, 1993 the mechanical/electrical
services business backlog was $1.0 billion compared
to $1.6 billion at December 31, 1992. The Company's overall
backlog in North America and in the United
Kingdom has stabilized at approximately $1.0 billion through
September 1994. Such backlog included $954.2
million at December 31, 1993 and $1,263.0 million at December 31,
1992 relating to companies which the
Company currently intends to retain. A reduction in backlog was
experienced in each of the North American
markets and in the United Kingdom and is attributable to the
downsizing of the Company's operations, the
Company's weakened financial condition which adversely affected
its ability to obtain new surety bonds and
contracts and the continuing recessions in the North American and
overseas construction markets.
General Corporate and Other Expenses
General corporate and other expenses for the years
ended December 31, 1993, 1992 and 1991 were
$26.4 million, $48.4 million and $19.1 million, respectively.
Corporate expenses for the year ended December
31, 1993, include approximately $12.0 million of expenses related
to legal, consulting and other professional fees
arising from the shareholder litigation and the debt
restructuring. The higher amount of corporate expense for
the year ended December 31, 1992 was related primarily to (a)
fees paid to lenders for extensions of,
amendments to and waivers of the Company's revolving credit
agreement ($4.5 million), (b) the write-off of
deferred debt expense in connection with the Company's debt
restructuring ($2.9 million), (c) legal, consulting
and other professional fees arising out of shareholder
litigation, defaults of covenants contained in loan
agreements, associated debt restructuring activities and the
restatement of the Company's 1991 and 1990
financial statements ($9.6 million), (d) the accelerated vesting
of deferred compensation as a result of the
termination of employment of certain officers ($5.6 million), (e)
employee termination costs ($1.8 million), (f)
the write-off of leasehold improvements and abandonment of a
lease ($4.2 million) in connection with the
relocation of the corporate headquarters from Purchase, New York
to Rye Brook, New York.
Discontinued Operations
The Consolidated Financial Statements reflect the water supply business as a discontinued operation for all periods presented.
For the years ended December 31, 1993, 1992 and 1991 revenues of the water supply business were $66.8 million, $59.8 million and $63.1 million, respectively. The operating income for the years ended December 31, 1993, 1992 and 1991 were $15.4 million, $4.8 million and $14.6 million, respectively. The operating results for the year ended December 31, 1992 included a charge of $7.0 million relating to the settlement of rate related proceedings and litigation. See Note T to the Consolidated Financial Statements and "Liquidity and Capital Resources."
On January 1, 1994, upon expiration of the then existing collective bargaining agreement, the local collective bargaining unit (Local 374 of the Utility Workers Union of America) representing 212 employees of JWS commenced a strike against JWS. On March 27, 1994, the membership of the local collective bargaining unit ratified a new five year collective bargaining agreement and ended the work stoppage.
In March 1993 the Company's Board of Directors
approved the disposition of the Company's U.S.
information services business which was sold in August 1993. The
Board of Directors had previously decided
to sell the Company's overseas information services businesses.
Accordingly, operating results reflect the
information services businesses as discontinued operations. See
Notes L and M to the Consolidated Financial
Statements. Revenues of the information services businesses were
approximately $876.7 million, $1.7 billion and
$1.2 billion in 1993, 1992 and 1991, respectively. Operating
income of the information services businesses in 1993
was $10.2 million compared to a loss from operations of $187.9
million in 1992 and operating income of $34.0
million in 1991. The loss in 1992 includes one-time charges of
$67.3 million which consists of the write-off of
goodwill and other intangible assets related to the U.S.
information services business and costs attributable to
employee severance and facilities consolidation. The 1992 loss
also reflects intense competition among personal
computer resellers, decreases in the prices of personal computers
and the rapid introduction of new technology.
The difficulties encountered by the Company in successfully
integrating the back office operations and
accounting systems of Businessland Inc., which was acquired in
August 1991, with the Company's preexisting
information services back office operations resulted in
additional losses. In 1993, the Company sold substantially
all the assets of its U.S. and foreign information services
subsidiaries. The transactions did not result in a
material gain or loss to the Company in 1993. See "Liquidity and
Capital Resources" for additional information
with respect to the disposition of the U.S. information services
subsidiary.
In connection with the plan to dispose of the
Company's foreign information services businesses
and certain of its U.S. information services units, the Company
provided for losses aggregating $49.5 million in
1992. These charges primarily represented the estimated losses
to be realized upon the disposition of such
business units in 1993. Such amount is in addition to the
aforementioned loss from operations of $187.9 million
and is included in the accompanying Consolidated Statements of
Operations under the caption "Loss from
disposal of businesses" in Discontinued Operations.
Liquidity and Capital Resources
For the nine months ended September 30, 1994 and the
year ended December 31, 1993, the
Company's operations used $37.0 million and $44.5 million,
respectively, of cash primarily to fund operating
losses and working capital requirements. From September 1992 to
February 1994, the Company had no available
lines of credit and experienced significant cash outflow as a
result of operating losses coupled with adverse
publicity associated with the restatement of its first and second
quarter 1992 financial statements, defaults under
its loan agreements and senior management changes. In February
1994, the Company obtained a $35 million
debtor-in-possession credit facility ("DIP Loan") from Belmont
Capital Partners II, L.P., an affiliate of Fidelity
Investments ("Belmont"), which is described below.
The Company's consolidated cash balance decreased by
$47.3 million from December 31, 1992 to
December 31, 1993. The Company's consolidated cash balance
increased by $0.2 million from $39.5 million at
December 31, 1993 to $39.7 million at September 30, 1994. The
September 30, 1994 cash balance included $1.2
million in foreign bank accounts. Cash in the foreign bank
accounts is not available to support the Company's
domestic mechanical/electrical services business or to pay
corporate expenses. The negative operating cash flow
reflected continued pressure to accelerate payment of accounts
payable and a delay on the part of customers
in payment of accounts receivable attributable to the Company's
weakened financial condition. Additionally,
recurring operating losses, restructuring costs, professional
fees relating to debt restructuring negotiations and
shareholder litigation have adversely affected cash flow. Cash
deposits made to secure insurance obligations
have also negatively impacted cash flow.
As a consequence of the Company's financial
difficulties, an asset disposition program was initiated
in the third quarter of 1992 with respect to the Company's
non-core businesses and certain other assets to raise
cash for working capital and to reduce debt. During the nine
months ended September 30, 1994, the Company
received net cash proceeds of $4.5 million from the sale of the
Company's minority ownership in an
environmental business and other non-core businesses and other
assets. The Company received net proceeds
of $40.8 million for the nine month period ended September 30,
1993 primarily from the sale of certain overseas
information services business units and other non-core businesses
and other assets. Such proceeds were
primarily used for working capital requirements.
In 1993, the Company's U.S. Information Services business and its Canadian mechanical and electrical service subsidiary made net repayments of $13.1 million and $6.2 million, respectively, on notes payable to various lending institutions.
The DIP Loan agreement provided a credit facility to
the Company of up to $35.0 million at an
interest rate of 12% per annum during the period of the Company's
Chapter 11 proceeding. In addition,
Belmont became entitled to receive, as additional interest, 4.5%
of the securities issued and to be issued under
the Plan of Reorganization (the "Additional Interest"). The DIP
Loan was secured by a first lien on substantially
all of the assets of the Company and most of its subsidiaries.
As of the Effective Date, the Company had drawn
down $30 million under the DIP Loan of which $25 million had been
drawn down as of September 30, 1994.
The DIP Loan was repaid on the Effective Date from borrowings
under new credit agreements described below.
Pursuant to the Plan of Reorganization, the Company
and its wholly-owned subsidiary SellCo issued,
or reserved for issuance, four series of notes (the "New Notes")
and 9,424,083 shares of newly authorized
common stock of the Company ("New Common Stock") (constituting
100% of outstanding shares as of the
Effective Date) to prepetition creditors of the Company, other
than holders of the Company's prepetition
subordinated debt, in settlement of their prepetition claims and
to Belmont in payment of Additional Interest
under the terms of the DIP Loan. The principal terms and
conditions of the New Notes, which are described
below, have been designed to minimize the Company's cash flow
requirements for debt service. The entire
$11.9 million principal amount of Series B Notes and
approximately $4.1 million principal amount of Series A
Notes were redeemed on the Effective Date with the net cash
proceeds derived from the sale of certain of the
Company's subsidiaries, the stock of which would have been
pledged as part of the collateral securing the Series
B Notes had such subsidiaries not been sold (and an additional
$600,000 of such proceeds was reserved for
prepayment of certain of the Series A Notes which have been
reserved for issuance in respect of disputed and
unliquidated claims). It is contemplated that, subject to the
rights of the Lenders under the Company's New
Credit Agreements discussed below under "New Credit Facility" to
receive the first $15.0 million of proceeds
of the sale of stock or assets of the Water Companies, the
balance of the Series A Notes will be prepaid with
the net cash proceeds derived from the sale of the remaining
subsidiaries of SellCo ("Net Sales Proceeds") and
five other non-core subsidiaries pledged as collateral for the
Series A Notes (the "Other Non-Core
Subsidiaries") and that the SellCo Subordinated Contingent
Payment Notes will only be paid from and to the
extent of any remaining Net Sales Proceeds of the SellCo
subsidiaries and the proceeds of a $5,464,000
promissory note made by the Company to the order of SellCo
pursuant to the Plan of Reorganization (the
"EMCOR Supplemental SellCo Note"). Interest on the EMCOR
Supplemental SellCo Note is payable on maturity.
The Series A Notes are in an initial principal
amount of approximately $58.1 million, including an
Additional Interest amount issued to Belmont under the DIP Loan,
but after giving effect to the prepayment
of approximately $4.1 million principal amount of Series A Notes
on the Effective Date. The Series A Notes
bear interest at the rate of 7% per annum. Interest on the
Series A Notes which commenced on the Effective
Date, is compounded semiannually and is payable by the issuance
of additional Series A Notes. The Series A
Notes mature on the third anniversary of the Effective Date and
provide for a mandatory redemption of
$10,000,000 principal amount (approximately $5.9 million
principal amount after giving effect to the approximate
$4.1 million prepayment made on the Effective Date), less any
prepayments from additional Net Sales Proceeds
of SellCo subsidiaries and the Other Non-Core Subsidiaries or
otherwise, on the second anniversary of the
Effective Date. The Series A Notes are guaranteed by MES
Holdings Corporation ("MES") and SellCo and
are secured by pledges of the capital stock of MES and SellCo,
most of the SellCo subsidiaries and the Other
Non-Core Subsidiaries. Up to a maximum of $8.8 million
additional principal amount of Series A Notes have
been reserved for issuance to holders of general unsecured
prepetition claims and to Belmont in respect of
Additional Interest upon resolution of disputed and unliquidated
claims (assuming such claims are ultimately
allowed in full).
The Series B Notes issued by the Company were in the principal amount of $11.9 million. As noted above, the Series B Notes were redeemed in full on the Effective Date immediately upon their issuance.
The Series C Notes issued, or reserved for issuance,
by the Company are in the principal amount
of approximately $62.8 million, including the Additional Interest
amount issued to Belmont. The Series C Notes
bear interest at the rate of 11% per annum and mature on the
seventh anniversary of the Effective Date.
Interest on the Series C Notes, which commenced on the Effective
Date, is payable semiannually by the issuance
of additional Series C Notes for the first eighteen months after
the Effective Date and thereafter is payable
quarter-annually in cash. The Series C Notes are unsecured
senior indebtedness of the Company, but
subordinate to (i) the Series A Notes and (ii) up to $100 million
of new working capital indebtedness of
EMCOR or MES, and are guaranteed by MES subject to payment in
full of the Series A Notes.
As a means of segregating asset sale proceeds for
the benefit of impaired creditors, SellCo issued,
or reserved for issuance, approximately $48.1 million principal
amount of ten year 12% Subordinated Contingent
Payment Notes (the "SellCo Notes"), including the Additional
Interest amount issued to Belmont. The SellCo
Notes are junior and subordinated indebtedness of SellCo so long
as any portion of indebtedness on account
of the Series A Notes or the guaranty of SellCo in respect
thereof remains outstanding. The SellCo Notes
mature on the tenth anniversary of the Effective Date and are
secured by a pledge of the capital stock of most
of the subsidiaries owned by SellCo subject to the lien in favor
of the Series A Notes and the rights of the
Lenders under the New Credit Agreements discussed below under
"New Credit Facility" to receive the first $15.0
million of proceeds of the sale of stock or assets of the Water
Companies. Subject to the prior payment in full
of the Series A Notes and establishment of a cash reserve for the
payment of capital gains taxes arising from
the sales of subsidiaries of SellCo and the rights of the Lenders
with respect to the proceeds of the sale of the
Water Companies, the SellCo Notes are mandatorily prepayable to
the extent of net sales proceeds from the sale
of stock or the assets of SellCo subsidiaries. Interest on the
SellCo Notes, which commenced on the Effective
Date, is compounded semiannually and is payable in additional
SellCo Notes. The EMCOR Supplemental
SellCo Note matures on the earlier of the tenth anniversary of
the Effective Date or one day prior to the date
which the SellCo Notes are deemed cancelled as described in the
following sentence. If, at any time after the
fifth anniversary of the Effective Date and prior to the maturity
date of the SellCo Notes, the value, as
determined by an independent appraiser selected by EMCOR, of the
consolidated assets of SellCo (excluding
the EMCOR Supplemental SellCo Note) is less than $250,000, the
balance of the SellCo Notes (not theretofore
paid from Net Sales Proceeds and the proceeds of the EMCOR
Supplemental SellCo Note which will have
become due and payable) will be deemed cancelled.
New Credit Facility. On December 14, 1994, the
Company and certain of its subsidiaries entered
into two New Credit Agreements with Belmont and other lenders
providing the Company and certain of its
subsidiaries with working capital facilities of up to an
aggregate of $45 million which became available upon the
Effective Date. The MES Credit Agreement is among the Company,
MES, substantially all of the U.S.
subsidiaries of MES, as guarantors, and the lenders and provides
the Company and MES with loans in an
aggregate amount of up to $35 million. The Dyn Credit Agreement
is among the Company, Dyn, the Dyn
subsidiaries, as guarantors, and the lenders and provides Dyn
with loans in an aggregate amount of up to $10
million. All the loans bear interest on the principal amount
thereof at the rate of 15% per annum and mature
on the date which is 18 months after the date of the New Credit
Agreements.
The loans under the MES Credit Agreement are guaranteed by most of the U.S. MES subsidiaries of MES and are secured by, among other things, substantially all of the assets of the Company, MES and most of its U.S. subsidiaries, including their respective accounts receivable, inventories, general intangibles and equipment and the capital stock of the U.S. MES subsidiaries (but not the stock of MES, Dyn, SellCo, SellCo's subsidiaries or the five Other Non-Core Companies) and the proceeds of the sale of stock or assets of the Water Companies to the extent of the first $15 million of such proceeds, subject to the rights to such proceeds of the lenders under the Dyn Credit Agreement. The Dyn loans are guaranteed by the Dyn subsidiaries and are secured by substantially all of the assets of Dyn and the Dyn subsidiaries, including their respective accounts receivable, inventories, general intangibles and equipment and the capital stock of Dyn and the Dyn subsidiaries and the proceeds of the sale of stock or assets of the Water Companies to the extent of the first $15 million of such proceeds, subject to the rights to such proceeds of the lenders under the MES Credit Agreement. The Dyn loans are also secured by the collateral securing the MES Loans, subject to the rights to such collateral of the lenders under the MES Credit Agreement.
The proceeds of the MES loans under the MES Credit
Agreement were used to repay amounts
under the DIP Loan and pay fees and expenses in connection with
the MES Credit Agreement and the Plan
of Reorganization and the balance will be used for the general
working capital of MES, the MES subsidiaries
and the Company. The proceeds of the Dyn loans were used to pay
fees and expenses in connection with the
Dyn Credit Agreement and will be used for the general working
capital of Dyn and the Dyn subsidiaries.
Each of the new credit agreements contains various
affirmative and negative covenants. The
negative covenants limit the Company, MES, Dyn and their
respective subsidiaries' ability to take certain actions
without the lenders' approval. Such actions include, among other
things: (i) merger or consolidation, (ii)
incurrence of indebtedness, (iii) placing of liens upon their
property, (iv) making of loans, investments or
guarantees and (v) transfer of assets. The negative covenants
require MES, Dyn and their subsidiaries to
maintain their backlogs and work-in-progress at not less than
specified levels and to prevent their losses from
operations from exceeding specified amounts in any month. The
MES Credit Agreement also requires the
Company, MES and its subsidiaries, and Dyn and its subsidiaries
to maintain certain financial coverage ratios.
The Company's Canadian subsidiary, Comstock Canada
Limited ("Comstock Canada"),has
borrowings of less than Canadian $1.0 million outstanding under
an expired demand secured facility which is
guaranteed by the Company. The lender has permitted Comstock
Canada to continue to borrow amounts
aggregating less than Canadian $1.0 million. This modest credit
facility has adversely affected Comstock Canada
and Comstock Canada is seeking to obtain a new increased credit
facility. However, there can be no assurance
that Comstock Canada will obtain a new credit facility or, if so,
as to the amount of any such facility, nor is there
any assurance Comstock's existing lender will continue to make
advances available to it or the amount of such
advances.
In June 1994, a number of the Company's U.K.
subsidiaries entered into a demand credit facility
with a U.K. bank for a credit line of English Pound 14.1 million
(approximately U.S. $22.3 million). The credit facility,
consists
of the following components with the individual credit limits as
indicated: an overdraft line of up to English Pound 6.0 million
(approximately $9.5 million); a facility for the issuance of
guarantees, bonds and indemnities of up to English Pound 7.3 million
(approximately U.S. $11.6 million); and other credit facilities
of up to English Pound 0.8 million approximately U.S. $1.2
million). The facility is secured by substantially all of the
assets of the Company's principal U.K. subsidiaries.
The overdraft facility provides for interest at the bank's base
rate, as defined (5.75% as of September 30, 1994)
plus 3% on the first English Pound 5.0 million of borrowings and at the bank's
base rate plus 4% for borrowings over English Pound 5.0
million. This credit facility, as amended, expires May 31, 1995.
The U.K. subsidiaries are negotiating the terms of an extension of the credit facility; however, there can be no assurance the credit facility will be extended or, if so, its terms.
As of September 30, 1994, the Company's U.K. subsidiaries had utilized $19.6 million of the credit facilities as follows: $7.4 million of borrowings under the overdraft line, $11.6 million for the issuance of guarantees and $0.6 million under other credit facilities.
The Water Companies carried in "Net assets held for
sale" in the accompanying Consolidated
Balance Sheets, have a revolving credit agreement which permits
unsecured borrowings of up to $17.9 million
by JWS and $2.1 million by Sea Cliff with interest rates based on
the prime rate, LIBOR plus 5/8% or the bid
rate (as defined). The revolving credit agreement providing for
these facilities expires on November 3, 1995.
Borrowings under the revolving credit agreement are reflected as
current liabilities in the condensed balance
sheet of "Net Assets Held for Sale" in Note L to the Consolidated
Financial Statements.
The Company's mechanical/electrical services business does not require significant commitments for capital expenditures. The Water Companies anticipate making capital expenditures of approximately $53.0 million for utility plant over the next five years. These capital expenditures are expected to be financed by internally generated funds with any remaining long-term financing requirements obtained from the proceeds of newly issued first mortgage bonds and from bank loans.
Management believes that projected cash flow from operations combined with the available funds under the MES and Dyn Credit Agreements will provide sufficient liquidity to meet the Company's operating, capital and scheduled debt service requirements for the foreseeable future. Factors supporting this belief include the terms of the New Notes, including the interest and amortization payment terms, and the contemplated prepayment of certain of the New Notes from the proceeds of sales of subsidiaries held for sale.
Status of Water Companies. JWS, the New York State
Consumer Protection Board, Nassau County,
certain other governmental bodies and a consumer advocate group
entered into a settlement dated December
22, 1993 (the "Settlement Agreement") which following approval by
the New York State Public Service
Commission on February 2, 1994, settled all JWS issues
outstanding before the Public Service Commission,
various state courts and in the RICO action. The Settlement
Agreement provides, among other things, (i) that
JWS will use its best efforts to bring about a separation of
Jamaica Water Securities Corporation ("JWSC"),
a subsidiary of the Company, which holds substantially all of the
common stock of JWS, from the Company and
that JWSC will submit plans to the Public Service Commission for
its separation from the Company and the
formation of a separate water works corporation to be
incorporated under the New York State Transportation
Corporation law to provide water utility service to Nassau County
customers served by JWS; (ii) a commitment
by JWS that, subject to limited specific exceptions, it will not
seek to have a general rate increase become
effective prior to January 1, 1997, thus providing rate stability
for three years; (iii) for refunds and other
payments to customers estimated to aggregate approximately $11.7
million over the 1994-1997 period; and (iv)
a cap on earnings above which JWS will share with its customers
its return on equity.
In September 1992, the Public Service Commission
issued an order that resulted in the suspension
of payment of dividends on JWS's common stock for the last two
quarters of 1992 and for the year ended
December 31, 1993. Dividends paid by JWS to the Company on its
common stock in 1992 and 1991 amounted
to $1.2 million and $2.0 million, respectively. As a result of
the Settlement Agreement referred to above, JWS
recommenced dividend payments on its common stock in April 1994.
Dividends paid by JWS to the Company
in the first nine months of 1994 amounted to $1.1 million.
Certain Insurance Matters. At January 1, 1994, the Company and Defender had letters of credit totaling $36.4 million of which $29.4 million remained outstanding at September 30, 1994 to secure certain insurance obligations. These letters of credit were intended to serve as collateral for the obligations of Defender and the Company to reimburse the Company's unrelated insurance carrier for claims paid with respect to the insurance programs for the years 1988 through 1991. Since September 30, 1994, $14.6 million was drawn upon by an insurance carrier and $13.9 million was renewed by the issuing banks. A $0.9 million letter of credit that was to expire in February 1995 was also drawn upon in full by the insurance carrier in December 1994. Since October 1992, neither the Company nor Defender has been able to obtain additional letters of credit to secure their insurance obligations, and, as a result they have been required to make cash collateral deposits to an unrelated insurance company to secure those types of obligations.
The deposits totaled $34.0 million, $21.3 million and $7.7 million as of September 30, 1994 and December 31, 1993 and 1992, respectively, and are classified as a long-term asset in the accompanying Consolidated Balance Sheets under the caption "Insurance Cash Collateral" in other assets. The need to provide cash collateral has adversely affected the Company's cash flow. The Company expects to continue to be required to post additional cash collateral for insurance claims inasmuch as it does not believe it will be able to obtain letters of credit for the foreseeable future.
The Company expects the existing letters of credit will be drawn upon in full by the insurance companies for whose benefit they were provided either in installments or at one time. As a result of the Chapter 11 proceedings, other than for the distributions provided for under the Plan of Reorganization, neither the Company nor Defender are obligated to reimburse the banks providing the letters of credit for the amounts drawn thereunder.
Item 3. PROPERTIES
The operations of the Company are conducted primarily in leased properties. The following table lists the major facilities:
Square Lease Expiration
Feet Date, Unless Owned
Corporate Headquarters
101 Merritt Seven Corporate Park
Norwalk, Connecticut 15,725 4/9/01
Mechanical and Electrical Services
1200 North Sickles Road
Tempe, Arizona 29,000 Owned
3208 Landco Drive
Bakersfield, California 49,875 4/30/95
4462 Corporate Center Drive
Los Alamitos, California 41,400 12/31/00
4464 Alvarado Canyon Road
San Diego, California 53,000 7/31/95
9505 Chesapeake Drive
San Diego, California 44,000 1/30/96
345 Sheridan Boulevard
Lakewood, Colorado 63,000 Owned
5697 New Peachtree Road
Atlanta, Georgia 27,200 11/30/95
2100 South York Road
Chicago, Illinois 77,700 1/09/00
1300 Michigan Street
Gary, Indiana 27,600 Month to Month
2655 Garfield Road
Highland, Indiana 34,600 7/08/96
3555 W. Oquendo Road
Las Vegas, Nevada 90,000 11/30/98
46-01 20th Avenue
Long Island City, New York 33,000 12/31/95
19-49 42nd Street
Long Island City, New York 59,000 2/28/96
30 N. MacQuesten Parkway
Mount Vernon, New York 25,300 11/30/98
111 West 19th Street
New York, New York 27,200 5/31/98
Two Penn Plaza
New York, New York 57,200 6/30/06
165 Robertson Road
Ottawa, Ontario 35,400 Owned
11245 Indian Trial
Dallas, Texas 43,400 4/27/96
11261 Indian Trial
Dallas, Texas 32,800 8/27/96
5550 Airline Road
Houston, Texas 74,500 6/30/96
515 Norwood Road
Houston, Texas 29,700 Month to Month
Canary Wharf
One Canada Square
London, U.K. 27,800 1/01/01
Building D-3 Freeport
Center
Clearfield, Utah 120,000 12/31/99
1574 South West Temple
Salt Lake City, Utah 58,500 Month to Month
22930 Shaw Road
Sterling, Virginia 32,600 7/31/99
109-D Executive Drive
Sterling, Virginia 49,000 7/31/96
1420 Spring Hill Road
McLean, Virginia 13,100 4/07/00
Supply of Water
410 Lakeville Road
Lake Success, New York 24,000 7/31/98
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JWS owns a waterworks system consisting of approximately 850 miles of water mains, 32 storage tanks and 93 wells (67 of which are presently operable). Water is drawn from these wells by electric motors housed in small brick or concrete buildings. These facilities are located on parcels of land, aggregating approximately 55 acres, owned by JWS scattered throughout the territory it serves. Many of the parcels are subject to liens, encumbrances and other restrictions. Sea Cliff owns approximately 56 miles of water mains and 4 parcels of land aggregating approximately 5 acres, on which a diesel pumping station, 2 storage facilities and 2 operating wells are located.
The Company believes that all of its property, plant and equipment are well maintained, in good operating condition and suitable for purposes for which they are used.
See Note J to Consolidated Financial Statements for
additional information regarding lease costs.
The Company believes there will be no difficulty either in
negotiating the renewal of its real property leases as
they expire or in finding other satisfactory space.
Item 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Directors and Officers and Other Beneficial Owners
The following table sets forth as of March 1, 1995
the number of shares of New Common Stock
beneficially owned by any person who is known to the Company to
be the beneficial owner of more than 5%
of any class of the Company's equity securities, by each director
and the named executive officers (as defined
below) of the Company and by all directors and officers of the
Company as a group. Except as otherwise
indicated, the persons listed below have sole voting power and
sole investment power with respect to the shares
they beneficially own.
Name of
Beneficial Owner Amount and Nature of
Beneficial Ownership(1)(2) Percent(2)
Frank T. MacInnis (3) --
Stephen W. Bershad -- --
David A.B. Brown -- --
Thomas D. Cunningham -- --
Albert Fried 108,135 (4) 1.1%
Malcolm T. Hopkins -- --
Kevin C. Toner -- --
Sheldon I. Cammaker -- --
Leicle E. Chesser -- --
Jeffrey M. Levy -- --
Joseph A. Gallo -- --
Mark A. Pompa -- --
All directors and executive
officers as a group 108,135 1.1%
Belmont Capital Partners
II, L.P. 903,675 (4)(5) 9.5%
________________________
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(1) The information contained in the table reflects "beneficial ownership" as defined in Rule 13d-3 of the Securities Exchange Act of 1934. Unless otherwise indicated the stockholders identified in this table have sole voting and investment power with respect to the shares owned of record by them. All percentages set forth in this table have been rounded.
(2) Assumes completion of issuance of New Common Stock, New Series X Warrants, New Series Y Warrants and New Series Z Warrants pursuant to the Plan of Reorganization.
(3) Mr. MacInnis is to receive on April 4, 1995 an option to purchase 200,000 shares of New Common Stock (the "Option"), at a price equal to the average market price for the New Common Stock over the 20 day trading period preceding the issuance of the Option.
(4) In the case of Albert Fried, the amount assumes beneficial ownership of 108,135 shares of New Common Stock owned by Albert Fried & Co. ("AF&C"), of which Mr. Fried is the managing partner.
In the case of Belmont Capital Partners II, L.P. ("Belmont"), the amount includes 835,351 shares of New Common Stock and 68,324 New Warrants as described in Note (5) below. AF&C received the shares of New Common Stock and Belmont received a portion of its shares of New Common Stock in their capacities as holders of prepetition unsecured claims against the Debtor. There is a reserve from the number of shares of New Common Stock to be issued to the holders of prepetition general unsecured claims for disputed claims against the Debtor. The Company believes that a substantial portion of such disputed claims will be disallowed and a substantial portion of the shares of New Common Stock held in reserve will be issued to the holders of allowed claims. In such case, the number of shares issued to AF&C and Belmont will increase in a presently undeterminable amount.
(5) Includes 28,272 shares, 28,272 shares and 11,780 shares issuable upon exercise of like numbers of New Series X Warrants, New Series Y Warrants and New Series Z Warrants, respectively, received by Belmont as Additional Interest.
Item 5. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors
Frank T. MacInnis, Age 48; Chairman of the Board,
President and Chief Executive Officer of the
Company since April 18, 1994. From April 1990 to April 1994 Mr.
MacInnis served as President and Chief
Executive Officer, and from August 1990 to April 1994 Chairman of
the Board, of Comstock Group Inc., a
nationwide electrical contracting company. From 1986 to April
1990, Mr. MacInnis was Senior Vice President
and Chief Financial Officer of Comstock Group Inc. In addition,
from 1986 to April 1994 Mr. MacInnis was
also President of Spie Group Inc., which owns Comstock Group
Inc., Spie Construction Inc., a Canadian pipeline
construction company, and Spie Horizontal Drilling Inc., a U.S.
company engaged in under the water drilling
for pipelines and communications cable.
Stephen W. Bershad, Age 53; Chairman and Chief Executive Officer for more than the past five years of Vernitron Corporation, a manufacturer of electronic components and controls.
David A.B. Brown, Age 51; President of The Windsor
Group, a management consulting firm of
which he is a co-founder, for more than the past five years. Mr.
Brown is also a director of BTU International,
Inc. and The Western Company of North America.
Thomas D. Cunningham, Age 45; Executive Vice President and Chief Financial Officer and a director of The Forschner Group, Inc., an importer and distributor of Swiss Army knives and watches and Sabatier and Forschner cutlery since March 1994. For more than five years prior thereto, Mr. Cunningham was a Managing Director of J.P. Morgan & Co. Inc., an international lending institution.
Albert Fried, Age 64; Managing Partner of Albert Fried & Company, a broker/dealer and member of the New York Stock Exchange, since 1955. Mr. Fried is also Chairman of the Board of Directors of Portec, Inc., a manufacturer of engineered products for the construction equipment, material handling and railroad industries, and is Vice Chairman of the Board of Directors of Oneita Industries, Inc., a manufacturer and marketer of activewear, including T-shirts and fleecewear.
Malcolm T. Hopkins, Age 67; Private investor since
1984. Retired Vice Chairman and Chief
Financial Officer of the former St. Regis Corporation, a forest
products, oil, gas and insurance company. Mr.
Hopkins is also a director of The Columbia Gas System, Inc.,
Kinder-Care Learning Centers, Inc., MAPCO Inc.,
Metropolitan Series Fund Inc. and U.S. Home Corporation and
serves as a Trustee of The Biltmore Funds.
Kevin C. Toner, Age 30; Private Investor since March
1995; Managing Director from December 1991
to March 1995 of UBS Securities Inc., a broker/dealer and member
of the New York Stock Exchange, engaged
in corporate finance, underwriting and distribution of high grade
U.S. corporate issues and Eurobonds. From
March 1991 to December 1991 Mr. Toner was a Vice President of UBS
Securities and for more than five years
prior thereto he held various positions with CS First Boston, an
investment banking firm.
Executive Officers
In addition to Mr. MacInnis, the following are the executive officers of the Company.
Sheldon I. Cammaker, Age 55; Executive Vice President and General Counsel of the Company for more than the past five years.
Leicle E. Chesser, Age 48; Executive Vice President
and Chief Financial Officer of the Company
since May 1994. From April 1990 to May 1994 Mr. Chesser served
as Executive Vice President and Chief
Financial Officer of Comstock Group Inc. and from 1986 to May
1994 he was also Executive Vice President and
Chief Financial Officer of Spie Group Inc.
Jeffrey M. Levy, Age 42; Executive Vice President of
the Company since November 1994. Senior
Vice President of the Company from December 1993 to November 1994
and Chief Operating Officer of the
Company since February 1994. From May 1992 to December 1993, Mr.
Levy was President and Chief Executive
Officer of the Company's subsidiary EMCOR Mechanical/Electrical
Services (East), Inc. From January 1991
to May 1992 Mr. Levy served as Executive Vice President and Chief
Operating Officer of Lehrer McGovern
Bovis, Inc., a construction management and construction company.
From December 1988 to December 1990
Mr. Levy was Vice President of Stone & Webster Engineering
Corporation which is engaged in the design and
construction of power, industrial and petrochemical facilities.
Joseph A. Gallo, Age 43; Senior Vice President of
the Company since April 1993, a Vice President
of the Company from November 1991 to April 1993, and Treasurer of
the Company for more than the past five
years.
Mark A. Pompa, Age 30; Vice President and Controller
of the Company since September 1994.
From June 1992 to September 1994, Mr. Pompa was Audit and
Business Advisory Manager of Arthur Andersen
& Co., an accounting firm, and from June 1988 to June 1992 Mr.
Pompa was a Senior Accountant at that firm.
Item 6. EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following Summary Compensation Table sets forth
the compensation awarded to, earned by
or paid to each of the Chief Executive Officer and the other four
most highly compensated executive officers
of the Company (collectively the "named executive officers")
during the fiscal years ended December 31, 1994,
1993 and 1992 for services rendered in all capacities to the
Company and its subsidiaries. On April 18, 1994,
Mr. Edward F. Kosnik resigned as Chairman of the Board, President
and Chief Executive Officer of EMCOR
and Mr. Frank T. MacInnis assumed such offices. For information
regarding Mr. Kosnik's resignation and the
employment agreements, if any, of the named executive officers,
see "Employment Contracts and Termination
of Employment and Change of Control Arrangements" below.
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation Awards(4)
Number of
Securities
Name and Principal Position Year Salary(2)($) Bonus($) Other Annual Restricted Stock Underlying All Other
Compensation(3) Award(s)(5) Options/SARs Compensation(8)
($) ($) (#) ($)
Frank T. MacInnis(1) 1994 426,923 250,000 None None (7) 256,300(9)
Chairman of the Board, 1993 - - - - - -
President and Chief 1992 - - - - - -
Executive Officer
Edward F. Kosnik(1) 1994 146,154 None None None None 251,899(10)
Former Chairman of 1993 483,460 80,000 None None None 7,800
the Board, President 1992 30,769 None None 300,000 100,000 None
and Chief Executive
Officer
Sheldon I. Cammaker 1994 361,322 50,000 None None None 176,700(11)
Executive Vice 1993 357,322 50,000 None None None 8,875
President and General 1992 362,600 50,000 None 54,375 37,622 13,110
Counsel
Jeffrey M. Levy(1) 1994 247,500 175,000 None None None 6,300
Executive Vice 1993 195,000 150,000 None None 46,500 7,650
President and Chief 1992 120,000 100,000 None None None None
Operating Officer
Stephen H. Meyers(1) 1994 186,923 None None None None 248,435(12)
Former Senior Vice 1993 217,212 40,000 None 181,250 50,000 5,175
President - Finance 1992 - - - - - -
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(1) As Mr. MacInnis joined the Company on April 18, 1994, the blanks opposite his name indicate that during 1992 and 1993 Mr. MacInnis was not employed by the Company, and, accordingly, there is no compensation information to report for him in respect of such years. In addition, amounts shown for Mr. MacInnis for 1994 reflect less than a full year of compensation. As Mr. Kosnik joined the Company in November 1992, and Mr. Levy joined the Company in May 1992, amounts shown for each of them for 1992 reflect less than a full year of compensation. Mr. Meyers joined the Company in January 1993 and the blanks opposite his name indicate that during 1992 there is no compensation information to report for him in respect of such year. In addition, amounts shown for Mr. Levy during 1992 and 1993 represent compensation for Mr. Levy's service as President of EMCOR Mechanical/Electrical Services (East), Inc., a subsidiary of the Company. Inasmuch as Mr. Kosnik and Mr. Meyers left the Company's employ on April 18, 1994 and October 21, 1994, respectively, the amounts shown for them for 1994 reflect less than a full year of compensation. See "Employment Contracts and Termination of Employment and Change of Control Arrangements" below for a description of Mr. Meyers' termination arrangements.
(2) Amounts shown include amounts the named executive officers
earned but chose to defer pursuant to the Company's 401(k)
Retirement Savings Plan (the "401(k) Plan"). Pursuant to the
401(k) Plan, Mr. Cammaker deferred $9,240 for 1994 and $8,994 for
1993 and 1992. Messrs. Kosnik, Levy and Meyers were
only eligible to contribute to the 401(k) Plan during 1994
and 1993, and the amounts each of them deferred
were $9,240 during 1994 and $8,994 during 1993. Mr.
MacInnis was not eligible to participate in the 401(k)
Plan during 1994. Amounts shown for the named executive
officers also include the amounts applied, if
any, by them to payment of their respective medical
insurance premiums made pursuant to the Company's
Premium Conversion Plan (the "Medical Plan"), a Cafeteria
Plan established under Section 125 of the
Internal Revenue Code of 1986, as amended. Pursuant to the
Medical Plan, during 1994, the following
amounts were applied by each of the following named
executive officers: Mr. Kosnik, $792, Mr.
Cammaker, $4,208, Mr. Levy, $2,453, and Mr. Meyers, $2,453;
and during 1993, $2,275 was applied by each
of them. During 1992, Mr. Kosnik did not participate in the
Medical Plan, Mr. Cammaker applied $1,250
to the Medical Plan, and Mr. Levy applied $609 to the
Medical Plan.
(3) The personal benefits provided to the named executive officers did not exceed the disclosure threshold established by the SEC pursuant to applicable rules.
(4) The column designated by the SEC to report Long-Term Incentive Plan Payouts has been excluded because the Company has no long-term incentive compensation plans and has not had any such plan during any portion of fiscal years 1994, 1993 or 1992.
(5) The dollar amounts shown for restricted stock awards are based on the market prices for the Company's previously outstanding common stock (all of which was cancelled on the Effective Date) on the dates the respective awards were made. As of December 31, 1994, none of the named executive officers held any restricted stock awards since the Company's previously outstanding common stock was all cancelled on the Effective Date. As of December 31, 1993, the aggregate number of shares of restricted stock held by each named executive officer and the aggregate dollar value of such shares (calculated by multiplying the aggregate number of shares held by such named executive officer by $.01, the price in the over-the-counter market for a share of the Company's unrestricted common stock on December 31, 1993) was: Mr. Kosnik, 66,667 shares ($667); Mr. Cammaker, 25,577 shares ($258); and Mr. Meyers, 50,000 shares ($500). The restricted stock awards to the named executive officers reported in the table were to vest or vested as follows: awards made in respect of 1992 to Mr. Cammaker vested 50% on January 2, 1994 and would have vested 50% on January 2, 1995. Awards made in respect of 1993 to Mr. Meyers vested 1/3 in January 1994 and the remainder vested in October 1994 when Mr. Meyers' employment with the Company was terminated. Upon joining the Company in November 1993, Mr. Kosnik was awarded a grant of 100,000 shares of restricted stock, 1/3 of which vested in November 1993 and the remaining shares were forfeited upon his resignation.
(6) The awards set forth in this column are of stock options only. The Company did not award stock appreciation rights ("SARs"). The stock options refer to previously outstanding common stock, all of which was cancelled on the Effective Date.
(7) Mr. MacInnis is to receive on April 4, 1995 an option to purchase 200,000 shares of New Common Stock (the "Option") at a price equal to the average market price for the New Common Stock over the 20 day trading period preceding the issuance of the Option.
(8) The amounts reported in this column include matching
contributions made by the Company under the
401(k) Plan during 1994, 1993 and 1992 for the account of
the named executive officers as follows: 1994
and 1993 - Messrs. Kosnik, Cammaker, Levy and Meyers, each
$1,800; 1992 - Mr. Cammaker, $1,800. The
amounts reported for 1994 also include contributions to be
paid during 1995 in respect of 1994 by the
Company for the account of the following named executive
officers pursuant to the Company's Money
Purchase Plan as follows: Mr. Cammaker and Mr. Levy, each
$4,500. Messrs. MacInnis, Kosnik and
Meyers were not eligible to participate in the Money
Purchase Plan for 1994 and Mr. MacInnis was not
eligible to participate in the 401(k) Plan for 1994. The
amounts reported for 1993 also include
contributions made during 1994 in respect of 1993 by the
Company for the account of the following named
executive officers pursuant to the Company's Money Purchase
Plan as follows: Mr. Kosnik, $6,000; Mr.
Cammaker, $7,075; Mr. Levy, $5,850; and Mr. Meyers, $3,375.
The amounts reported for 1992 also include
contributions made during 1993 in respect of 1992 by the
Company for the account of the following named
executive officer pursuant to the Company's Money Purchase
Plan as follows: Mr. Cammaker, $6,866.
Messrs. Kosnik and Levy were not eligible to participate in
the Money Purchase Plan for 1992. For 1992,
the amounts reported also include a contribution made during
1992 in respect of 1991 pursuant to the
Company's Employee Stock Ownership Plan of $4,444 for Mr.
Cammaker. Inasmuch as Mr. MacInnis was
not eligible to participate in the 401(k) Plan or the Money
Purchase Plan for 1994, the amounts reported
in this column for Mr. MacInnis include $6,300 payable to
him under a supplemental retirement plan in
accordance with the terms of his employment agreement.
(9) Amount reflects a signing bonus of $250,000 paid to Mr. MacInnis upon his joining the Company on April 18, 1994.
(10) Amount includes payments of $100,000 in each of February and March 1994 and $50,000 in April 1994 paid to induce Mr. Kosnik to remain with the Company for a period of time to enable the Company to find a successor.
(11) Amount includes a stay bonus of $170,400 paid to Mr. Cammaker on September 30, 1994.
(12) Amount includes a stay bonus of $112,500 paid to Mr. Meyers on September 30, 1994 and a severance payment of $112,500 paid to Mr. Meyers on October 31, 1994 after Mr. Meyers' employment with EMCOR terminated on October 21, 1994. This amount also includes an aggregate of $21,635 in severance payments paid to Mr. Meyers in November and December of 1994. A remaining $203,365 in severance payments owed to Mr. Meyers will be paid to him in equal weekly installments during 1995.
Option Exercises and Holdings
All outstanding options to purchase shares of the previously outstanding common stock of the Company held during 1994 by the named executive officers were cancelled on the Effective Date. Except for a provision of Mr. MacInnis' employment agreement which provides for the grant to him on April 4, 1995 of an option to purchase 200,000 shares of New Common Stock, none of the named executive officers is entitled to or holds any options to purchase New Common Stock as of December 31, 1994. No named executive officer exercised any options during 1994. No named executive officer holds or held any SARs.
Employment Contracts and Termination of
Employment and Change of Control Arrangements
Employment Agreement
The Company has entered into an Employment Agreement
(the "Agreement"), dated as of April
18, 1994, with Frank T. MacInnis providing for his employment as
Chief Executive Officer and President of the
Company during the period April 18, 1994 through December 31,
1997. The Agreement provides that the term
of employment will automatically be extended for successive
one-year periods unless the Company or Mr.
MacInnis gives written notice not to extend at least six months
prior to the end of such period. The Company
is also to use its best efforts to ensure his election as
Chairman of the Board of Directors of the Company.
Pursuant to the Agreement, the Company is to pay Mr.
MacInnis an annual base salary of $600,000
and to increase such base salary on the first day of each
calendar year during his employment by at least the
percentage increase for the prior year in the relevant consumer
price index. In addition, Mr. MacInnis is
entitled to receive an annual bonus, which, for the period ended
on December 31, 1994, was to be no less than
$150,000. For each calendar year thereafter, Mr. MacInnis' bonus
will be determined by a formula agreed upon
by Mr. MacInnis and the Compensation and Personnel Committee of
the Board of Directors of the Company.
In addition to his salary and bonus, Mr. MacInnis has been paid a
one-time cash payment of $250,000 and is
to receive an option (the "Option") to purchase 200,000 shares of
new common stock of the Company at a price
equal to the average market price for the common stock over that
20 day trading period preceding the issuance
of the Option. The Option will be issued three months plus 20
days after the Effective Date.
Under the terms of the Agreement, Mr. MacInnis has
been provided with certain benefits
customarily accorded to the Company's senior executive officers
as well as supplemental benefits such that he
will become fully vested in the Company's Money Purchase Plan and
401(k) Plan. In addition, Mr. MacInnis
is entitled to $600 per month for leasing (plus maintenance and
insurance) of an automobile; reimbursement for
all initiation fees and monthly dues for membership in a club
suitable for entertaining clients of the Company;
all legal expenses incurred by him in connection with the
Agreement; and the cost of any increased tax liability
to him caused by the receipt of these fringe benefits.
If Mr. MacInnis' employment is terminated during the
term of the Agreement by the Company
other than for Cause (as defined in the Agreement) or he
terminates his employment for Good Reason (as
defined in the Agreement), Mr. MacInnis will be entitled to
receive a cash payment equal to the sum of: (i)
the greater of (A) his base salary at the highest annual rate in
effect during his employment from the date of
termination through December 31, 1997 or (B) two times his base
salary at its then current annual rate and (ii)
an amount equal to the product of the highest bonus paid to him
during his employment (but in no event less
than $150,000) times (A) the number of full or partial years
remaining from the date of termination through
December 31, 1997 or (B) two, whichever is greater; however, in
the event of a termination following a Change
in Control (as defined in the Agreement), the factor of two in
clause (i)(B) above will be increased to three.
In addition, Mr. MacInnis will be entitled to receive all unpaid
amounts in respect of any bonus for any calendar
year ending before the date of termination.
During 1994, the Company had an employment contract
with Sheldon I. Cammaker, expiring
January 31, 1999, pursuant to which Mr. Cammaker serves as a
senior executive officer of the Company. Mr.
Cammaker received an annual base salary of $361,322 in 1994 which
salary increases on the first day of each
calendar year during his employment by at least 6%. In addition,
pursuant to the terms of his employment
contract, Mr. Cammaker is eligible to receive annual bonuses, has
been provided with certain benefits
customarily accorded the Company's senior executive officers and
is provided with a Company automobile.
The above-referenced employment contract provides
that, in the event of a change in control of the
Company and within two years thereafter Mr. Cammaker is
terminated or elects to terminate his employment,
Mr. Cammaker would be entitled to retain any shares of restricted
stock of the Company previously issued to
him and to be paid an amount equal to the sum of (i) $470,000,
(ii) $320,000 multiplied by each full calendar
year remaining under his employment agreement, and (iii) $320,000
less, with respect to clause (iii), the base
salary already paid to him for the year of termination.
Mr. Meyers, whose employment with the Company was
terminated on October 21, 1994, had an
employment agreement with the Company without a fixed term. Mr.
Meyers received a base salary at the annual
rate of $225,000 and was eligible for an annual bonus. Upon
joining the Company, Mr. Meyers received a grant
of an option to purchase 50,000 shares of common stock, at an
exercise price of $3.625 per share (the fair market
value of a share of common stock on the date of grant, January
15, 1993), in addition to a grant of 50,000 shares
of restricted stock. The option, which was the only option
granted by the Company or any of its subsidiaries
to an employee during the 1993 fiscal year, was cancelled
pursuant to the Plan of Reorganization.
Mr. Edward F. Kosnik joined the Company in November
1992 as Executive Vice President and
Chief Financial Officer. In April 1993 he became President and
Chief Executive Officer and became Chairman
of the Board as of July 1, 1993. In April 1994 Mr. Kosnik
resigned as Chairman of the Board, President and
Chief Executive Officer of the Company. When Mr. Kosnik joined
the Company he received an employment
agreement without a fixed term. Prior to becoming President and
Chief Executive Officer, his base salary was
at the rate of $400,000 per annum in accordance with the terms of
his employment agreement, and thereafter
his salary was at the annual rate of $500,000. Pursuant to the
employment agreement, Mr. Kosnik received an
option to purchase 100,000 shares of common stock, at an exercise
price of $3.00 per share (the fair market value
of a share of common stock on the date of grant, November 24,
1992), in addition to a grant of 100,000 shares
of restricted stock. The restricted stock was to vest, and the
stock options were to become exercisable, one-third
in November 1993, one-third in November 1994 and one-third in
November 1995. Mr. Kosnik's employment
agreement also provided that he was eligible for an annual bonus.
In December 1993 Mr. Kosnik indicated a
desire to leave the Company, and in order to induce him to remain
with the Company for a period of time to
enable the Company to find a successor, Mr. Kosnik was paid
$250,000 in 1994 in addition to his base salary and
in addition to a bonus of $80,000 paid to him in respect of 1993.
Following his resignation, Mr. Kosnik's options lapsed and he forfeited 66,667 shares of the restricted stock issued to him that had not vested.
Termination Arrangements
Stephen H. Meyers' employment with the Company
terminated pursuant to a termination agreement
dated October 21, 1994 (the "Meyers Termination Agreement").
Pursuant to the Meyers Termination
Agreement, Mr. Meyers resigned as an officer of the Company as of
the close of business on October 31, 1994.
Mr. Meyers agreed to provide to the Company, upon reasonable
notice, consulting services of up to 40 hours
during the period November 1, 1994 through February 28, 1995
without any charge to the Company, and at the
rate of $125 per hour for such services in excess of 40 hours.
Mr. Meyers agreed, following reasonable notice,
to use his best efforts to make himself reasonably available for
consulting services to the Company after February
28, 1995 at a rate of $125 per hour plus reimbursement of any
reasonable and necessary out-of-pocket expenses
incurred in connection therewith.
The Meyers Termination Agreement also provides for
the payment of $337,500 to Mr. Meyers in
connection with the termination of his employment, of which
$112,500 was paid on October 31, 1994 (including
$16,600 paid by the EMCOR Group, Inc. Employee Severance Pay/Stay
Bonus Plan) and the balance of $225,000
of which is payable in 52 equal weekly installments.
Other Arrangements
Effective as of June 25, 1993, the Company adopted the
EMCOR Group, Inc. Employees' Severance
Pay/Stay Bonus Plan (the "Plan") in order to encourage designated
employees of the parent corporation to
continue their employment over the next two years while the
Company restructured its business operations. As
amended, the Plan provides that a Plan participant will be
entitled to receive a pre-determined amount of
severance pay if his employment with the Company is terminated
for reasons other than death, disability,
voluntary resignation or for cause (as defined) during the
two-year period commencing on June 25, 1993 and
ending on June 24, 1995. Certain Plan participants also were
entitled to receive a predetermined stay bonus if
they remained continuously employed with the Company during the
period which commenced on June 25, 1993
and ended on September 30, 1994, and all stay bonuses payable
under the Plan have been paid.
All severance payments payable under the Plan represent
an obligation of the Company and are to
be paid from its general assets. Notwithstanding the foregoing,
the Company may, from time to time, in its sole
discretion, make contributions to a taxable, irrevocable trust
("Trust") to pre-fund all or a portion of a Plan
participant's benefits to which he may become entitled. Payments
from the Trust to Plan participants shall be
in discharge of the Company's liability under the Plan to such
participants to the extent such benefits are paid
from the Trust. In addition, the assets of the Trust, which
would be allocated to accounts to be established for
the benefit of Plan participants, will not be subject to the
claims of the Company's creditors in a bankruptcy or
other insolvency proceeding under federal or state law. Although
the Plan participants would have a secured
interest in the contributions made by the Company and credited to
their respective accounts, if any, they would
have no interest, secured or unsecured, in the income of the
Trust (including unrealized capital gains), which
income would be distributed quarterly to the Company, which will
be responsible for the payment of any federal,
state or local taxes payable on such income. Through December
31, 1994, $969,514 had been contributed to the
Plan and amounts payable as stay bonuses aggregating $828,725
were fully funded and paid out on September 30,
1994.
As soon as practicable following the date a Plan participant becomes entitled to receive a severance payment under the Plan, the Company is to direct the Trustee under the Trust (the "Trustee") to distribute to him in a lump sum the lesser of: the amount credited to his account, if any, in the Trust, or the amount of his severance payment benefit to which he is then entitled to the extent, if any, of the amount credited to his Trust account. To the extent that the amount credited to his Trust account is less than such benefit, he is to receive the balance from the Company, either in a lump sum or in weekly installments (not exceeding 52 installments), at such times and in such amounts, as determined by the Committee administering the Plan in its sole discretion.
Payments under the Plan are subject to federal, state and local income tax withholding and all other applicable federal, state and local taxes. The Trustee and the Company, as the case may be, are to withhold from any payments it makes all applicable federal, state and local withholding taxes and the employee will be required to file any necessary certificate or other form in connection therewith prior to receiving any payments.
In the event that a Plan participant dies or becomes disabled prior to becoming entitled to any benefit payable under the Plan, his right to such benefit will be forfeited. In the event a Plan participant dies after becoming entitled to a benefit payable under the Plan but prior to recovering the full amount of such benefit, his designated beneficiary or his estate (if no beneficiary has been designated) will be entitled to receive such unpaid benefits on the date or dates that the Plan participant would have received them while living.
The Plan is administered by an administrative committee
appointed by the Board of Directors, which
consists of such number of persons as shall from time to time be
determined by the Board of Directors.
Members of the committee may be officers, directors, or employees
of the Company or others and shall hold
office at the pleasure of the Board of Directors and without
compensation, unless otherwise determined by the
Board of Directors. The committee is charged with the operation
and administration of the Plan. The
committee has the power to interpret and construe the Plan, to
determine all questions arising under the Plan,
and to adopt and amend from time to time such rules and
regulations necessary for the administration of the
Plan which are not inconsistent with the terms and provisions of
the Plan. Notwithstanding the foregoing, the
Board of Directors retains the power to determine all questions
of eligibility, status and rights of Plan
participants.
The Plan terminates automatically, effective as of August 24, 1995, unless the termination date is deferred to a later date by the Board of Directors of the Company ("Deferred Termination Date"). The Board of Directors of the Company may amend, suspend or terminate the Plan or any portion thereof at any time prior to the later of August 24, 1995 or any Deferred Termination Date; provided, however, that unless the written consent of a Plan participant is obtained, no such amendment or termination shall adversely affect the rights of any Plan participant. Upon termination of the Plan, all Plan benefits not payable from the Trust shall be paid by the Company within 60 days of such termination date. Upon termination of both the Plan and the Trust, any assets remaining in the Trust after all benefits payable under the Plan have been paid in full shall be returned to the Company.
Under the terms of the Plan the following named
executive officers of the Company would be entitled
to receive a severance payment as follows: Sheldon I.
Cammaker-$340,788 and Jeffrey M. Levy-$247,500. See
Item 6. "Executive Compensation-Summary Compensation Table" above
for the stay bonuses paid to named
executive officers.
Compensation Committee Interlocks and Insider Participation
In fiscal year 1994, the Board of Directors of the Company was responsible for matters concerning executive compensation. Mr. Kosnik was Chairman of the Board, President and Chief Executive Officer through April 15, 1994, and Mr. MacInnis, who succeeded Mr. Kosnik as Chairman of the Board, also served as the Chief Executive Officer and President of the Company during 1994.
Director Compensation
Each director who is not an officer of the Company ("non-employee director") receives an annual retainer of $30,000 and $1,000 for each meeting of the Board he attends, other than telephonic meetings of the Board in which case each non-employee director who participates receives $500. In addition, each non-employee director also receives $500 for each meeting of a committee of the Board of Directors attended by the director, and each non-employee director who chairs a committee of the Board receives an additional $2,000 per annum. Directors who also serve as officers of the Company do not receive compensation for services rendered as directors.
The Company's 1994 Management Stock Option Plan
During the restructuring process and the Plan of Reorganization negotiations, all parties concluded that it would be in the best interests of the Company, its creditors and equity holders that there be both continuity of key management and a performance incentive for maintaining such continuity. Accordingly, the Company adopted a Management Stock Option Plan (the "1994 Plan").
The 1994 Plan is conditioned on
approval by the stockholders of the Company following its
adoption.
The 1994 Plan is administered by the Compensation and
Personnel Committee of the Board of
Directors (the "Compensation Committee"), comprised of two or
more directors of the Company, each of whom
is disinterested within the meaning of Rule 16b-3(c)(2) under the
Securities Exchange Act of 1934 (the
"Exchange Act") and considered an outside director within the
meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code") and the regulations
promulgated thereunder. Such key
employees as may be determined by the Compensation Committee from
time to time will be eligible to
participate in the 1994 Plan.
The aggregate number of shares of New Common Stock that
may be issued pursuant to options under
the 1994 Plan may not exceed 1,000,000. The maximum number of
shares which may be the subject of options
granted to any individual in any calendar year shall not exceed
500,000 shares.
Within one year after the Effective Date, the
Compensation Committee shall determine the recipients
of options to purchase 500,000 shares of New Common Stock of
EMCOR pursuant to the 1994 Plan and shall
issue such options to such recipients in the respective amounts
as determined by the Compensation Committee;
provided, however, that in no event shall such options be issued
prior to the expiration of three months plus 20
days after the Effective Date. The employment agreement between
the Company and Frank T. MacInnis
requires that Mr. MacInnis shall receive options to purchase
200,000 shares of New Common Stock three months
and twenty days following the Effective Date.
Options may be granted by the Compensation Committee to
eligible employees as "incentive stock
options" (as defined under Section 422 of the Code) or as
non-qualified stock options.
The exercise price of an incentive stock option and a non-qualified stock option must be at least equal to the fair market value of the New Common Stock on the date of grant; provided, however, that the purchase price for the initial grant of options with respect to 500,000 shares shall be equal to the average market price of New Common Stock over the 20 day trading period immediately preceding the date of issuance of the option; and provided, further, that if the average market price of New Common Stock for the applicable period cannot be determined, the exercise price shall be determined by an investment advisor selected by the Compensation Committee of the Board of Directors of the Company. Notwithstanding the preceding, the exercise price of any such option which is an incentive stock option shall not be less than the fair market value of the New Common Stock on the date of grant of the option.
Options may not be exercised more than ten years after the date of grant. Options shall be exercisable at such rate and times as may be fixed by the Committee on the date of grant; however, the rate at which the option first becomes exercisable may not be more rapid than 33-1/3% on and after each of the first, second and third anniversaries of the date of grant. The aggregate fair market value (determined at the time the option is granted) of the New Common Stock with respect to which incentive stock options are exercisable for the first time by a participant during any calendar year (under all stock option plans of the Company and its subsidiaries) shall not exceed $100,000; to the extent that this limitation is exceeded, such excess options shall be treated as non-qualified stock options for purposes of the 1994 Plan and the Code.
At the time an option is granted, the Compensation Committee may, in its sole discretion, designate whether the option is to be considered an incentive stock option or non-qualified stock option. Options with no such designation shall be deemed an incentive stock option, to the extent that the $100,000 limit described above is met.
Payment of the purchase price for shares acquired upon
the exercise of options may be made by any
one or more of the following methods: in cash, by check, by
delivery to the Company of shares of New Common
Stock already owned by the option holder, by a "cashless"
exercise method with a designated broker, or by such
other method as the Compensation Committee may permit from time
to time. However, a holder may not use
previously owned shares of New Common Stock that were acquired
pursuant to the 1994 Plan, or any other stock
plan that may be maintained by the Company or its subsidiaries,
to pay the purchase price under an option,
unless the holder has beneficially owned such shares for at least
six months.
Options become immediately exercisable in full upon the
retirement of the holder after reaching the
age of 65, upon the disability or death of the holder while in
the employ of the Company, or upon the
occurrence of such special circumstances as in the opinion of the
Compensation Committee merit special
consideration. However, no options or rights may be exercised
earlier than six months following the later of the
date of grant or of the stockholder approval of the 1994 Plan
(except that the estate of a deceased holder of an
option may exercise it prior to the expiration of such six-month
period).
Options terminate at the end of the three-month period
following the holder's termination of
employment. This period is extended to six months in the case of
the death of the holder, in which case the
option is exercisable by the holder's estate.
Each option contains anti-dilution provisions which
will automatically adjust the number of shares
subject to options in the event of a stock dividend, split-up,
conversion, exchange, reclassification or substitution.
In addition, upon the dissolution or liquidation of the Company,
or the occurrence of a merger or consolidation
in which the Company is not the surviving corporation, or in
which the Company becomes a subsidiary of
another corporation or in which the voting securities of the
Company which are outstanding immediately prior
thereto do not continue to represent (either by remaining
outstanding or by being converted into voting securities
of the surviving entity) more than 50% of the combined voting
securities of the Company or such surviving entity
immediately after such merger or consolidation, or upon the sale
of all or substantially all of the assets of the
Company, the 1994 Plan and the options granted thereunder shall
terminate unless provision is made by the
Company in connection with such transaction for the assumption of
options theretofore granted, or the
substitution for such options of new options of the successor
corporation or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kinds of shares and
the per share exercise prices. If options
terminate as a result of any such transaction, the holder will be
entitled to the excess of (i) the fair market value
(determined on the basis of the amount received by stockholders
in connection with such transaction) of the
shares subject to the portion of the option not theretofore
exercised (whether or not the option is then
exercisable pursuant to its terms or otherwise), over (ii) the
aggregate purchase price that would be payable for
such shares upon the exercise of the option. In the event of any
other change in the corporate structure or
outstanding shares of New Common Stock, the Compensation
Committee may make such equitable adjustments
to the number of shares and the class of shares available under
the 1994 Plan or to any outstanding options as
it shall deem appropriate to prevent dilution or enlargement of
rights.
The Company shall obtain such consideration for granting options under the 1994 Plan as the Compensation Committee in its discretion may request.
Each option may be subject to provisions to assure that any exercise or disposition of New Common Stock will not violate the securities laws.
No options may be granted under the 1994 Plan after ten years following the date of its adoption.
The Board of Directors or the Compensation and Personnel Committee may at any time withdraw or amend the 1994 Plan and may, with the consent of the affected holder of an outstanding option at any time withdraw or amend the terms and conditions of outstanding options. Any amendment which would increase the number of shares issuable pursuant to options or to any individual employee, or change the class of employees to whom options may be granted shall be subject to the approval of the stockholders of the Company within one year of such amendment.
The Federal income tax consequences to an employee who receives incentive stock options generally will, under current law, be as follows:
An employee will not realize any income upon the grant
or exercise of an incentive stock option. If
the employee disposes of the shares of New Common Stock acquired
upon the exercise of an incentive stock
option at least two years after the date the option is granted
and at least one year after the New Common Stock
is transferred to him or her, the employee will realize long-term
capital gain in an amount equal to the excess,
if any, of his or her selling price for the shares over the
option exercise price. In such case, the Company will
not be entitled to any tax deduction resulting from the issuance
or sale of the shares. If the employee disposes
of the shares of New Common Stock acquired upon the exercise of
an incentive stock option prior to the
expiration of two years from the date the option is granted, or
one year from the date the New Common Stock
is transferred to him or her, any gain realized will be taxable
at such time as follows (a) as ordinary income to
the extent of the difference between the option exercise price
and the lesser of the fair market value of the
shares on the date the option was exercised or the amount
realized from such disposition, and (b) as capital gain
to the extent of any excess, which gain shall be treated as
short-term or long-term capital gain depending upon
the holding period of the New Common Stock. In such case, the
Company may claim an income tax deduction
(as compensation) for the amount taxable to the employee as
ordinary income.
In general, the difference between the fair market value of the New Common Stock at the time the incentive stock option is exercised and the option exercise price will constitute an item of adjustment, for purposes of determining alternative minimum taxable income, and under certain circumstances may be subject, in the year in which the option is exercised, to the alternative minimum tax.
If an employee uses shares of New Common Stock which he
or she owns to pay, in whole or in part,
the exercise price for shares acquired pursuant to an incentive
stock option, (a) the holding period for the newly
issued shares of New Common Stock equal in value to the old
shares which were surrendered upon the exercise
shall include the period during which the old shares were held,
(b) the employee's basis in such newly issued
shares will be the same as his or her basis in the old shares
surrendered and (c) no gain or loss will be
recognized by the employee on the old shares surrendered.
However, if any employee uses shares previously
acquired pursuant to the exercise of an incentive stock option to
pay all or part of the exercise price under an
incentive stock option, such tender will constitute a disposition
of such previously acquired shares for purposes
of the one-year (or two-year) holding period requirement
applicable to such incentive stock option and such
tender may be treated as a taxable exchange.
The Federal income tax consequences to an employee who
receives non-qualified stock options
generally will, under current law, be as follows:
An employee will not realize any income at the time the
option is granted. Generally, an employee
will realize ordinary income, at the time the option is exercised
in a total amount equal to the excess of the then
market value of the New Common Stock acquired over the exercise
price. However, Section 83 of the Code
provides that, if a director, officer or principal stockholder
(i.e., an owner of more than 10 percent of the
outstanding shares of New Common Stock) receives shares pursuant
to the exercise of a non-qualified stock
option, he or she is not required to recognize any income until
the date on which such shares can be sold at a
profit without liability under Section 16(b) of the Exchange Act.
At such time, the director, officer or principal stockholder will realize income equal to the amount by which the then fair market value of the shares acquired pursuant to the exercise of such option exceeds the price paid for such shares. Alternatively, a director, officer or principal stockholder who would not otherwise be taxed at the time the shares are transferred may file a written election within 30 days with the Internal Revenue Service, to be taxed as of the date of transfer, on the difference between the then fair market value of the shares and the price paid for such shares.
All income realized upon the exercise of a
non-qualified stock option will be taxed as ordinary income.
The Company will be entitled to a tax deduction (as compensation)
for the amount taxable to an employee
(including a director, officer and principal stockholder) upon
the exercise of a non-qualified stock option, as
described above, in the same year as those amounts are taxable to
the employee.
Shares of New Common Stock issued pursuant to the
exercise of a non-qualified stock option generally
will constitute a capital asset in the hands of an employee
(including a director, officer or principal stockholder)
and will be eligible for capital gain or loss treatment upon any
subsequent disposition. The holding period of
an employee (including a director, officer or principal
stockholder) will commence upon the date he or she
recognizes income with respect to the issuance of such shares, as
described above. The employee's basis in the
shares will be equal to the greater of their fair market value as
of that date or the amount paid for such shares.
If, however, an employee uses shares of New Common Stock which he
or she owns to pay, in whole or in part,
the exercise price for shares acquired pursuant to the exercise
of a non-qualified stock option, (a) the holding
period for the newly issued shares of New Common Stock equal in
value to the old shares which were
surrendered upon the exercise shall include the period during
which the old shares were held, (b) the employee's
basis in such newly issued shares will be the same as his or her
basis in the surrendered shares, (c) no gain or
loss will be realized by the employee on the old shares
surrendered, and (d) the employee will realize ordinary
income in an amount equal to the fair market value of the
additional number of shares received over and above
the number of old shares surrendered (the "Additional Shares")
and the employee's basis in the Additional
Shares will be equal to such fair market value.
In addition to the Federal income tax consequences discussed above, Section 280G of the Code provides that if an officer, stockholder or highly compensated individual receives a payment which is in the nature of compensation and which is contingent upon a change in control of the employer, and such payment equals or exceeds three times his or her "base salary" (as hereinafter defined), then any amount received in excess of base salary shall be considered an "excess parachute payment." An individual's "base salary" is equal to his or her average annual compensation over the five-year period (or period of employment, if shorter) ending with the close of the individual's taxable year immediately preceding the taxable year in which the change in control occurs. If the taxpayer establishes, by clear and convincing evidence, that an amount received is reasonable compensation for past or future services, all or a portion of such amount may be deemed not to be an excess parachute payment. If any payments made under the 1994 Plan in connection with a change in control of the Company constitute excess parachute payments with respect to any employee, then in addition to any income tax which would otherwise be owed on such payment, the individual will be subject to an excise tax equal to 20% of such excess parachute payment and the Company will not be entitled to any tax deduction to which it otherwise would have been entitled with respect to such excess parachute payment.
Section 280G provides that payments made pursuant to a
contract entered into within one year of the
change in control are presumed to be parachute payments unless
the individual establishes, by clear and
convincing evidence, that such contract was not entered into in
contemplation of a change in control. In
addition, the General Explanation of the Tax Reform Act of 1984
prepared by the Staff of the Joint Committee
on Taxation indicates that the grant of an option within one year
of the change in control or the acceleration
of an option because of a change in control may be considered a
parachute payment in an amount equal to the
value of the option or the value of the accelerated portion of
the option as the case may be. Pursuant to
proposed regulations issued by the Treasury Department under
Section 280G, the acceleration of a non-qualified
stock option because of a change in control is considered a
parachute payment in an amount equal to the value
of the accelerated portion of the option. Even if the grant of
an option within one year of the change in control
or the acceleration of an option is not a parachute payment for
purposes of Section 280G, the exercise of an
option within one year of the change in control or the exercise
of the accelerated portion of an option may result
in a parachute payment, in an amount equal to the excess of the
fair-market value of the shares received upon
exercise of the option over the exercise price. Payments
received for the cancellation of an option because of
a change in control may also result in parachute payments.
The foregoing summary with respect to Federal income taxation does not purport to be complete and reference is made to the applicable provisions of the Code.
Item 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Albert Fried and Kevin C. Toner are directors of the
Company and both have a material interest in
the New Credit Agreements, which provide the Company and certain
of its subsidiaries with working capital
facilities of up to an aggregate of $45.0 million. Albert Fried
is Managing Partner of Albert Fried & Company,
which agreed to loan up to $7.0 million as one of the Lenders
under the New Credit Agreements. Kevin C.
Toner agreed to loan up to $1.0 million as one of the Lenders
under the New Credit Agreements. In addition,
UBS Mortgage Finance Inc., an affiliate of UBS Securities Inc.,
Mr. Toner's former employer, agreed to loan
up to $2.0 million as one of the Lenders under the New Credit
Agreements.
Item 8. LEGAL PROCEEDINGS
Shareholder Litigation
Since August 1992, nineteen class action lawsuits were
filed against EMCOR arising out of the
restatements of earnings, write-offs and losses announced by
EMCOR on August 4, 1992 and October 2, 1992.
The lawsuits named as defendants, among others, EMCOR and certain
of its former officers and directors and
alleged federal securities law and state law violations. On
November 2, 1992, all of those actions were
consolidated for pre-trial purposes before Judge Charles L.
Brieant in the White Plains division of the United
States District Court for the Southern District of New York.
Pursuant to Stipulation and Court Order, on January 15,
1993, a single consolidated amended class
action complaint (the "Complaint") was filed against EMCOR and
Andrew T. Dwyer, a former Chairman of the
Board, President and Chief Executive Officer of EMCOR, Ernest W.
Grendi, a former director, Executive Vice
President and Chief Financial Officer of EMCOR, Joseph E. Grendi,
former Chief Financial Officer of
EMCOR's Mechanical/Electrical Services Group, and four other
former directors of EMCOR, Innis O'Rourke,
Jr., Craig C. Perry, Edmund S. Twining, Jr. and George M. Duff,
Jr., each of whom were members of EMCOR's
Audit Committee for all or part of 1991, and Ernst & Young, which
served as EMCOR's auditor for 1992 and
1991 and several prior years.
The Complaint alleges violations of Section 10(b) of
the Securities and Exchange Act of 1934, Rule
10b-5 promulgated thereunder and common law fraud and deceit on
the part of EMCOR and the other named
defendants. Among other things, EMCOR is alleged to have
intentionally and materially overstated its inventory,
accounts receivable and earnings in various public disseminations
during the purported class period, May 1, 1991
through October 1, 1992. The Complaint seeks an unspecified
amount of damages. On March 30, 1993,
EMCOR filed an answer which denied the material allegations in
the Complaint. In June 1994, the Bankruptcy
Court modified the automatic stay provided by the Bankruptcy Code
with respect to the class action lawsuits
in order to allow discovery of the non-debtor defendants and
limited discovery of EMCOR. Following the entry
of that order, there has been a substantial amount of documentary
and deposition discovery directed to EMCOR
and certain of its present and former employees.
However, the Bankruptcy Court's order dated September
30, 1994, confirming the Plan of
Reorganization, included a discharge of all claims asserted
against EMCOR in the class action lawsuits, and a
permanent injunction against continuing these lawsuits, or any
other proceeding, with respect to the claims
asserted therein. Accordingly, on December 2, 1994, these
actions were dismissed with prejudice as against
EMCOR.
Securities And Exchange Commission Investigation
EMCOR has been informed by the Securities and Exchange
Commission (the "SEC") that it is
conducting a private investigation to determine whether there
have been violations of certain provisions of the
federal securities laws and/or the rules and regulations of the
SEC in connection with EMCOR's financial
records, reports, and public disclosures. EMCOR has been
cooperating with the SEC's staff and has voluntarily
produced documents and information as requested by the staff. On
April 12, 1994, the SEC staff informed
EMCOR of its intention to recommend that the SEC file a civil
injunction action against EMCOR. EMCOR
is currently engaged in discussions with the SEC staff concerning
a possible consensual resolution of the matter.
New York County District Attorney Investigations
In connection with an investigation of the plumbing industry being conducted by the New York County District Attorney's Office, two related subsidiaries of EMCOR engaged in the plumbing business in New York City have received subpoenas for certain of their books and records. The subsidiaries have complied with those subpoenas. Additionally, certain employees of the two subsidiaries have been subpoenaed to testify as witnesses before a grand jury, and the employees have complied with the subpoenas.
As part of an investigation by the District Attorney's Office of New York County into the business affairs of a general contractor that does business with the Company's subsidiary, Forest Electric Corporation ("Forest"), in February 1995, a search warrant was executed at Forest's executive offices. The Company has been informed that Forest and certain of its officers are targets of the investigation. Neither the Company nor Forest has been advised of the precise nature of any suspected violation of law.
Dynalectric Litigation
The Dynalectric Company ("Dynalectric") is a defendant
in an action entitled Computran v.
Dynalectric, et al., pending in Superior Court of New Jersey,
Bergen County, arising out of its participation in
a joint venture. The plaintiff, Computran, a participant in, and
a subcontractor to, the joint venture, alleges that
Dynalectric wrongfully terminated its subcontract, fraudulently
diverted funds due it, misappropriated its trade
secrets and proprietary information, fraudulently induced it to
enter into the joint venture and conspired with
other defendants to commit certain acts in violation of the New
Jersey Racketeering Influence and Corrupt
Organization Act. Dynalectric believes that Computran's claims
are without merit and intends to defend this
matter vigorously. Dynalectric has filed counterclaims against
Computran. Discovery is ongoing; no trial date
is scheduled.
Litigation Regarding Warrants of Participation
On September 26, 1994 certain holders of Warrants of
Participation ("Warrants") that were issued
pursuant to a Warrant Agreement dated June 15, 1969 by the
Company's predecessor, Jamaica Water and
Utilities, Inc. ("JWU"), commenced a declaratory judgment action
against the Company's wholly-owned
subsidiary Jamaica Water Securities Corporation ("JWSC") by
filing a complaint in the Supreme Court of the
State of New York, Westchester County, bearing the caption,
Harold F. Scattergood, Jr., et al. v. Jamaica Water
Securities Corp. (Index No. 15992/94). On October 17, 1994, an
amended complaint (the "Complaint") was served
adding additional plaintiffs.
Plaintiffs seek a declaration that JWSC is the
successor to the Company's obligations under the
Warrant Agreement by reason of its 1977 acquisition of JWU's 96%
stock interest in Jamaica Water Supply
Company. Plaintiffs also claim that three events have triggered
the Warrants, obligating JWSC to issue shares
of its own stock to plaintiffs: (1) the 1988 filing by the City
of New York of a condemnation proceeding and
lis pendens seeking to condemn that part of water distribution
system of Jamaica Water Supply Company located
in Queens County; (2) the prosecution of that condemnation
proceeding, which was subsequently dismissed by
the court; and (3) a 1993 settlement agreement entered into by
JWSC and of Jamaica Water Supply Company
which settled unrelated matters involving the Public Service
Commission, Nassau County and others. Plaintiffs
claim that each of these events constituted a disposition of the
assets of Jamaica Water Supply Company which
triggered the Warrants. In the alternative, plaintiffs claim
that the Warrant Agreement's December 31, 1994
expiration date should be extended for some indefinite period.
The Company has moved to dismiss the
Complaint on the grounds that it fails to state a cause of
action.
Jamaica Water Supply Company
Rate Related Proceedings and Related Litigation.
Effective March 1991, Jamaica Water Supply
Company ("JWS") was authorized by the Public Service Commission
of the State of New York (the "Public
Service Commission") to increase its rates charged to customers
by amounts designed to increase annual
revenues by $3,992,000. At that time the Public Service
Commission made $2,000,000 of that increase temporary
and subject to refund pending a further review by the Public
Service Commission. Upon completion of its review,
in July 1992, the Public Service Commission ordered JWS to refund
to its customers all of the amounts collected
under the temporary portion of the rate increase during the
period from March 1991 through June 1992. In
addition, the Public Service Commission ordered JWS to reduce the
rates charged customers, as initially
authorized effective March 1991, by amounts designed to reduce
annual revenues by $1,400,000 effective July
1, 1992. During the third quarter of 1992, JWS, which had not
recorded as revenue any of the amounts collected
under the temporary portion of the rate increase, made the
required refund, aggregating $2,900,000 including
interest, by way of credits to customers' bills.
In January 1992, the Public Service Commission ordered
its Staff to perform an audit covering all
aspects of JWS's operations. The report on that audit alleged
that mismanagement and imprudence on the part
of JWS may have resulted in excess charges to the customers of up
to $10,600,000. As a result of the audit
report, in June 1992, the Public Service Commission instituted a
proceeding requiring JWS to demonstrate that
its rates charged customers are not excessive and providing for
an investigation of JWS's management practices.
As part of this proceeding, and citing the audit report's
assertions without receiving the audit report in evidence,
the Public Service Commission ordered that $10,600,000 of JWS's
annual revenues be made temporary and
subject to refund, effective August 6, 1992, pending the
completion of the investigation.
Between December 1992 and May 1993, each of JWS, the
Public Service Commission Staff, the New
York State Consumer Protection Board, Waterbill Watchdogs, Inc.,
the County of Nassau, the Town of
Hempstead, the New York City Department of Environmental
Protection and the New York City Water Board
appeared and submitted testimony in the Public Service Commission
proceedings. On June 3, 1993, the Public
Service Commission issued an order suspending hearings and
appointing two administrative law judges for the
purpose of effecting a settlement. Negotiations among the parties
and through the settlement judges were
ongoing from that time.
In addition, in February 1993, the County of Nassau commenced an action alleging violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO") and common law fraud based on allegations that JWS intentionally filed false rate applications and, as a result, had earnings that exceeded projections by $8,653,000. The complaint demanded treble damages and punitive damages.
As a result of the negotiations ordered by the Public Service Commission, all of the foregoing parties entered into a settlement agreement dated December 22, 1993 (the "Settlement Agreement"), which, following approval by the Public Service Commission on February 2, 1994, settled all issues outstanding before the Public Service Commission, various state courts, and in the RICO action.
The Settlement Agreement provides, among
other things, (i) that JWS will use its best efforts to bring
about the separation of Jamaica Water Securities Corp.
("JWSC"), a subsidiary of EMCOR, which holds substantially all of
the common stock of JWS, from EMCOR
and that JWSC will submit plans to the Public Service Commission
for its separation from EMCOR and the
formation of a separate waterworks corporation to be incorporated
under the New York Transportation
Corporations Law to provide water utility service to the Nassau
County customers served by JWS, (ii) a
commitment by JWS that, subject to limited specified exceptions,
it will not seek to have a general rate increase
become effective prior to January 1, 1997, thus providing rate
stability for three years, (iii) for refunds and other
payments to customers estimated to aggregate approximately $11.7
million over the 1994-1997 period, and (iv)
a cap on earnings above which JWS will share with its customers
its return on equity.
New York City Condemnation Proceeding. From time to time representatives of New York City (the "City") and EMCOR met to discuss a possible purchase by the City of that portion of JWS's water distribution system which is located in the City. That system constitutes approximately 75% of JWS's water plant.
In September 1986, the State of New York enacted a law
that requires the City to acquire by
condemnation all of the property of JWS "constituting or relating
to [its] water distribution system located in the
City of New York" only in the event of a decision by the Supreme
Court of the State of New York that the
amount of compensation to be paid JWS for the water distribution
system "shall be determined solely by the
income capitalization method of valuation, based on the actual
net income as allowed (to JWS) by the [New
York State] public service commission." In addition, the law
provides that if any court determines "that a method
of compensation other than the income capitalization method be
utilized, or if the proposed award is more than
the [JWS] rate base of the [condemned] assets . . . as utilized
by the public service commission in setting rates,"
the City may withdraw the condemnation proceeding without
prejudice or costs. As of December 31, 1987, the
rate base of those assets located in the City was approximately
$53,084,000 exclusive of water meters currently
under lease which may be required to be purchased in the event of
condemnation.
In April 1988, the City instituted a proceeding in the
Supreme Court of the State of New York
pursuant to the 1986 statute. The City sought, in the first
instance, an order providing that the income
capitalization method of valuation would be the sole method used
to determine compensation for JWS's
property, and, on that basis, asked the Court to determine the
value of the JWS property to be condemned.
Pursuant to the 1986 law, if the Court were to determine
compensation that exceeds the rate base or were to
determine compensation by a method other than the income
capitalization method, the City could withdraw the
condemnation proceeding. JWS argued, at trial and in its
post-trial memorandum, that the judicially recognized
method of valuing public utility property is by the Reproduction
Cost New, Less Depreciation ("RCNLD") for
tangible and intangible assets in order to determine just
compensation for the JWS property in the City. JWS
also sought consequential and severance damages that would result
from separating the JWS Nassau County
water supply system from that in the City. The aggregate
compensation sought by JWS as of December 31, 1987
was $923,966,341, consisting of $846,625,285 RCNLD, $49,670,056
consequential and severance damages and
$27,671,000 as the fair market value of the land owned by JWS.
The City submitted its income capitalization
valuation, as of December 31, 1987, at $62,500,000. The
evidentiary hearings in the proceedings were concluded
and JWS reserved its right to contest the constitutionality of
the statute.
Subsequent to the trial, the Court requested that the parties address the constitutionality of the statute. After a joint post-hearing submission from JWS and the City contending that the statute was constitutional, the Supreme Court sua sponte, by decision dated June 21, 1993, dismissed the City's petition and held, inter alia, that "insofar as the legislature has directed this Court to make . . . a decision [on valuation only prior to any taking] through General City Law 20(2), that statute is unconstitutional", because such a decision would be advisory. Aware that a constitutional challenge to a nearly identical condemnation statute involving Saratoga County, was pending in the appellate courts, neither JWS nor the City served a notice of entry of the dismissal order that would commence the period within which an appeal could be taken.
On February 24, 1994, the New York Court of Appeals
held the nearly-identical Saratoga County
related statute to be constitutional. On April 6, 1994, a
conference was held with the Supreme Court pursuant
to the City's request to reconsider its JWS decision in light of
the Court of Appeals February 24, 1994 decision.
At the April 6, 1994 conference, the Court stated it would, as
requested by the City, reconsider its June 21, 1993
decision. The Court further stated that in the event it decided
to withdraw its June 21, 1993 decision that it
would then take the proceedings under further consideration.
EMCOR cannot predict the decision of the Supreme Court,
when or if the Supreme Court will
conduct further proceedings under the statute, what the decision
of the Supreme Court might be if it decides
to value the JWS property or the effect of the pending litigation
on the ability to sell or the timing of the sale
of JWS.
Item 9. MARKET PRICE OF AND DIVIDENDS OF THE REGISTRANT'S
COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Market Information
There is no established public trading market at present for the New Common Stock. The Company will apply for inclusion of the New Common Stock in the National Association of Securities Dealers' Automated Quotation System ("NASDAQ").
As of March 6, 1995, 3,231,733 shares of New Common
Stock were issued and outstanding and
6,192,350 shares were held by the Company pending distribution
pursuant to the Plan of Reorganization.
Holders
The number of holders of record of New Common Stock as of March 6, 1995 was approximately 77.
Dividends
The Company did not pay dividends on the prepetition
common stock during 1993 or 1992 and it does
not anticipate that it will pay any dividends on the New Common
Stock in the foreseeable future. The Series
A Notes prohibit the payment of dividends on the New Common Stock
and the Series C Notes provide that
dividends are limited to 50% of Consolidated Net Income (as
defined) for the period from the Effective Date
to the most recently ended fiscal quarter.
Item 10. RECENT SALES OF UNREGISTERED SECURITIES
The New Common Stock, the New Notes and the New Warrants have been issued pursuant to the Plan of Reorganization on the Effective Date in satisfaction of various claims against, or interests in, the Company allowed by the Bankruptcy Court. In reliance on the exemptions provided by section 1145 of the United States Bankruptcy Code, none of such securities were registered under the Securities Act of 1933, as amended (the "Securities Act") in connection with their issuance and distribution pursuant to the Plan of Reorganization.
On March 6, 1992, $60 million principal amount of 9.10%
Senior Notes due 2002 (the "Notes") were
issued by the Company to nine insurance companies. The offering
of Notes was made pursuant to Section 4(2)
of the Securities Act which exempts from registration
transactions not involving a public offering. The following
are the original purchasers of the Notes: The Prudential
Insurance Company, American General Life and
Accident Insurance Company, The Ohio National Life Insurance
Company, Modern Woodmen of America, The
Paul Revere Life Insurance Company, The Paul Revere Protective
Life Insurance Company, The Union Central
Life Insurance Company, The Paul Revere Variable Annuity
Insurance Company, and the Manhattan Life
Insurance Company.
Item 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
Authorized Capital Stock
The Company's Amended and Restated Certificate of Incorporation (the "Charter") provides that the total number of all classes of stock which the Company shall have authority to issue is Thirteen Million Seven Hundred Thousand (13,700,000) shares of New Common Stock, par value $.01 per share. As of March 6, 1995, 3,231,733 shares of New Common Stock had been issued and were outstanding and 6,192,350 shares were held by the Company pending distribution pursuant to the Plan of Reorganization.
New Common Stock
Each share of New Common Stock has one vote and, except
as may be otherwise provided by the
General Corporation Law of the State of Delaware (the "General
Corporation Law"), the exclusive voting power
for all purposes is fixed in the holders of the New Common Stock.
The holders of record of the New Common
Stock are entitled to receive, when, if and as declared by the
Board of Directors, but only out of funds legally
available for the payment of dividends, such dividends of cash or
in property, including securities of the
Company, as the Board of Directors shall from time to time
declare. In the event of any liquidation, dissolution
or winding up of the Company, whether voluntary or involuntary,
after payment or provision for payment of the
debts and other liabilities of the Company, the holders of the
New Common Stock would be entitled to share
ratably (i.e., an equal amount of assets for each share of New
Common Stock) in the remaining assets of the
Company.
Subject to the provisions of the General Corporation Law, the Company may issue its New Common Stock from time to time for such consideration (not less than the par value thereof) as may be fixed by the Board of Directors, which is expressly authorized to fix the same at its discretion. Shares so issued for which the consideration has been paid or delivered to the Company shall be deemed fully paid stock and shall not be liable to any further call or assessment thereon, and the holders of such shares shall not be liable for any further payments in respect of such shares. Notwithstanding anything to the contrary set forth in the Charter, the Company shall not issue any non-voting equity securities; provided, however, that this provision, included in the Charter in compliance with Section 1123(a)(6) of the Bankruptcy Code, shall have no force and effect beyond that required by Section 1123(a)(6) of the Bankruptcy Code and shall be effective only for so long as Section 1123(a)(6) of the Bankruptcy Code is in effect and applicable to the Company.
Whenever a compromise or arrangement is proposed
between the Company and its creditors or any
class of them and/or between the Company and its stockholders or
any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application
in a summary way of the Company or any
creditor or stockholder thereof or on the application of any
receiver or receivers appointed for the Company
under the provisions of Section 291 of Title 8 of the Delaware
Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for the
Company under the provisions of Section 279 of
Title 8 of the Delaware Code, order a meeting of the creditors or
class of creditors, and/or of the stockholders
or class of stockholders, of the Company, as the case may be, to
be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in
value of the creditors or class of creditors, and/or
of the stockholders or class of stockholders, of the Company, as
the case may be, agree to any compromise or
arrangement and to any reorganization of the Company as a
consequence of such compromise or arrangement,
the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the
said application has been made, be binding on all the creditors
or class of creditors, and/or on all the
stockholders or class of stockholders, of the Company, as the
case may be, and also on the Company.
Certain Corporate Governance Matters
Except as the General Corporation Law or the By-Laws of
the Company may otherwise provide, the
holders of a majority of the outstanding shares of stock entitled
to vote shall constitute a quorum at a meeting
of stockholders for the transaction of any business. The
stockholders present may adjourn the meeting despite
the absence of a quorum. When a quorum is once present to
organize a meeting, it is not broken by the
subsequent withdrawal of any stockholders.
Each stockholder entitled to vote in accordance with
the terms of the Charter and By-laws shall be
entitled to one vote, in person or by proxy, for each share of
stock entitled to vote held by such stockholder.
In the election of Directors, a plurality of the votes present at
the meeting shall elect. Election of Directors
need not be by written ballot, unless the By-Laws of the Company
so provide. Any other action shall be
authorized by a majority of the votes cast except where the
Charter or the General Corporation Law prescribes
a different percentage of votes and/or a different exercise of
voting power. Action shall be taken by stockholders
of the Company only at a duly called annual or special meeting of
stockholders of the Company and stockholders
may not act by written consent. Voting by ballot shall not be
required for corporate action except as otherwise
provided by the General Corporation Law.
In furtherance and not in limitation of the powers conferred under the General Corporation Law, the Board of Directors of the Company is expressly authorized to make, alter or repeal By-Laws not inconsistent with law or with the Charter.
Item 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Charter provides that the personal
liability of directors of the Company to the
Company is eliminated to the fullest extent permitted by Section
102(b)(7) of the General Corporation Law, as
the same may be amended and supplemented. The Company's Charter
provides for the indemnification of, to
the fullest extent permitted by the General Corporation Law, all
persons who may be indemnified by the
Company under the General Corporation Law, which would include
the directors, officers, employees and agents
of the Company. The indemnification provided by the Company's
Charter does not limit or exclude any rights,
indemnities or limitations of liability to which any person may
be entitled, whether as a matter of law, under the
By-Laws of the Company, by agreement, vote of the stockholders or
disinterested directors of the Company or
otherwise. The Company's Charter also does not absolve directors
of liability (1) for any breach of the directors'
duty of loyalty to the Company or its stockholders, (2) for acts
or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) under
Section 174 of the General Corporation Law,
which makes directors personally liable for unlawful dividends or
unlawful stock repurchases or redemptions in
certain circumstances and expressly sets forth a negligence
standard with respect to such liability, or (4) for any
transaction from which the director derived any improper personal
benefit.
Under Delaware law, directors, officers, employees and other individuals may be indemnified against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement in connection with specified actions, suits or proceedings, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation (a "derivative action")) if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. A similar standard of care is applicable in the case of a derivative action, except that indemnification only extends to expenses (including attorneys' fees) incurred in connection with defense or settlement of such an action and Delaware law requires court approval before there can be any indemnification of expenses where the person seeking indemnification has been found liable to the Company.
Item 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See "Item 15. Financial Statements and Exhibits" and the Consolidated Financial Statements which begin on page F-1.
Item 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Item 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
See Index to Consolidated Financial Statements and Schedules which appears on page F-1 hereof.
(b) Exhibits
The exhibits listed on the Exhibit Index following page S-III-5 hereof are filed herewith in response to this Item.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 17, 1995
EMCOR GROUP, INC.
By:/s/ Frank T. MacInnis
Name: Frank T. MacInnis
Title: Chairman of the Board,
President and Chief Executive Officer
|
EMCOR GROUP, INC. AND SUBSIDIARIES
(formerly JWP INC. and Subsidiaries)
Index to Consolidated Financial Statements and Schedules
Page No.
Financial Statements:
Independent Auditors' Report . . . . . . . . F-2
Consolidated Balance Sheets as of September 30, 1994 and December 31, 1993 and 1992. . . . . . . . . . . .F-4
Consolidated Statements of Operations for the Nine Months
Ended September 30, 1994 and 1993 and
the Years Ended December 31, 1993, 1992 and 1991. .F-6
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1994 and 1993 and the Years Ended December 31, 1993, 1992 and 1991. . . . . . F-8
Consolidated Statements of Shareholders' (Deficit) Equity as of September 30, 1994 and December 31, 1993, 1992, 1991
and 1990. . . . . . . . . . . . . . . . . . . . . F-10 Notes to Consolidated Financial Statements. . . . F-11 Schedules: Schedule III - Condensed Financial Information of EMCOR Group, Inc.. . . . . . . . . . . . . . . . . S-III-1 |
Schedule VIII - Valuation and Qualifying Accounts S-III-5
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and
Shareholders of EMCOR Group, Inc.
We have audited the accompanying Consolidated Balance Sheets of
EMCOR Group, Inc. (formerly JWP INC.)
and its subsidiaries (the "Company") as of September 30, 1994 and
December 31, 1993, and the related
Consolidated Statements of Operations, Shareholders' (Deficit)
Equity and Cash Flows for the periods then
ended. Our audits also included the financial statement
schedules for the period then ended September 30,
1994, listed in the Index at Item 15(a). These financial
statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility
is to report on these financial statements and
financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require
that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our report dated July 8, 1994, we did not express an opinion
on the 1993 consolidated financial statements
due to the material uncertainties related to the Company's
ability to continue as a going concern because the
Company had experienced significant losses from operations for
each of the years ended December 31, 1993 and
1992, had negative working capital and a deficit in shareholders'
equity and because of the possible material
effects of uncertainties related to the net realizable value
of assets of discontinued operations, claims filed
against the Company, and the possible consequences of the
bankruptcy proceedings. As discussed in Note A
to the consolidated financial statements, during December 1994
the Company emerged from Chapter 11 of the
Federal Bankruptcy Code. The emergence from bankruptcy resulted
in a significant reduction in debt, the
obtaining of a new credit agreement and the valuing of the
Company at its new reorganization value resulted
in positive shareholders' equity versus a pre-emergence deficit
of $324.0 million. Accordingly, our present
opinion on the 1993 consolidated financial statements, as
expressed herein, is different from our prior report
on the 1993 consolidated financial statements.
As further discussed in Note A to the consolidated financial statements, the Company's Plan of Reorganization was confirmed by the U.S. Bankruptcy Court on September 30, 1994.
The Company will account for the
reorganization in accordance with the American Institute of
Certified Public Accountants Statement of Position
90-7 "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code." The consolidated
financial statements subsequent to the emergence from Chapter 11
will be prepared using a different basis of
accounting and, therefore, will not be comparable to the
pre-emergence consolidated financial statements. As
disclosed in Note A to the consolidated financial statements, the
Company's assets and liabilities as of September
30, 1994, will be restated by management, with the assistance of
its financial advisors, to their reorganized value,
which will approximate their fair value at the date of
reorganization. The Company consummated its Plan of
Reorganization and emerged from under Chapter 11 of the Federal
Bankruptcy Code in December 1994.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 1994 and December 31, 1993, and the results of its operations and its cash flows for the periods then ended in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth herein.
As more fully described in Note T to the consolidated financial statements, the Company is involved with certain legal proceedings. The Company is presently unable to predict the outcome of these proceedings, and the impact, if any, that the ultimate resolution of such matters will have upon the Company and its consolidated financial statements.
As discussed in Note U to the consolidated financial statements, the Company changed its method of accounting for post-employment benefits effective January 1, 1994.
Deloitte & Touche LLP
New York, New York
December 21, 1994
EMCOR Group, Inc. and Subsidiaries
(formerly JWP INC. and Subsidiaries)
Consolidated Balance Sheets
(In thousands)
September 30, December 31, December 31,
1994 1993 1992
ASSETS
Current Assets
Cash and cash equivalents $ 39,699 $ 39,534 $ 86,836
Accounts receivable,
less allowance for doubtful
accounts of $28,833,
$31,170 and $42,630 460,059 455,944 458,273
Costs and estimated
earnings in excess of billings on
uncompleted contracts 73,482 61,987 67,817
Inventories 7,571 5,221 6,618
Prepaid expenses and other 9,170 13,240 9,746
Net assets held for sale 75,593 20,454 32,894
Total Current Assets 665,574 596,380 662,184
Net assets held for sale - 63,161 85,611
Investments, notes and
other long-term receivables 12,504 19,737 22,440
Property, plant and equipment, net 36,262 39,266 51,087
Other Assets
Excess of cost of acquired
businesses over net assets,
less amortization 57,820 58,973 61,542
Insurance cash collateral 33,960 21,394 7,733
Funds held in escrow 17,221 335 -
Miscellaneous 5,861 7,196 16,987
114,862 87,898 86,262
Total Assets $829,202 $806,442 $907,584
|
The accompanying notes to the consolidated financial statements are an integral part of these statements.
EMCOR Group, Inc. and Subsidiaries
(formerly JWP INC. and Subsidiaries)
Consolidated Balance Sheets
(In thousands)
September 30, December 31, December 31,
1994 1993 1992
LIABILITIES AND SHAREHOLDERS' (DEFICIT)
Current Liabilities
Notes payable $ 7,652 $ 172 $ 6,452
Debtor-in-possession note payable 25,000 - -
Current maturities of long-term debt
and capital lease obligations 2,420 2,327 2,634
Debt in default - 501,007 501,007
Accounts payable 203,943 209,867 224,840
Billings in excess of costs and
estimated earnings on uncompleted contracts 127,541 115,179 125,764
Accrued payroll and benefits 37,589 37,939 45,665
Other accrued expenses and liabilities 89,137 182,213 120,733
Total Current Liabilities 493,282 1,048,704 1,027,095
Long-term debt 2,362 2,538 4,111
Other long-term obligations 34,636 57,462 52,357
Pre-consent date bankruptcy claims subject to
compromise 622,859 - -
Shareholders' (Deficit) Equity
Preferred Stock, $1 par value, 25,000,000 shares
authorized, 418,100 shares in 1994
and 425,000 shares in 1993 and 1992
of Series A issued and outstanding 20,905 21,250 21,250
Common Stock, $.10 par value, 75,000,000 shares
authorized, 40,732,791, 40,715,541 and 40,754,051
shares issued and outstanding, excluding treasury
shares of 727,389 in 1994 and 1993 and 591,775 in
1992 4,073 4,072 4,075
Warrants of Participation 576 576 576
Capital surplus 204,591 204,247 203,505
Cumulative translation adjustment (5,733) (6,068) (3,930)
(Deficit) (548,349) (526,339) (401,455)
Total Shareholders' (Deficit) (323,937) (302,262) (175,979)
Total Liabilities and Shareholders' (Deficit) $ 829,202 $ 806,442 $ 907,584
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The accompanying notes to the consolidated financial statements are an integral part of these statements.
EMCOR Group, Inc. and Subsidiaries
(formerly JWP INC. and Subsidiaries)
Consolidated Statements of Operations
(In thousands, except per share data)
Nine Months Ended
September 30,
1994 1993
(Unaudited)
Revenues $1,313,450 $1,713,596
Costs and Expenses
Cost of sales 1,192,330 1,567,321
Selling, general and administrative 133,758 161,769
Restructuring charges - -
Reorganization charges 10,100 -
1,336,188 1,729,090
Operating Loss (22,738) (15,494)
Interest expense (2,172) (38,302)
Interest income 988 544
Net (loss) gain on businesses
sold or held for sale (532) 2,614
Loss on investment (4,092) -
Loss From Continuing Operations Before Income Taxes
and Cumulative Effect of Accounting Changes (28,546) (50,638)
Provision (benefit) for income taxes 750 (192)
Loss From Continuing Operations Before
Cumulative Effect of Accounting Changes (29,296) (50,446)
Discontinued Operations
Income from operations, net of income taxes 9,386 7,585
Loss from disposal of businesses, net of income taxes - (7,634)
Income (loss) from discontinued operations 9,386 (49)
Cumulative Effect of Change in Method of
Accounting For:
-Income Taxes - -
-Post-employment Benefits - (2,100)
Net Loss $ (22,010) $ (50,495)
(Loss) Income Per Share
Continuing operations $ (0.72) $ (1.27)
Discontinued operations
Income from operations 0.23 0.19
Loss from disposal of businesses - (0.19)
Income from discontinued operations 0.23 -
Cumulative effect of change in method
of accounting for:
-Income taxes - -
-Post-employment benefits - (0.05)
Net loss $ (0.54) $ (1.27)
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The accompanying notes to the consolidated financial statements are an integral part of these statements.
EMCOR Group, Inc. and Subsidiaries
(formerly JWP INC. and Subsidiaries)
Consolidated Statements of Operations
(In thousands, except per share data)
Year Ended December 31,
1993 1992 1991
Revenues $2,194,735 $2,404,577 $2,318,112
Costs and Expenses
Cost of sales 2,043,558 2,160,723 1,973,561
Selling, general and administrative 216,709 440,725 286,900
Restructuring charges - 38,741 -
Reorganization charges - - -
2,260,267 2,640,189 2,260,461
Operating (Loss) Income (65,532) (235,612) 57,651
Interest expense (51,075) (45,894) (46,240)
Interest income 888 1,713 2,348
Net gain (loss) on
businesses sold or held
for sale 1,028 (76,078) (6,628)
(Loss) Income From Continuing Operations
Before Income Taxes and Cumulative Effect
of Accounting Changes (114,691) (355,871) 7,131
(Benefit) provision for income taxes (700) 7,644 2,419
(Loss) Income From Continuing Operations Before
Cumulative Effect of Accounting Changes (113,991) (363,515) 4,712
Discontinued Operations
Income (loss) from operations, net of income
taxes 11,263 (203,739) 24,263
Loss from disposal of businesses,
net of income taxes (20,350) (49,491) -
(Loss) income from discontinued operations (9,087) (253,230) 24,263
Cumulative Effect of Change in Method of Accounting
For:
-Income Taxes - 4,315 -
-Post-employment Benefits - - -
Net (Loss) Income $(123,078) $ (612,430) $ 28,975
(Loss) Income Per Share
Continuing operations $ (2.84) $ (9.00) $ 0.10
Discontinued operations
Income (loss) from operations 0.28 (5.02) 0.63
Loss from disposal of businesses (0.50) (1.22) -
(Loss) income from discontinued operations (0.22) (6.24) 0.63
Cumulative effect of change in method of
accounting for: 0.11 -
-Income taxes - - -
-Post-employment benefits -
Net (loss) income $ (3.06) $ (15.13) $ 0.73
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The accompanying notes to the consolidated financial statements are an integral part of these statements.
EMCOR Group, Inc and Subsidiaries
(formerly JWP INC. and Subsidiaries)
Consolidated Statements of Cash Flows
(In thousands)
Nine Months Ended
September 30,
1994 1993
(Unaudited)
Net Loss $(22,010) $(50,495)
Adjustments to Reconcile Net Loss
to Net Cash (Used in) Provided by Operating
Activities
Depreciation and amortization 12,311 29,699
Reorganization charges 10,100 -
Net loss (gain) from businesses
sold or held for sale 532 (2,614)
Provision for losses on accounts
and other receivables - -
Write-down of investment 4,092 -
Stock compensation - 212
Deferred income taxes 7,704 -
Loss from disposal of discontinued operations - 7,634
Cumulative effect of accounting change
for post-employment benefits 2,100 -
Other, net (359) (42)
14,470 (15,606)
Change in Operating Assets and
Liabilities Excluding Effect of Businesses Disposed
of and Acquired
Decrease in accounts receivable 12,177 26,563
(Increase) decrease in inventories
and contracts in progress (2,876) 32,636
(Decrease) in accounts payable and accrued expenses(33,633) (99,616)
Changes in other assets and liabilities (27,088) (1,565)
Net Cash Used in Operations (36,950) (57,588)
Cash Flows From Financing Activities
Proceeds from long-term debt - 710
Proceeds from debtor-in-possession financing 25,000 -
Cash deposited in trust account for funding of
post-bankruptcy debt (7,501) -
Payments of long-term debt
and capital lease obligations (956) (5,534)
Redemption of preferred stock of subsidiary company - (500)
Decrease (increase) in notes payable, net 7,220 (17,479)
All other - (52)
Net Cash Provided By (Used in) Financing Activities 23,763 (22,855)
Cash Flows From Investing Activities
Proceeds from sale of businesses and other assets 4,458 40,834
Purchase of property, plant and equipment (3,056) (13,974)
Net disbursements for other investments (2,422) -
Cash balance of businesses held for sale or sold 8,597 (3,127)
Other, net 5,775 -
Net Cash Provided by Investing Activities 13,352 23,733
Increase (Decrease) in Cash and Cash Equivalents 165 (56,710)
Cash and Cash Equivalents at Beginning of Period 39,534 86,836
Cash and Cash Equivalents at End of Period $39,699 $30,126
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The accompanying notes to the consolidated financial statements are an integral part of these statements.
EMCOR Group, Inc and Subsidiaries
(formerly JWP INC. and Subsidiaries)
Consolidated Statements of Cash Flows
(In thousands)
Year Ended December 31,
1993 1992 1991
Net (Loss) Income $(123,078) $(612,430) $28,975
Adjustments to Reconcile Net
(Loss) Income to Net Cash (Used
in) Provided by Operations
Depreciation and amortization 35,246 68,993 49,072
Restructuring charges applicable
to continuing operations - 38,741 -
Restructuring charges applicable
to discontinued operations - 25,950 -
Net (gain) loss from
businesses sold or held for sale (1,028) 76,078 6,628
Provision for losses on accounts
and other receivables 13,663 113,903 16,241
Inventory valuation adjustments - 59,787 5,300
Write-off of deferred debt issuance cost - 2,876 -
Write-off of fixed assets
and miscellaneous assets - 11,167 8,200
Write-off of goodwill
and other intangibles - 54,873 -
Stock compensation 727 9,518 3,808
Deferred income taxes 4,138 7,137 13,418
Loss from disposal of
discontinued operations 20,350 49,491 -
Equity and other losses
in unconsolidated affiliate - 5,690 -
Cumulative effect of
accounting change for income taxes - (4,315) -
Other, net 2,411 21,112 10,829
(47,571) (71,429) 142,471
Change in Operating
Assets and Liabilities Excluding
Effect of Businesses
Disposed of and Acquired
Decrease (increase) in
accounts receivable 41,286 73,379 (119,774)
Decrease (increase) in
inventories and contracts in progress 35,292 123,884 (41,309)
(Decrease) increase in accounts
payable and accrued expenses (73,563) (190,752) 114,595
Changes in other assets and liabilities 17 15,335 6,490
Net Cash (Used in) Provided
by Operations (44,539) (49,583) 102,473
Cash Flows from Financing Activities
Proceeds from long-term debt 710 85,302 47,660
Payments of long-term debt and
capital lease obligations (6,027) (68,514) (78,710)
Payments of Businessland 10-1/4%
Senior Notes - - (18,750)
Proceeds from issuance of common
stock and exercise of stock options - 1,911 2,169
Payment of preferred dividends - (1,354) (711)
Redemption of preferred stock of
subsidiary company (500) - -
Acquisition of common stock for
the treasury - (8,130) (7,877)
(Decrease) increase in notes
payable, net (19,269) 30,258 89,544
Net Cash (Used in) Provided by
Financing Activities (25,086) 39,473 33,325
Cash Flows from Investing Activities
Proceeds from sale of businesses and
other assets 43,400 138,971 10,066
Acquisitions of businesses, net of
cash acquired - (15,899) (62,600)
Purchase of property, plant and equipment (17,329) (36,411) (56,000)
Purchase of environmental facilities - (32,044) -
Net disbursements for other investments - (9,695) (4,779)
Cash balance of businesses held for
sale or sold (3,748) (26,241) -
Other, net - 1,672 (2,619)
Net Cash Provided by (Used in) Investing
Activities 22,323 20,353 (115,932)
(Decrease) Increase in Cash and Cash
Equivalents (47,302) 10,243 19,866
Cash and Cash Equivalents at Beginning
of Year 86,836 76,593 56,727
Cash and Cash Equivalents at End of Year $ 39,534 $ 86,836 $ 76,593
|
The accompanying notes to the consolidated financial statements are an integral part of these statements.
EMCOR Group, Inc. and Subsidiaries
(formerly JWP INC. and Subsidiaries)
Consolidated Statements of Shareholders' (Deficit) Equity
(In thousands)
Cumulative Retained Shareholders'
Preferred Common Warrants of Capital Translation Earnings Equity
Stock Stock Participation Surplus Adjustments (Deficit) (Deficit)
----------------------------------------------------------------------------------------------
Balance December 31, 1990 $ - $ 3,797 $ 576 $ 178,786 $ 2,836 $ 184,518 $ 370,513
Common stock issued in
connection with acquisitions - 190 - 29,048 - - 29,238
Preferred stock issued in
exchange for Businessland's
10-1/4% senior notes 21,250 - - - - - 21,250
Foreign currency translation
adjustment - - - - 1,971 - 1,971
Preferred stock dividends - - - - - (711) (711)
Other, net - 31 - 4,869 - - 4,900
Net income - - - - - 28,975 28,975
----------------------------------------------------------------------------------------------
Balance December 31, 1991 21,250 4,018 576 212,703 4,807 212,782 456,136
Common stock issued in
connection with acquisitions - 10 - 739 - - 749
Exercise of stock options - 14 - 1,897 - - 1,911
Acquisition of common stock
for the treasury - (57) - (8,073) - - (8,130)
Guaranteed future value of
stock issued to acquire
businesses - - - (12,308) - - (12,308)
Deferred compensation and
officer bonus - 55 - 9,463 - - 9,518
Foreign currency translation
adjustment - - - - (8,737) - (8,737)
Preferred stock dividends - - - - - (1,807) (1,807)
Other, net - 35 - (916) - - (881)
Net loss - - - - - (612,430) (612,430)
----------------------------------------------------------------------------------------------
Balance December 31, 1992 21,250 4,075 576 203,505 (3,930) (401,455) (175,979)
Deferred Compensation - 9 - 718 - - 727
Foreign currency translation
adjustment - - - - (2,138) - (2,138)
Preferred stock dividends - - - - - (1,806) (1,806)
Other, net - (12) - 24 - - 12
Net loss - - - - - (123,078) (123,078)
----------------------------------------------------------------------------------------------
Balance December 31, 1993 21,250 4,072 576 204,247 (6,068) (526,339) (302,262)
Foreign currency translation
adjustment - - - - 335 - 335
Exchange of preferred stock
for common stock (345) 1 - 344 - - -
Net loss - - - - - (22,010) (22,010)
----------------------------------------------------------------------------------------------
Balance September 30, 1994 $20,905 $ 4,073 $ 576 $ 204,591 $ (5,733) $(548,349) $ (323,937)
==============================================================================================
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The accompanying notes to the consolidated financial statements are an integral part of these statements.
EMCOR Group, Inc. and Subsidiaries
(formerly JWP INC. and Subsidiaries)
Notes to Consolidated Financial Statements
NOTE A Basis of Presentation
JWP INC. emerged from Chapter 11 of the United States Bankruptcy Code on December 15, 1994 (the "Effective Date") and changed its name to EMCOR Group, Inc. ("EMCOR" or the "Company"). The Company reorganized pursuant to its Third Amended Joint Plan of Reorganization dated August 9, 1994, as amended and proposed by the Company and its subsidiary SellCo Corporation (the "Plan of Reorganization"). Under the Plan of Reorganization, prepetition creditors of the Company (other than holders of subordinated debt) received certain notes of EMCOR and its subsidiary SellCo Corporation ("SellCo") and substantially all of the common stock of EMCOR. The prepetition holders of the Company's subordinated debt, common and preferred stock and warrants of participation received warrants to purchase common stock of EMCOR in exchange for their debt and equity interests.
Pursuant to the Plan of Reorganization, on the Effective Date
EMCOR issued or reserved for issuance to prepetition creditors
of EMCOR (other than holders of EMCOR's subordinated debentures
and notes) in exchange for approximately $525.7 million of
EMCOR senior bank and institutional indebtedness and
substantially all other general unsecured claims, both allowed
and disputed, against the Company, and to Belmont Capital
Partners II, L.P. ("Belmont"), which provided a debtor-in-
possession credit facility to the Company, the following
securities: (i) 9,424,083 shares of newly authorized common
stock of the Company ("New Common Stock") (constituting 100% of
the issued and outstanding shares as of the Effective Date);
(ii) approximately $62.2 million principal amount of 7% Senior
Secured Notes, Series A, due 1997 of the Company ("Series A
Notes") issued on the Effective Date and up to a maximum of
$8.8 million additional principal amount of Series A Notes
which are reserved for issuance to holders of general unsecured
claims and to Belmont upon resolution of disputed and
unliquidated prepetition general unsecured claims (assuming
such claims are ultimately allowed in full); (iii)
approximately $11.9 million principal amount of 7% Senior
Secured Notes, Series B, due 1997 ("Series B Notes"); (iv)
approximately $62.8 million principal amount of 11% Notes,
Series C, due 2001 of the Company ("Series C Notes"); and (v)
approximately $48.1 million principal amount of 12%
Subordinated Contingent Payment Notes due 2004 of SellCo (the
"SellCo Notes"). The entire $11.9 million principal amount of
Series B Notes and approximately $4.1 million principal amount
of the Series A Notes issued on the Effective Date were
immediately redeemed on that date at their face amount in
accordance with their terms from the proceeds realized from the
sale and liquidation of certain subsidiaries, the stock of
which would have been pledged as part of the collateral
securing the Series B Notes had such subsidiaries not been sold
(and an additional $600,000 of such proceeds was reserved for
redemption of certain of the Series A Notes reserved for
disputed and unliquidated claims). The Plan of Reorganization
is discussed in detail under "The Restructuring and Chapter 11
Proceeding" in Item 1 of the accompanying Registration
Statement on Form 10.
From February 14, 1994 to the Effective Date, the Company was a debtor-in-possession under Chapter 11 of the U.S. Bankruptcy Code. The accompanying Consolidated Financial Statements were prepared on the basis of the principles prescribed by the American Institute of Certified Public Accountants' Statement of Position 90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code." As a result, the liabilities compromised in the bankruptcy proceeding were reclassified to the caption "Pre-consent date bankruptcy claims subject to compromise" in the accompanying Consolidated Balance Sheets. During the Chapter 11 proceeding, the Company expensed the various legal and other professional fees incurred. These fees are reflected in the accompanying Consolidated Statements of Operations for the nine months ended September 30, 1994, under the caption "Reorganization charges." As of December 21, 1993, the Company ceased to accrue interest on its debt in default. See Note C for further discussion of the debt in default.
Prior to the commencement and during the continuation of the Company's Chapter 11 proceeding, the Company experienced significant constraints in its surety bonding lines that adversely affected its operations. The surety bonding companies that provide bid and performance bonds for the Company reviewed and continue to review bond requests on a case-by-case basis. The Company's surety bonding companies have become more selective in issuing surety bonds for large construction projects, typically in excess of $10.0 million, and those with a duration of more than three years. The Company's surety bonding companies will generally not bond new projects for the Company's businesses held for sale.
In addition, a surety bonding company that was a primary source of surety bonds for the Dynalectric Companies terminated its surety business as of January 1994. As a result, these subsidiaries were without any surety bonding facilities for most of 1994. In November 1994 the Company entered into an arrangement with a new surety bonding company to provide surety bonds for those subsidiaries that had been without bonding facilities since January 1994. These subsidiaries accounted for approximately 23% of the Company's revenues for the nine months ended September 30, 1994 attributable to mechanical and electrical subsidiaries EMCOR plans to retain. The absence of available surety bonding for these subsidiaries resulted in a significant reduction in their backlog. The new surety bonding arrangement should allow these subsidiaries to obtain new contracts thereby increasing backlog.
During the third quarter of 1994, the Company wrote down its investment in Health Care International Ltd. ("HCI"), a Scottish hospital, due to its deteriorating financial condition. HCI was placed in receivership in November, 1994.
Effective January 1, 1994, the Company adopted the provisions of Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Post-employment Benefits" (SFAS 112). See Note U.
In April 1992, the Company announced its intention to sell its water supply business. However, in July 1993, the Company's Board of Directors decided not to proceed with the sale due to uncertainties created by the then pending rate-related proceedings and litigation which are described in Note T. In December 1993, the Company's principal water supply subsidiary, Jamaica Water Supply Company ("JWS"), entered into an agreement with respect to the rate-related proceedings and litigation thereby eliminating significant uncertainties relating to the water supply business. This agreement was approved by the New York State Public Service Commission on February 2, 1994. Accordingly, in the first quarter of 1994 the Company reinstated its plan of sale. In 1993, the Company sold substantially all of its information services businesses. Operating results for all periods presented reflect the Company's information services and water supply businesses as discontinued operations (see Note L).
As indicated above and in Notes M and L, the Company has developed and implemented a business restructuring plan which presently includes the sale of its water supply business, certain mechanical services business units and non-core businesses. The net assets of businesses to be sold have been classified in the Consolidated Balance Sheets as of September 30, 1994 and December 31, 1993 and 1992 as "Net assets held for sale" and carried as either current or long-term assets on the basis of their actual or expected disposition dates.
Certain reclassifications have been made to the prior year's Consolidated Financial Statements to conform to current year presentation.
The results of operations for the nine months ended September 30, 1994 are not necessarily indicative of the results to be expected for the year ended December 31, 1994.
NOTE B Summary of Significant Accounting Policies
Principles of Consolidation
The Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. Significant intercompany accounts and transactions have been eliminated.
Revenue Recognition
Revenues on long-term contracts are recognized on the percentage-of-completion method. Percentage-of-completion for the mechanical contracting business is measured principally by the percentage of costs incurred and accrued to date for each contract to the estimated total costs for each contract at completion ("cost to cost"). Certain of the Company's electrical contracting business units measure percentage of completion by the percentage of labor costs incurred and accrued to date for each contract to the estimated total labor costs for such contract, while others are on the cost to cost method. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in contract performance and estimated profitability, including those arising from contract penalty provisions and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined.
Accounts receivable at September 30, 1994 and December 31, 1993 and 1992 include $78.0 million, $90.4 million and $85.2 million, respectively, of retainage billed under the terms of the contracts. In accordance with industry practice, certain of these receivables relate to contracts having production cycles longer than one year and, therefore, a portion will not be realized within the year. Disputes involving customers often arise in the normal course of the Company's business, primarily on projects where the Company is a subcontractor and is contesting with general contractors, owners or both for additional funds because of events such as delays or changes in contract specifications. Such disputes, whether for claims or for unapproved change orders in process of negotiation, are recorded at their estimated net realizable value only when realization is probable and can be reasonably estimated. Claims against the Company are recognized when a loss is considered probable and amounts are reasonably determinable. Accounts receivable and costs and estimated earnings in excess of billings on uncompleted contracts at September 30, 1994 and December 31, 1993 and 1992 include claims and change orders in the process of negotiation which aggregate approximately $57.6 million, $51.2 million and $46.6 million, respectively, net of valuation allowances. A portion of these receivables may not be realized within one year.
Costs and estimated earnings on uncompleted contracts and related amounts billed as of September 30, 1994 and December 31, 1993 and 1992 are as follows:
September 30, December 31, December 31,
1994 1993 1992
(In thousands)
Costs incurred on uncompleted contracts $ 2,917,701 $ 3,031,225 $ 2,796,376
Estimated earnings 213,561 238,869 259,393
3,131,262 3,270,094 3,055,769
Less billings to date 3,185,321 3,323,286 3,113,716
$ (54,059) $ (53,192) $ (57,947)
|
Such amounts are included in the accompanying Consolidated Balance Sheets under the following captions:
September 30, December 31, December 31,
1994 1993 1992
(In thousands)
Costs and estimated earnings in excess of
billings on uncompleted contracts $ 73,482 $ 61,987 $ 67,817
Billings in excess of costs and estimated
earnings on uncompleted contracts (127,541) (115,179) (125,764)
$ (54,059) $ (53,192) $ (57,947)
|
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Utility plant and equipment, which is classified as net assets held for sale as of September 30, 1994 and December 31, 1993 and 1992, includes, in addition to direct labor and materials, costs such as related employee benefits, taxes, interest and other costs attributable to plant and equipment construction. The water supply business provides for depreciation on the straight-line basis at amounts equivalent to a composite rate of approximately 2% of the average depreciable plant. All other subsidiaries provide for depreciation principally using the straight-line method over estimated useful lives.
Property, plant and equipment as of September 30, 1994 and December 31, 1993 and 1992 consists of:
September 30, December 31, December 31,
1994 1993 1992
(In thousands)
Machinery and equipment $ 58,962 $ 55,640 $ 51,530
Furniture and fixtures 14,925 16,146 25,344
Land, buildings and leasehold
improvements 20,560 19,932 23,396
94,447 91,718 100,270
Accumulated depreciation and
amortization 58,185 52,452 49,183
$ 36,262 $ 39,266 $ 51,087
|
Inventories
Inventories which consist primarily of construction materials are stated at the lower of cost or market. Cost is determined by principally using average costs.
Net Assets Held for Sale
Net assets held for sale are stated at the lower of cost or estimated net realizable value and carried as either current or long-term assets on the basis of their actual or expected disposition dates.
Cost in Excess of Net Assets Acquired
Cost in excess of net assets acquired (goodwill) is amortized on a straight line basis over 40 years. The amounts included in the accompanying Consolidated Balance Sheets are net of cumulative amortization of $9.7 million, $8.5 million and $6.9 million, at September 30, 1994, December 31, 1993 and 1992, respectively. The Company periodically reviews whether new events and circumstances warrant the write-off of goodwill or a revision to the estimated useful life.
In 1992 the Company's Board of Directors approved a plan to downsize the Company's North American mechanical/electrical services business and to sell non-core businesses and certain mechanical and electrical business units. As a result, in 1992, the Company wrote-off goodwill of $48.5 million related to such businesses to reflect the net realizable value of businesses held for sale and the permanent impairment of goodwill.
Net (Loss) Income Per Share
Net (loss) income per common share has been calculated based on
the weighted average number of common shares outstanding and
common share equivalents relating to warrants of participation
and stock options outstanding when the effect of such
equivalents are dilutive (40,816,783 shares, 40,583,185 shares
and 38,800,000 shares for years ended December 31, 1993, 1992
and 1991, respectively, and 40,715,604 shares and 40,800,883
shares for the nine months ended September 30, 1994 and 1993,
respectively). For 1993, 1992 and 1991, per common share
amounts of (loss) income from continuing operations and net
(loss) income reflect dividends paid and accrued on the
Company's preferred stock. The Company ceased accruing
dividends on its preferred stock on December 21, 1993, the date
on which an involuntary bankruptcy petition was filed against
the Company. Cumulative unpaid dividends at that date
aggregated $2.3 million.
Statements of Cash Flows
For purposes of the Consolidated Statements of Cash Flows, the Company considers all highly liquid instruments with original maturities of three months or less to be cash equivalents.
Income Taxes
Effective January 1, 1992, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). The adoption of SFAS 109 changed the Company's method of accounting for income taxes from the deferred method (APB 11) to an asset and liability approach. Previously, the Company deferred the tax effects of timing differences between financial reporting and taxable income. The asset and liability approach requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable for the period and the change during the period in deferred tax assets and liabilities. Prior years' financial statements have not been restated for such accounting change.
At September 30, 1994 and December 31, 1993 and 1992 (after giving effect to the adoption of SFAS No. 109), the valuation allowance recorded against the deferred tax assets was $178.1 million, $170.1 million and $138.3 million, respectively. (See Note G).
NOTE C Debt In Default
Debt in default at September 30, 1994 and December 31, 1993 and 1992 consists of (in thousands):
Notes payable to banks under revolving $ 155,795
credit facility at prime plus 3/4%
Senior notes payable to insurance 328,572
companies, 9.1% to 10.95%
Total senior debt 484,367
Subordinated notes payable to insurance 9,600
companies, 12%
7-3/4% Convertible Subordinated Debentures 7,040
$ 501,007
|
Prior to the commencement of its Chapter 11 bankruptcy proceeding, the Company failed to make principal payments on its senior notes and 12% subordinated notes and was in default under various financial covenants contained in the loan agreements pursuant to which those notes were issued, including covenants requiring maintenance of minimum tangible net worth and minimum current ratio. Its bank revolving credit facility also contained certain financial and other covenants, including covenants requiring maintenance of minimum tangible net worth and minimum current ratio, under which the Company was in default. Additionally, the Company had not made scheduled semi-annual interest payments since September 1, 1993 with respect to its 7-3/4% Convertible Subordinated Debentures. As a result, the entire amount of such notes, debentures and bank indebtedness has been classified in the accompanying Consolidated Balance Sheets as "Pre-consent date bankruptcy claims subject to compromise" at September 30, 1994 and "Debt in default" at December 31, 1993 and 1992.
Commencing in April 1993, the Company ceased making payments of principal and interest on indebtedness under its revolving credit facility and on indebtedness evidenced by its senior and subordinated notes. Interest continued to accrue in accordance with the provisions of the loan agreements and notes pursuant to which this indebtedness was incurred, which in certain circumstances included default rates at an additional 2% and, in one case, 4% until December 21, 1993, the date on which an involuntary bankruptcy petition was filed against the Company. At September 30, 1994 and December 31, 1993, accrued interest applicable to debt in default was $43.3 million. Such amount is included in "Pre-consent date bankruptcy claims subject to compromise" at September 30, 1994 and "Other accrued expenses and liabilities" at December 31, 1993 and 1992 in the accompanying Consolidated Balance Sheets. The Company also had pledged to the holders of its senior notes and bank indebtedness the common stock of five subsidiaries held for sale and certain proceeds from the sale of these subsidiaries. Substantially all of the assets of three of those subsidiaries were sold in 1994. The combined net book value of the remaining subsidiaries was $16.2 million as of September 30, 1994.
The Company's 7-3/4% Convertible Subordinated Debentures were convertible into its common stock at any time on or prior to September 1, 2012 at $30.11 per share which was subject to change as provided in the indenture pursuant to which the debentures were issued. The debentures were redeemable, at the Company's option, on any date prior to maturity at redemption prices (expressed as percentages of principal amount) ranging from 102.325% in 1994 to 100% in 1997 and thereafter, plus accrued interest. In 1992, the Company purchased $8.7 million of its 7-3/4% debentures and realized a net gain of $1.8 million from early retirement of such debt.
See Note A with respect to the exchange of the debt in default for new debt and equity securities pursuant to the Company's Plan of Reorganization which became effective on December 15, 1994.
NOTE D Pre-Consent Date Bankruptcy Claims Subject to Compromise
As described in Note A, on February 14, 1994, the Company consented to the entry of an order for relief under Chapter 11 of the U.S. Bankruptcy Code. While the Company continued business as a debtor-in-possession until its Plan of Reorganization became effective on December 15, 1994, the Company's creditors were stayed from taking action against the Company to collect debts in existence prior to December 21, 1993, the date an involuntary petition was filed against the Company. These liabilities, described below, are included in "Pre-consent date bankruptcy claims subject to compromise" as of September 30, 1994, and in various liability accounts, at December 31, 1993 and 1992, in the accompanying Consolidated Balance Sheets. These liabilities have been discharged pursuant to the Company's Plan of Reorganization.
Other Accrued Other Long-Term
Accounts Debt Expenses and Obligations Total
Payable in Default Liabilities
-------------------------------------------------------------------------------------------
(In thousands)
Debt in default $ - $501,007 $ - $ - $501,007
Accrued interest - - 43,315 - 43,315
Amount due to JWP
Information - - 24,933 - 24,933
Services, Inc.
Foreign debt guarantees - - 6,037 - 6,037
Stock price guarantees - - 5,118 - 5,118
Preferred dividends in - - 2,257 - 2,257
arrears
Unexpired leases - - - 1,718 1,718
Unfunded directors
retirement - - - 975 975
benefits
Insurance reserves - - 9,600 26,800 36,400
Other impaired claims 400 - 699 - 1,099
-------------------------------------------------------------------------------------------
$ 400 $501,007 $91,959 $29,493 $622,859
===========================================================================================
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The Bankruptcy Court established April 8, 1994 as the bar date for filing of claims against the Company. Certain claims filed against the Company are contingent or in dispute and such claims will be resolved by either litigation or settlement. See Note A.
The Company received approval from the Bankruptcy Court to pay or otherwise honor certain of its obligations that arose prior to the entry of the order for relief under Chapter 11, including employee wages and benefits, amounts payable under the Company's property, casualty, workers' compensation and other insurance programs and amounts payable under an employee stay bonus/severance pay plan.
NOTE E Debtor-In-Possession Financing
In February 1994, the Company and most of its subsidiaries entered into an agreement with Belmont Capital Partners II, L.P., an affiliate of Fidelity Investments ("Belmont"), to provide for a debtor-in-possession credit facility to the Company (the "DIP Loan"). The agreement provided to the Company a credit facility of $35 million at an interest rate of 12% per annum during the Chapter 11 proceeding. The agreement also provided that Belmont was to receive, as additional interest, a percentage of the securities to be issued under the Company's Plan of Reorganization. The DIP Loan was secured by a first lien on substantially all of the assets of the Company and most of its subsidiaries. As of the Effective Date, the Company had drawn down $30 million under the DIP Loan of which $25 million was outstanding as of September 30, 1994.
The Company was in default of certain covenants of the DIP Loan. Pursuant to written waivers of default dated April 27, 1994, May 6, 1994, August 2, 1994 and November 4, 1994, the Company had been permitted by Belmont to draw on its line of credit.
The DIP Loan was repaid on the Effective Date from borrowings under the New Credit Facility which is discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" under "Liquidity."
NOTE F Long-Term Debt
As of September 30, 1994 and December 31, 1993 and 1992, respectively, long-term debt, excluding current maturities, totaling $2.4 million, $2.5 million and $4.1 million was owed by certain of the Company's subsidiaries. The aggregate amount of long-term debt maturing during the next five years is $0.3 million in 1995 and 1996, $0.2 million in 1997 and 1998 and $1.3 million thereafter.
NOTE G Income Taxes
Effective January 1, 1992, the Company adopted the Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). Under the liability method specified by SFAS 109, a deferred tax asset or liability is determined based on the difference between the financial statement and tax basis of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. The cumulative effect of adopting SFAS 109 was to record an income tax benefit of $4.3 million or $0.11 per share as of January 1, 1992. Such amount has been reflected in the Consolidated Statements of Operations under the caption "Cumulative effect of change in method of accounting for income taxes."
The Company files a consolidated federal income tax return including all U.S. subsidiaries. At September 30, 1994, the Company had a net operating loss carry-forward ("NOL") for U.S. income tax purposes expiring in years through 2008 which approximated $500 million. SFAS 109 requires a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company provided a valuation allowance for the full amount of its NOLs. As described in Note A, under the Plan of Reorganization, newly issued equity and debt securities have been exchanged for existing debt of the Company; therefore, a substantial portion of the NOLs may not be available to reduce future U.S. taxable income.
At September 30, 1994 and December 31, 1993 and 1992 (after giving effect to the adoption of SFAS 109), the valuation allowances recorded against the deferred tax assets were $178.1 million, $170.1 million and $138.3 million, respectively.
The provision (benefit) for income taxes relating to continuing operations consists of:
For the Nine Months For the Year Ended December 31,
Ended 1993 1992 1991
September 30, 1994
-----------------------------------------------------------
(In thousands)
Current
Federal $ - $ (4,138) $ - $ 663
State and local 750 1,000 1,248 1,092
Foreign - (1,700) 1,106 2,834
750 (4,838) 2,354 4,589
-----------------------------------------------------------
Deferred
Federal - 4,138 4,487 (5,440)
State and Local - - (56) (156)
Foreign - - 859 3,426
-----------------------------------------------------------
- 4,138 5,290 (2,170)
-----------------------------------------------------------
$ 750 $ (700) $7,644 $2,419
===========================================================
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The provision (benefit) for income taxes relating to discontinued operations consists of:
For the Nine
Months Ended For the Year Ended December 31,
September 30, 1994 1993 1992 1991
(In thousands)
---------------------------------------------------------------
Current
Federal $ - $ - $ (237) $ (525)
State and Local - - 7 (218)
----------------------------------------------------------------
- - (230) (743)
----------------------------------------------------------------
Deferred
Federal - - 983 13,287
State and Local - - 864 2,301
----------------------------------------------------------------
- - 1,847 15,588
----------------------------------------------------------------
$ - $ - $ 1,617 $14,845
================================================================
|
Factors accounting for the variation from U.S. statutory income tax rates relating to continuing operations are as follows:
For The Nine Months
Ended For The Year Ended December 31,
September 30, 19941993 1992 1991
(In thousands)
-----------------------------------------------------------
Federal income taxes at the statutory $(10,989) $(40,142) $(120,996) $2,425
rate
State and local income taxes, net of 488 650 787 618
federal tax
Amortization and write-off of - - 29,791 (488)
intangibles
Valuation allowance against deferred tax 11,251 38,792 96,849 -
asset
Other - - 1,213 (136)
---------------------------------------------------------
$ 750 $ (700) $ 7,644 $2,419
=========================================================
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Factors accounting for the variation from U.S. statutory income tax rates relating to discontinued operations are as follows:
For The Nine Months
Ended For The Year Ended December 31,
September 30, 1994 1993 1992 1991
----------------------------------------------------------------------------
(In thousands)
Federal income taxes at the statutory $ 3,285 $(3,180) $(85,548) $13,296
rate
State and local income taxes, net of - - 575 1,375
federal tax
Amortization and write-off of - - 28,289 -
intangibles
Valuation allowance against deferred tax (3,285) 3,180 58,409 -
asset
Other - - (108) 174
----------------------------------------------------------------------------
$ - $ - $ 1,617 $14,845
============================================================================
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The components of the net deferred income tax liability are as follows:
At At At
September December 31, December 31,
30, 1994 1993 1992
--------------------------------------------
(In thousands)
Deferred tax assets:
Net operating loss carry-forward $179,397 $177,654 $ 74,787
Excess of amounts expensed for financial
statement purposes over amounts
deducted for income tax purposes 54,262 26,183 93,891
Other 2,899 2,899 2,816
Total deferred tax asset 236,558 206,736 171,494
Deferred tax liabilities:
Costs capitalized for financial
statement purposes and deducted for
income tax purposes 61,449 39,593 33,086
Foreign deferred tax liability 2,695 2,695 1,635
Total deferred tax liability 64,144 42,288 34,721
Net deferred tax asset before valuation
allowance 172,414 164,448 136,773
Valuation allowance for net deferred tax
asset (178,053) (170,087) (138,274)
$(5,639) $(5,639) $ (1,501)
Net deferred income tax liability
|
(Loss) income before income taxes from continuing operations consists of the following:
For The Nine
Months Ended For The Year Ended December 31,
September 30, 1994 1993 1992 1991
-------------------------------------------------------------------------
(In thousands)
United States $(18,236) $(106,672) $(342,304) $(11,013)
Foreign (10,310) (8,019) (13,567) 18,144
-------------------------------------------------------------------------
$(28,546) $(114,691) $(355,871) $ 7,131
=========================================================================
|
Income (loss) before income taxes from discontinued operations consists of the following:
For The Nine
Months Ended For The Year Ended December 31,
----------------------------------------------
September 30, 1993 1992 1991
1994
----------------------------------------------
(In thousands)
United
States $9,386 $(6,270) $(228,754 $36,010)
Foreign - (2,817) (22,859) 3,098
----------------------------------------------
$9,386 $(9,087) $(251,613 $39,108)
==============================================
|
The above amounts applicable to discontinued operations in 1993 and 1992 include a loss from disposal of businesses of $20.4 million and $49.5 million, respectively.
NOTE H Capital Stock and Warrants
In August 1991, the Company issued 425,000 shares of preferred stock in connection with the acquisition of Businessland, Inc. (See Note K). The preferred stock was convertible into common stock of the Company, at any time, at the option of the holder at a conversion price of $20.00 per share, subject to customary anti-dilution provisions and exchangeable for 8.5% Convertible Subordinated Notes due 2006 of the Company, in whole, but not in part, at the option of the Company. Commencing July 31, 1993, the Company had the option to redeem the shares of preferred stock at $50.00 per share. Each share of preferred stock entitled the holder to receive cumulative cash dividends at the annual rate of $4.25 per annum per share. The Company has not paid dividends on its preferred stock since September 1992. The Company ceased accruing dividends on its preferred stock on December 21, 1993, the date on which an involuntary bankruptcy petition was filed against the Company. Cumulative unpaid dividends at September 30, 1994 and December 31, 1993 aggregated $2.3 million and $0.5 million at December 31, 1992. The preferred stock and the obligations with respect to the cumulative unpaid dividends were canceled pursuant to the Company's Plan of Reorganization.
In 1969, the Company distributed 1,152,649 warrants of participation to holders of its common stock. The warrants of participation, which would have expired on December 31, 1994, entitled their holders to receive shares of common stock of the Company in the event that JWS disposed of all or any significant portion of its water distribution system or the Company disposed of any shares of JWS. The number of shares of common stock to be issued, if any, would have been determined on the basis of a specified formula and would have been distributed to warrant holders on a pro rata basis. The warrants of participation were canceled pursuant to the Company's Plan of Reorganization.
As of September 30, 1994 and December 31, 1993, 1992 and 1991, the Company had outstanding stock options of approximately 2.3 million, 2.3 million, 3.2 million and 1.2 million shares, respectively, at option exercise prices ranging from $3.00 to $21.05 per share. The stock options were issued in connection with the Company's 1992 and 1991 Stock Option Plans, the 1986 Incentive Stock Option and Appreciation Plan and in connection with the acquisition of NEECO, Inc. in 1990. During 1993, options to purchase a total of 50,000 shares were granted at an exercise price of $3.625 per share. No stock options were exercised in 1994 or in 1993. All of these options were canceled pursuant to the Company's Plan of Reorganization
As described in Note A, under the Plan of Reorganization, the holders of the Company's existing preferred and common stock and warrants of participation received warrants to purchase the common stock of the reorganized Company in exchange for their respective shares and warrants of participation.
NOTE I Retirement Plans
A foreign subsidiary has a defined benefit pension plan covering substantially all eligible employees. The benefits under the plan are based on wages and years of service with the subsidiary. The Company's policy is to fund the minimum amount required by law.
Net pension expense for the foreign defined benefit plan for the nine months ended September 30, 1994 and for the years ended December 31, 1993, 1992 and 1991 consists of the following components:
For the Nine
Months Ended For The Year Ended December 31,
September 30, 1994 1993 1992 1991
----------------------------------------------------------------------
(In thousands)
Service costs-benefits earned $ 1,526 $ 1,479 $ 1,301 $ 1,484
Interest on projected benefit
obligations 1,981 2,478 2,481 2,108
Actual return on plan assets (7,955) (5,473) (3,428)
(2,592)
Net amortization and deferral (120) 5,129 2,452 838
----------------------------------------------------------------------
Net pension expense $ 795 $ 1,131 $ 761 $ 1,002
======================================================================
|
The benefit obligations and funded status of the plan at September 30, 1994 and December 31, 1993 and 1992 are as follows:
As of As of December 31,
September 30, 1994 1993 1992
------------------------------------------------------
(In thousands)
Accumulated benefit obligations:
Vested $28,400 $25,293 $21,214
Non-Vested - - -
Impact of future salary increases 4,546 4,049 3,393
------------------------------------------------------
Projected benefit obligations 32,946 29,342 24,607
Plan assets at market value 37,158 34,566 27,531
------------------------------------------------------
Excess of plan assets over projected benefit
obligations 4,212 5,224 2,924
Unrecognized prior service cost 838 882 -
Unrecognized net (gain) from past experience
different from that assumed and effect of
changes in assumptions (5,262) (5,453) (1,670)
Unrecognized net (asset) from initial
application of SFAS No. 87 (725) (795) (889)
------------------------------------------------------
(Accrued) prepaid pension $ (937) $ (142) $ 365
======================================================
|
The assumptions used as of September 30, 1994 and December 31, 1993, 1992 and 1991 in determining the pension cost and liability shown above were as follows:
1994 1993 1992 1991
-------------------------------------
Discount rate 9% 9% 10% 11%
Rate of salary
progressions 7% 7% 7% 7%
Rate of return
on assets 10% 10% 10% 11%
|
The unrecognized net asset of the foreign plan is being amortized over 15 years. The plan assets are invested 80% in equity securities and 20% in fixed income securities.
The Company contributes to various union pension funds based upon wages paid to union employees of the mechanical and electrical business units. Such contributions approximated $32.2 million, $45.5 million, $41.6 million and $38.5 million in the first nine months of 1994 and in 1993, 1992 and 1991, respectively.
The Company has defined contribution retirement plans that cover its U.S. non-union eligible employees. Contributions to these plans are based on a percentage of the employee's base compensation. The expense recognized for the nine months ended September 30, 1994 and for the years ended December 31, 1993, 1992 and 1991 relating to continuing operations for the defined contribution plans was $5.0 million, $3.5 million, $4.7 million and $4.7 million, respectively.
NOTE J Lease Commitments
The Company and its subsidiaries lease land, buildings and equipment under various leases. The leases frequently include renewal options and require the Company to pay for utilities, taxes, insurance and maintenance expense.
In 1994, the Company was unable to renegotiate the terms of the lease for its headquarters located in Rye Brook, New York. As a result, the Company, during its Chapter 11 proceedings, rejected that lease and entered into a new lease for its headquarters in Norwalk, Connecticut. The future minimum payments under operating leases and related subleases, below, include the new lease in Norwalk, Connecticut. Future minimum payments, by year and in the aggregate, under capital leases, operating leases and related subleases with initial or remaining terms of one or more years relating to continuing operations at September 30, 1994 are as follows:
Capital Operating
Leases Leases Subleases
-----------------------------
(In thousands)
Year 1 $ 723 $16,281 $ 2,392
Year 2 828 15,029 2,435
Year 3 574 10,661 2,415
Year 4 131 8,539 2,415
Year 5 120 7,287 2,415
Thereafter 582 34,329 5,331
----------------------------
Total minimum lease payments 2,958 $92,126 $17,403
===================
Amounts representing interest 616
------
Present value of net minimum
lease payments (includes $2,342
current portion of $700) ======
|
Future minimum payments under operating leases relating to discontinued operations as of September 30, 1994 are as follows (in thousands): $434, $418, $396, $297 and $0 in 1995, 1996, 1997, 1998 and 1999, respectively.
"Other long-term obligations" at September 30, 1994 and December 31, 1993 and 1992 include capital lease obligations of $1.6 million, $2.2 million and $3.2 million, respectively.
Rent expense relating to continuing operations for the nine months ended September 30, 1994 and for the years ended December 31, 1993, 1992 and 1991 was $14.7 million, $21.5 million, $26.6 million and $22.8 million, respectively. Rent expense for the nine months ended September 30, 1994 includes sublease rentals of $1.4 million and $0.8 million for the years ended December 31, 1993 and 1992. Rent expenses relating to discontinued operations for the years ended December 31, 1993, 1992 and 1991 was $7.5 million, $20.7 million and $10.0 million, respectively. There was no rent expense relating to discontinued operations for the nine months ended September 30, 1994.
NOTE K Business Combinations
During 1992 the Company acquired two mechanical contracting businesses for which the Company paid approximately $15.4 million in cash, notes and common stock. Net tangible assets acquired were approximately $7.0 million. The acquisitions were accounted for by the purchase method of accounting, and, accordingly, the consolidated results of operations include the results of the acquired businesses from acquisition dates. Pro-forma amounts for the year ended December 31, 1992 are not materially different from the actual amounts.
In the fourth quarter of 1991, the Company completed the acquisition of Businessland Inc. ("Businessland"). Pursuant to the acquisition, the Company paid $17.0 million in cash and exchanged 1,108,195 shares of its common stock for all the outstanding common stock of Businessland. The Company acquired Businessland's 10 1/4% Senior Notes in the aggregate principal amount of $50.0 million for an aggregate of $18.75 million in cash and 425,000 shares of its $4.25 Convertible Exchangeable Preferred Stock with a liquidation preference of $50.00 per share. Businessland was merged with the Company's then existing information services subsidiary. The acquisition of Businessland was accounted for by the purchase method of accounting. The Company sold the rental operations of Businessland in 1991 for $10.1 million in cash. The sale of the rental operations did not result in a gain or loss to the Company. Including the acquisition of Businessland, the Company paid in 1991 approximately $133.7 million in cash, notes and common stock for acquired businesses. Net tangible assets acquired were approximately $80.3 million.
NOTE L Discontinued Operations
Discontinued operations include the Company's information services businesses and water supply business.
In March 1993, the Company's Board of Directors approved the disposition of the Company's U.S. information services business. The Board of Directors had previously decided to sell the Company's overseas information services businesses. Accordingly, operating results of the information services businesses have been classified as discontinued operations. In August 1993, the Company sold substantially all of the assets of the principal subsidiary ("IS Subsidiary") carrying on its U.S. information services business for which no material gain or loss was realized. Under the terms of the sale agreement, the purchaser assumed the debt and other liabilities relating to the ongoing operations of the business. The IS Subsidiary received warrants to buy up to 10% of the purchasers' common stock for a nominal amount. The Company assigned no value to these warrants.
In October 1993, the IS Subsidiary filed a voluntary petition under Chapter 7 of the U.S. Bankruptcy Code. In connection with the bankruptcy filing, the Company recorded a loss of $8.1 million in the third quarter of 1993. Such amount is included in "Loss from disposal of businesses, net of income taxes" in the accompanying Consolidated Statements of Operations. At December 31, 1993, the Company owed its IS Subsidiary $24.9 million. Such amount is included in the accompanying Consolidated Balance Sheets in "Pre-consent date bankruptcy claims subject to compromise" at September 30, 1994 and in "Other accrued expenses and liabilities" at December 31, 1993.
Additionally, in 1993 the Company recorded a loss of $1.5 million to further write-down the net assets of the IS Subsidiary to its estimated net realizable value based upon current market conditions and sold substantially all of the assets of its foreign information services businesses. The sale of its foreign information services businesses resulted in a loss of $3.3 million. Such amounts are included under the caption "Loss from disposal of businesses, net of income taxes" in the accompanying Consolidated Statements of Operations. As of December 31, 1993, all of the information services businesses had been sold.
In 1993, the Company's French and Belgian information services subsidiaries filed petitions in their respective countries seeking relief from their creditors.
Revenues of the information services businesses in 1993, 1992 and 1991 were $876.7 million, $1,692.4 million and $1,213.8 million, respectively. Operating income of these businesses was $10.2 million in 1993 compared to an operating loss of $187.9 million in 1992 and operating income of $34.0 million in 1991. In 1992, the information services businesses loss includes $41.3 million attributable to the write-off of goodwill and other intangibles related to the U.S. information services business and $26.0 million primarily relating to severance payments and facilities consolidation.
Additionally, in 1992 the Company provided for a loss of $49.5 million in connection with its plan to dispose of the overseas information services businesses and other units of its U.S. information services business. This loss represented the estimated loss to be realized upon the disposition of such businesses. Such loss includes $32.1 million related to the write-off of goodwill and other intangible assets and $17.4 million for estimated losses to be incurred up to the expected disposal dates and the write-down of other assets to estimated net realizable value.
In 1992 and 1991, the information services businesses operated primarily in the United States, Europe and Canada. The following presents information about operations in such geographical areas:
Operating Identifiable
Revenues Income (loss) Assets
-------------------------------------------
(In thousands)
1992
United States $1,418,350 $(144,743) $378,913
Europe 245,497 (37,727) 78,072
Canada 28,573 (5,469) 10,186
-------------------------------------------
$1,692,420 $(187,939) $467,171
===========================================
1991
United States $1,106,711 $32,987 $723,759
Europe 91,088 1,824 116,094
Canada 15,970 (775) 16,781
-------------------------------------------
$1,213,769 $34,036 $856,634
===========================================
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In April 1992, the Company announced its intention to sell its water supply business. However, in July 1993 the Company's Board of Directors decided not to proceed with the sale due to uncertainties created by the then pending rate related proceedings and litigation. In December 1993, JWS entered into an agreement with respect to the rate related proceedings and litigation. This agreement was approved by the New York State Public Service Commission on February 2, 1994. Accordingly, in the first quarter of 1994 the Company reinstated its plan of sale. A $7.4 million loss was recorded in 1993 to write-down the net assets of the water supply business to estimated net realizable value. The financial statements for all periods presented reflect the water supply business as discontinued operations.
See Note T with respect to the status of a proceeding initiated in 1988 by The City of New York to acquire by condemnation all of the water distribution system of JWS that is located in New York City. Additionally, see Note T with respect to the lawsuit brought by certain holders of warrants of participation against Jamaica Water Securities Corp.
The assets of the water supply business consist primarily of utility plant and equipment which are located in Nassau and Queens Counties in the State of New York. The net assets of the water supply business, which aggregated $62.2 million at September 30, 1994, $60.0 million at December 31, 1993 and $57.2 million at December 31, 1992, are classified as either a short-term asset or a long-term asset in the accompanying Consolidated Balance Sheets under the caption "Net assets held for sale" since the disposition of the water supply business is expected to take place mid-year 1995.
Revenues of the water supply business were $50.5 million and $50.1 million for the nine months ended September 30, 1994 and 1993, respectively, and $66.8 million, $59.8 million and $63.1 million in 1993, 1992 and 1991, respectively. Operating income of the water supply business was $12.5 million and $5.7 million for the nine months ended September 30, 1994 and 1993, respectively, and $15.4 million, $4.8 million and $14.6 million in 1993, 1992 and 1991, respectively. The 1992 results include a provision of $7.0 million related to the settlement of litigation referred to above.
Combined operating results of discontinued operations including both the information services and water supply businesses are as follows:
For The Nine Months
Ended September 30, For The Year Ended December 31,
-------------------------------------------------------------
(Unaudited)
1994 1993 1993 1992 1991
--------------------- ---------------------------------
(In thousands)
Revenues $50,452 $911,342 $943,455 $1,752,171 $1,276,876
Costs and expenses 37,999 890,402 917,872 1,935,349 1,228,281
-------------------------------------------------------------
Operating income (loss) 12,453 20,940 25,583 (183,178) 48,595
Interest expense (3,067) (13,355) (14,320) (18,944) (9,487)
-------------------------------------------------------------
Income (loss) before taxes 9,386 7,585 11,263 (202,122) 39,108
-------------------------------------------------------------
Provision for income taxes - - - 1,617 14,845
-------------------------------------------------------------
Income (loss) from 9,386 $ 7,585 $ 11,263 $ (203,739) $ 24,263
discontinued operations
|
As discussed above, in August 1993, the Company sold substantially all of its information services businesses. The operating results of discontinued operations in 1994 consists only of the water supply business.
NOTE M Other Businesses Sold and Net Assets Held for Sale
In the first nine months of 1994 and 1993, the Company received cash proceeds of $4.5 million and $40.8 million, respectively, from the sale of certain non-core businesses and other assets. In the first nine months of 1994, the assets sold by the Company included the sale of the Company's minority ownership in an environmental business and other non-core businesses. During the fourth quarter of 1994, the Company completed the sale of its telecommunications service and manufacturing business. In 1993, the Company sold substantially all of the assets of its Software House subsidiary, the U.S. information services business and certain other non-core businesses and other assets. The Company realized a gain of $2.7 million from the sale of Software House. No material gain or loss was realized from the aggregate of the other sales in either 1994 or 1993.
For the year ended December 31, 1993, the Company received cash proceeds of $43.4 million of which $12.6 million was from the sale of Software House and approximately $30.8 million was from the sale of a number of other non-core businesses and other assets. Additionally, the Company received notes and other assets with an aggregate carrying value of $10.9 million.
On October 16, 1992, the Company completed the sale of five environmental businesses for which it received net cash proceeds of $84.1 million. The five businesses sold were two air pollution control businesses, JWP Air Technologies, Inc. and JWP Amcec Corp., a sludge pelletization project located in New York City and another in Baltimore, Maryland, and Enviro- Gro Technologies Co., a sludge processing business. The Company realized a gain of approximately $12.0 million from the sale of these businesses. Additionally, the Company's Board of Directors approved a plan for the sale of the Company's remaining energy and environmental related businesses, other non-core businesses and certain mechanical/electrical services operations. In connection with this asset disposition plan, a loss of $88.1 million was provided for in 1992. The loss represents the estimated loss to be realized upon the disposition of the businesses held for sale. The loss consists of $24.1 million attributable to the write-off of goodwill and $64.0 million related to the write-down of other assets to net realizable value.
In 1991, the Company incurred a loss of $6.6 million in connection with the sale of a certain subsidiary. For 1992 and 1991, the operating results of these businesses as well as the provisions for the write-down of assets are included in (loss) income from continuing operations.
Revenues and operating (loss) income of other businesses sold and held for sale for the nine months ended September 30, 1994 and 1993 and for the years ended December 31, 1993, 1992 and 1991 are as follows:
For The Nine Months
Ended September 30, For The Year Ended December 31,
(Unaudited)
1994 1993 1993 1992 1991
---------------------- -------------------------------------------
(In thousands)
Revenues $120,991 $287,471 $257,910 $526,894 $501,696
Operating
(loss) income (9,541) (2,093) (11,802) (41,151) 15,325
|
A condensed balance sheet relating to discontinued operations (the water supply business) and other net assets held for sale at September 30, 1994 is as follows (in thousands):
Current maturities of long-term debt
Cash $6,502 and capital lease obligations $14,222
Accounts receivable, net 47,946 Accounts payable 10,796
Costs and estimated earnings in Billings in excess of costs and
excess of billings 4,447 estimated earnings 5,345
Inventories 12,253 Other accrued expenses 58,080
--------
Other current assets 1,862 88,443
-------
73,010 Long-term debt 31,806
Property, plant and equipment, net 152,371 Other long-term liabilities 42,772
Other assets 13,233 Net assets held for sale 75,593
------- --------
$238,614 $238,614
======== ========
|
In addition to the above, there are certain retained assets and liabilities of businesses sold ("Closeouts") which are not classified as net assets held for sale. Revenues and operating income attributed to Closeouts for the nine months ended September 30, 1994 were $17.3 million and $2.2 million respectively.
NOTE N Reorganization and Restructuring Charges
For the nine months ended September 30, 1994, the Company recorded $10.1 million of reorganization charges in the accompanying Consolidated Statements of Operations for various legal and other professional fees associated with its Chapter 11 proceeding. Such reorganization charges are expensed as incurred as prescribed by the American Institute of Certified Public Accountants' Statement of Position 90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code."
In 1992 the Company recorded $38.7 million of restructuring charges related to continuing operations. The Company's business restructuring plan contemplated the downsizing and consolidation of the Company's North American mechanical/electrical services operations. The Company's strategy also provides for the disposition of non-core businesses and certain mechanical/electrical services operations. The restructuring charges consisted of $10.8 million applicable to permanent impairment of goodwill and $27.9 million for severance payments, facilities consolidation costs, provisions for contract losses and the write-down of certain assets to net realizable value.
NOTE O Insurance Reserves
The Company is primarily insured with an indirect wholly-owned captive insurance subsidiary ("Defender") for its workers' compensation, automobile and general liability insurance. The insurance liability is determined actuarially based on claims filed and an estimate of claims incurred but not yet reported. The present value of such claims was determined as of September 30, 1994 and December 31, 1993 using a 4% discount rate. The estimated current portion of the insurance liability was $24.6 million, $17.7 million and $16.5 million at September 30, 1994 and December 31, 1993 and 1992, respectively. Such amounts are included in "Other accrued expenses and liabilities" in the accompanying Consolidated Balance Sheets. The non-current portion of the insurance liability was $46.3 million, $41.0 million and $33.1 million at September 30, 1994 and December 31, 1993 and 1992, respectively. Such amounts are included in "Other long-term obligations". The undiscounted liability was approximately $73.4 million, $65.2 million and $56.0 million at September 30, 1994 and December 31, 1993 and 1992, respectively.
At January 1, 1994, the Company and Defender had letters of credit totaling $36.4 million of which $29.4 million remained outstanding at September 30, 1994 to secure certain insurance obligations. These letters of credit were intended to serve as collateral for the obligations of Defender and the Company to reimburse the Company's unrelated insurance carrier for claims paid with respect to the insurance programs for the years 1988 through 1991. Since September 30, 1994, $14.6 million was drawn upon by an insurance carrier and $13.9 million was renewed by the issuing banks. A $0.9 million letter of credit that was to expire in February 1995 was also drawn upon in full by the insurance carrier in December 1994. Since October 1992, neither the Company nor Defender has been able to obtain additional letters of credit to secure their insurance obligations, and, as a result they have been required to make cash collateral deposits to an unrelated insurance company to secure those types of obligations. The deposits totaled $34.0 million, $21.3 million and $7.7 million as of September 30, 1994 and December 31, 1993 and 1992, respectively, and are classified as a long-term asset in the accompanying Consolidated Balance Sheets under the caption "Insurance Cash Collateral" in other assets.
The Plan of Reorganization contemplates that the letters of credit described above will be drawn upon in full by the unrelated insurance carriers either in installments or at one time, and the Company's obligations to Defender, which were pledged as collateral to the banks issuing the letters of credit, were impaired in the proceeding as well as any related Company obligations to those banks. Beginning in February 1994, Defender ceased making payments for the amounts owed to the unrelated insurance carriers, which obligations are in effect secured by the letters of credit, and the Company's insurance carriers commenced partial draws upon certain of the letters of credit. Approximately $22.5 million had been drawn upon these letters of credit through December 31, 1994, to reimburse claims, of which $13.7 million remains on deposit with the insurance companies. Under the terms of the Company's Plan of Reorganization, other than for the distributions provided for under the Plan of Reorganization neither the Company nor Defender is obligated to the banks whose letters of credit are drawn upon by the insurance carriers.
The Company is subject to regulation with respect to the handling of certain materials used in construction which are classified as hazardous or toxic by agencies at the Federal, State and local levels. The Company's policy is not to undertake projects principally involving the remediation or removal of such materials. However, where remediation is a required part of contract performance, the Company believes it complies with all applicable regulations governing the discharge of material into the environment or otherwise relating to the protection of the environment. The Company believes that it presently maintains adequate insurance coverage for all of its current operations.
NOTE P Additional Cash Flow Information
For the Nine
Months Ended For the Year Ended
September 30, December 31,
1994 1993 1992 1991
--------------------------------------------------------------------
(In thousands)
Cash paid (refunded) during the year for:
Interest $5,947 $26,126 $62,582 $54,258
Income taxes 332 (2,177) (15,617) 14,400
Significant non-cash financing and investment
transactions are as follows:
Notes receivable and other assets received from
sale of assets $ - $10,875 $ - $ -
Debt assumed in acquisitions - - 929 93,662
Debt issued to acquire companies - - 2,566 9,648
Common stock issued for acquisitions - - 749 29,238
Preferred stock issued to retire debt - - - 21,250
Fixed assets acquired under capital lease
obligations 27 46 1,616 2,760
|
NOTE Q Translation Components of Shareholders Equity (Deficit)
Translation components of shareholders equity (deficit) for the nine months ended September 30, 1994 and for the years ended December 31, 1993, 1992 and 1991 are as follows:
For The Nine
Months Ended
September 30, For The Year Ended December 31,
1994 1993 1992 1991
---------------------------------------------------------------------
(In thousands)
Amounts transferred from cumulative translation
adjustment as a result of the sale or
substantially complete liquidation of
investments in foreign entities $ - $ 890 $ - $ -
Effect of balance sheet translation 335 (3,028) (8,737) 1,971
-------------------------------------------------------------------
$ 335 $(2,138) $ (8,737) $ 1,971
===================================================================
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NOTE R Segment Information
The following presents information about continuing operations by
geographic areas:
Operating Identifiable
Revenues Income (Loss) Assets
--------------------------------------------------------------------------
(In thousands)
1994 (nine months)
----
United States $1,003,490 $ (16,723) $577,310
Europe 229,137 (2,508) 137,130
Canada 80,823 (3,507) 39,169
-----------------------------------------------------------------------
$1,313,450 $ (22,738) $753,609
=======================================================================
1993
----
United States $1,692,470 $ (57,906) $572,468
Europe 321,632 (4,403) 112,293
Canada 180,633 (3,223) 38,066
-----------------------------------------------------------------------
$2,194,735 $ (65,532) $722,827
=======================================================================
1992
----
United States $1,793,350 $(220,242) $582,426
Europe 386,003 (15,985) 145,435
Canada 225,224 615 61,218
-----------------------------------------------------------------------
$2,404,577 $(235,612) $789,079
=======================================================================
1991
----
United States $1,713,651 $ 42,706 $1,842,391
Europe 374,380 5,199 283,315
Canada 230,081 9,746 108,121
-----------------------------------------------------------------------
$2,318,112 $ 57,651 $2,233,827
=======================================================================
|
NOTE S Selected Unaudited Quarterly Information
1994 Quarterly Results March 31 June 30 Sept. 30 Total
--------------------------------------------------------------------------
(In thousands, except per share data)
Revenues $435,554 $433,541 $444,355 $1,313,450
Gross profit 42,297 42,825 35,998 121,120
Loss from continuing operations
before cumulative effect
of accounting change (7,418) (6,289) (15,589) (29,296)
Income from discontinued operations 1,144 2,683 5,559 9,386
Cumulative effect of change in
method of accounting for
post-employment benefits (2,100) - - (2,100)
--------------------------------------------------------------------------
Net loss $ (8,374) $ (3,606) $(10,030) $ (22,010)
==========================================================================
(Loss) income per share:
Continuing operations $ (0.18) $ (0.15) $ (0.39) $ (0.72)
Discontinued operations 0.03 0.06 0.14 0.23
Cumulative effect of change in
method of accounting for
post-employment benefits (0.05) - - (0.05)
--------------------------------------------------------------------------
Net loss per share $ (0.20) $ (0.09) $ (0.25) $ (0.54)
==========================================================================
|
1993 Quarterly Results March 31 June 30 Sept. 30 Dec. 31 Total
-------------------------------------------------------------------------
(In thousands, except per share data)
Revenues $563,879 $583,872 $565,845 $481,139 $2,194,735
Gross profit 58,554 47,604 40,117 4,902 151,177
Loss from continuing operations (11,830) (18,956) (19,660) (63,545) (113,991)
Income (loss) from discontinued
operations 1,718 3,026 (4,793) (9,038) (9,087)
-------------------------------------------------------------------------
Net loss $(10,112) $(15,930) $(24,453) $(72,583) $ (123,078)
=========================================================================
(Loss) income per share:
Continuing operations $ (0.30) $ (0.48) $ (0.49) $ (1.57) $ (2.84)
Discontinued operations 0.04 0.08 (0.12) (0.22) (0.22)
-------------------------------------------------------------------------
Net loss per share $ (0.26) $ (0.40) $ (0.61) $ (1.79) $ (3.06)
=========================================================================
|
The loss from continuing operations in the fourth quarter of 1993 reflects a provision of $37.2 million primarily for estimated losses on large uncompleted contracts. The loss from discontinued operations in the fourth quarter of 1993 includes a $7.4 million charge to write-down the net assets of the water supply business to estimated net realizable value and a $2.4 million loss from the sale of the Company's information services business in Germany.
1992 Quarterly Results March 31 June 30 Sept. 30 Dec. 31 Total
--------------------------------------------------------------------------
(In thousands, except per share data)
Revenues $582,580 $606,824 $ 609,553 $ 605,620 $2,404,577
Gross profit 80,469 82,563 60,918 19,904 243,854
Loss from continuing
operations before
cumulative effect of
accounting change (7,822) (31,525) (89,599) (234,569) (363,515)
Loss from discontinued
operations (9,712) (22,489) (38,176) (182,853) (253,230)
Cumulative effect of
change in method of
accounting for income
taxes 4,315 - - - 4,315
Net loss $(13,219) $(54,014) $(127,775) $(417,422) $ (612,430)
(Loss) income per share:
Continuing operations $ (0.20) $ (0.80) $ (2.22) $ (5.78) $ (9.00)
Discontinued operations (0.25) (0.54) (0.94) (4.51) ( 6.24)
Cumulative effect of change
in method of
accounting for income
taxes 0.11 - - - 0.11
Net loss per share $ (0.34) $ (1.34) $ (3.16) $ (10.29) $ (15.13)
|
The loss from continuing operations in the fourth quarter of
1992 includes the following: (i) restructuring charges of $13.9
million primarily for consolidation and downsizing of certain
North American mechanical and electrical units, (ii) $70.2
million for losses attributable to assets held for sale, (iii)
valuation allowance of $56.1 million relating to accounts
receivable, work-in-progress on uncompleted contracts and
inventory and (iv) a valuation allowance of $24.0 million
provided against deferred tax assets. The loss from
discontinued operations in the fourth quarter of 1992 includes
the following: (i) restructuring charges of $18.0 million
relating to severance payments and facilities consolidation,
(ii) $37.6 million for losses attributable to assets held for
sale, (iii) valuation allowances of $62.4 million relating to
accounts receivable and inventory and (iv) $29.3 million
relating to write-off of goodwill and other intangibles.
NOTE T Legal Proceedings
Since August 1992, nineteen purported class action lawsuits have been filed against the Company arising out of the restatement of earnings, write-offs and losses announced by the Company on August 4, 1992 and October 2, 1992. Pursuant to Stipulation and Court Order, on January 15, 1993, a single consolidated amended class action complaint (the "Complaint") was filed. The Complaint named as defendants the Company, certain former officers and directors, a former subsidiary officer and the Company's then independent auditor Ernst & Young.
The Complaint alleges violations of Section 10(b) of the Securities and Exchange Act of 1934, Rule 10(b)-5 promulgated thereunder and common law fraud and deceit on the part of the Company and certain other defendants. Among other things, the Company is alleged to have intentionally and materially overstated its inventory, accounts receivable and earnings in various public disseminations during the purported class period May 1, 1991 through October 2, 1992. The Complaint seeks an unspecified amount of damages. The Company denied the material allegations in the Complaint. The parties are now engaged in discovery proceedings. However, the Bankruptcy Court's order dated October 3, 1994, confirming the Company's Plan of Reorganization, included a discharge of all claims asserted against the Company in the class action lawsuit and a permanent injunction against continuing these actions, or any other proceeding, with respect to the claims asserted therein. Accordingly, on December 2, 1994 the lawsuit against the Company was dismissed with prejudice.
The Company had been informed by the Securities and Exchange Commission (the "SEC") that it was conducting a private investigation to determine whether there were violations of certain provisions of the federal securities laws and/or the rules and regulations of the SEC in connection with the Company's financial records, reports and public disclosures. The Company cooperated with the SEC's staff and voluntarily produced requested documents and information. On April 12, 1994, the SEC's staff informed the Company of its intention to recommend that the SEC file a civil injunction against the Company. The Company is currently engaged in discussions with the SEC's staff concerning a possible consensual resolution of the matter.
In January 1992 the Public Service Commission of the State of New York ("PSC") ordered its staff to perform an audit covering all aspects of operations of JWS. The report on that audit alleged that mismanagement and imprudence on the part of JWS may have resulted in excess charges to its customers of up to $10.6 million. As a result of the audit report, in June 1992 the PSC instituted a proceeding requiring JWS to demonstrate that its rates charged to customers are not excessive and provided for an investigation of JWS's management practices. As part of this proceeding and citing the audit report's assertion without receiving the audit report in evidence, the PSC ordered that $10.6 million of JWS's annual revenues be made temporary and subject to refund, effective August 6, 1992, pending the completion of the investigation.
Between December 1992 and May 1993 each of JWS, the PSC's staff, the New York State Consumer Protection Board, Waterbill Watchdog, Inc., the County of Nassau, the Town of Hempstead and others appeared and submitted testimony in the PSC proceedings. On June 3, 1993, the PSC issued an order suspending hearings and appointed two administrative law judges for the purpose of effecting a settlement. Negotiations among the parties and through the judges were ongoing from that time.
In addition in February 1993, the County of Nassau commenced an action alleging violations of the Racketeering Influenced Corrupt Organizations Act ("RICO") and common law fraud based on allegations that JWS intentionally filed false rate applications with the PSC and that, for the period from March 31, 1987 through March 31, 1992, JWS had earnings that exceeded its projections by $8.7 million.
As a result of the negotiations, JWS, the New York State
Consumer Protection Board, Nassau County, certain other
governmental bodies and a consumer advocate group entered into
a settlement dated December 22, 1993 (the "Settlement
Agreement") which, following approval by the PSC on February 2,
1994, settled all issues outstanding before the PSC and various
state courts and in the RICO action. The Settlement Agreement
provides, among other things (i) that JWS will use its best
efforts to bring about a separation of Jamaica Water Securities
Corporation ("JWSC"), a subsidiary of the Company which holds
substantially all of the common stock of JWS, from the Company
and that JWSC will submit a plan to the PSC on or about
December 31, 1994 for its separation from the Company and the
formation of a separate water works corporation to be
incorporated under the New York State Transportation
Corporation law to provide water utility service to Nassau
County customers presently served by JWS; (ii) commitment by
JWS that, subject to limited specific exceptions, it will not
seek to have a general rate increase become effective prior to
January 1, 1997, thus providing rate stability for three years;
(iii) for refunds and other payments to customers estimated to
aggregate approximately $11.7 million over the 1994-1997
period; and (iv) a cap on earnings above which JWS will share
with its customers its return on equity.
In 1986, the State of New York enacted a statute requiring The City of New York (the "City") to acquire by condemnation all of the JWS property constituting or relating to its water distribution system located in the City only if a Supreme Court of the State of New York (the "Supreme Court") decides that the amount of compensation to be paid for the system is determined solely by the income capitalization method of valuation. If the Court determines compensation by a method other than the income method capitalization or the award is for more than the rate base of the condemned assets, the statute permits the City to withdraw the proceeding without prejudice or costs. In 1988, the City instituted a proceeding pursuant to the statute to acquire the system which constitutes approximately 75% of JWS' water utility plant. JWS argued at trial that the judicially recognized method for valuing public utility property is by the method known as "Reproduction Cost New, Less Depreciation". JWS also sought consequential and severance damages that would result from separating the JWS Nassau County water supply system from that in the City. The aggregate amount sought by JWS as of December 31, 1987 was approximately $924 million. The City submitted its income capitalization valuation, as of December 31, 1987, at approximately $63 million.
In June 1993, the Supreme Court dismissed the City's petition. The Supreme Court concluded, among other things, that the statute is unconstitutional because it directs the Court to render an advisory opinion. In February 1994, the New York Court of Appeals held constitutional a nearly-identical statute dealing with another water utility. In April 1994, upon a request made by the City for reconsideration by the Court, the Court stated that it would reconsider its prior decision in light of the February decision of the Court of Appeals. The Company cannot predict when or if the Court will conduct further proceedings under the statute nor is it possible to predict what the decision of the Court might be if it decides to value the JWS property or the effect of the pending litigation on the proposed sale of JWS.
On September 26, 1994 certain holders of Warrants of Participation ("Warrants") that were issued pursuant to a Warrant Agreement dated June 15, 1969 by the Company's predecessor, Jamaica Water and Utilities, Inc. ("JWU"), commenced a declaratory judgment action against JWSC by filing a complaint in the Supreme Court of the State of New York, Westchester County, bearing the caption, Harold F. Scattergood, Jr., et al. v. Jamaica Water Securities Corp. (Index No. 15992/94). On October 17, 1994, an amended complaint was served adding additional plaintiffs.
Plaintiffs seek a declaration that JWSC is the successor to the Company's obligations under the Warrant Agreement by reason of its 1977 acquisition of JWU's 96% stock interest in JWS. Plaintiffs also claim that three events have triggered the Warrants, obligating JWSC to issue shares of its own stock to plaintiffs: (1) the 1988 filing by The City of New York of a condemnation proceeding and lis pendens seeking to condemn that part of the water distribution system of JWS located in Queens County; (2) the prosecution of that condemnation proceeding, which was subsequently dismissed by the court; and (3) a 1993 settlement agreement entered into by JWSC and JWS which settled unrelated matters involving the Public Service Commission, Nassau County and others. Plaintiffs claim that each of these events constituted a disposition of the assets of JWS which triggered the Warrants. In the alternative, plaintiffs claim that the Warrant Agreement's December 31, 1994 expiration date should be extended for some indefinite period. JWSC has moved to dismiss the complaint on the grounds that it fails to state a cause of action.
In connection with an investigation of the plumbing industry being conducted by the New York County District Attorney's Office, two related subsidiaries of the Company engaged in the plumbing business in New York City received subpoenas for certain of their books and records. The subsidiaries complied with those subpoenas. Additionally, certain employees of these subsidiaries were subpoenaed to testify as witnesses before a grand jury and those employees complied with the subpoenas.
As part of an investigation by the District Attorney's office of New York County into the business affairs of a general contractor that does business with the Company's subsidiary, Forest Electric Corporation ("Forest"), in February 1995, a search warrant was executed at Forest's executive offices. The Company has been informed that Forest and certain of its officers are targets of the investigation. Neither the Company nor Forest has been advised of the precise nature of any suspected violation of law.
The Dynalectric Company ("Dynalectric") is a defendant in an action entitled Computran v. Dynalectric, et al., pending in Superior Court of New Jersey, Bergen County, arising out of its participation in a joint venture. The plaintiff, Computran, a participant in, and a subcontractor to, the joint venture, alleges that Dynalectric wrongfully terminated its subcontract, fraudulently diverted funds due it, misappropriated its trade secrets and proprietary information, fraudulently induced it to enter into the joint venture and conspired with other defendants to commit certain acts in violation of the New Jersey Racketeering Influence and Corrupt Organization Act. Dynalectric believes that Computran's claims are without merit and intends to defend this matter vigorously. Dynalectric has filed counterclaims against Computran. Discovery is ongoing; no trial date is scheduled.
In addition to the above, the Company is involved in other legal proceedings and claims which have arisen in the ordinary course of business. The Company believes it has a number of valid defenses to these actions and the Company intends to vigorously defend itself in these matters and does not believe that a significant liability will result. However, the Company cannot predict the outcome thereof or the impact that an adverse result of the matters discussed above will have upon the Company's financial position or results of operations.
NOTE U Adoption of New Accounting Pronouncement
Effective January 1, 1994, the Company adopted the provisions of Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Post-employment Benefits" (SFAS 112). This standard requires that the cost of benefits provided to former or inactive employees be recognized on an accrual basis of accounting. Previously the Company recognized post-employment benefit costs (primarily short-term disability and severance costs) when paid. The cumulative effect of adopting SFAS 112 was to record a charge of $2.1 million or $0.05 per share as of January 1, 1994. Such amount has been reflected in the Consolidated Statements of Operations for the nine months ended September 30, 1994 under the caption "Cumulative Effect of Change in Accounting for Post-employment Benefits". The adoption of SFAS 112 did not have a material effect on the 1994 loss before cumulative effect of change in method of accounting for post-employment benefits.
Effective January 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards No. 106, "Accounting For Postretirement Benefits Other Than Pensions" (SFAS 106). The actuarial present value of the accumulated post-retirement benefit obligations under SFAS 106 approximated $7.0 million as of December 31, 1993. Such amounts relate to the Company's water supply business which is included in "Net Assets held for Sale" in the accompanying Consolidated Balance Sheets and "Discontinued Operations" in the accompanying Consolidated Statements of Operations.
NOTE V Other
JWS is subject to a PSC order which requires that dividend payments by JWS not exceed 50% of JWS's net income available to common shareholders for the preceding twelve month period and subject further to a debt/equity ratio restriction. Under the PSC order, approximately $2.6 million of JWS's retained earnings were available for the payment of dividends and $51.1 million of JWS's retained earnings were restricted as of September 30, 1994.
In September 1992, the PSC issued an order requiring additional certifications before the payment of JWS of cash dividends on its common stock. This resulted in the suspension of dividend payments by JWS on its common stock for the last two quarters of 1992 and all of 1993. Dividends on its common stock paid by JWS to the Company in 1992 and 1991 amounted to $1.2 million and $2.0 million, respectively. As a result of the Settlement Agreement described in Note T, JWS recommenced dividend payments on its common stock in 1994. Dividends paid by JWS to the Company on its common stock in the first nine months of 1994 amounted to $1.1 million.
NOTE W Pro Forma Balance Sheet Information (Unaudited)
The Company, effective December 31, 1994, will adopt Fresh Start Reporting in accordance with the American Institute of Certified Public Accountants Statement of Position 90-7 ("SOP 90-7") - "Financial Reporting by Entities in Reorganization under the Bankruptcy Code." Fresh Start Reporting will result in material changes to the consolidated balance sheet, including valuation of assets and liabilities at fair market value and valuation of equity based on the appraised reorganization value of the ongoing business.
The unaudited pro forma consolidated balance sheet information below has been prepared based on an assumption that Fresh Start Reporting and the Plan of Reorganization (see Note A) were adopted on September 30, 1994. The amounts and estimates reflected in the pro forma balance sheet are subject to change based on further information to be received by the Company. The following is a summary pro forma balance sheet of the post restructuring and fresh start adjusted balances as of September 30, 1994:
Pro Forma as of
September 30, 1994
Post Restructuring
and Fresh Start
(in thousands)
Assets:
Current assets $562,740
Non-current assets 156,748
Total assets $719,488
Liabilities and Shareholders' Equity:
Current liabilities $472,703
Long-term debt and obligations 165,655
Shareholders' equity 81,130
Total liabilities and shareholders' $719,488
equity
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SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF EMCOR GROUP, INC.
Balance Sheets
(In Thousands)
September 30, December 31,
1994 1993 1992
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents $ 8,699 $ 6,984 $ 59,963
Prepaid expenses and other current
assets 1,158 3,985 7,565
Net assets held for sale 75,593 20,454 32,894
Total Current Assets 85,450 31,423 100,422
Net assets held for sale - 63,161 85,611
Investments, notes and other long-term
receivables - 452 4,678
Property and equipment, net 740 982 3,499
Other assets, principally investments in
and amounts due from wholly-owned
subsidiaries 216,686 220,053 161,397
Total Assets $302,876 $316,071 $355,607
LIABILITIES AND SHAREHOLDERS
(DEFICIT) EQUITY:
CURRENT LIABILITIES:
Current maturities of long-term debt $ 558 $ 744 $ 1,686
Debtor-in-possession note payable 25,000 --- ---
Debt in default - 501,007 501,007
Accrued expenses and other current
liabilities 69,876 74,419 26,843
Total Current Liabilities 95,434 576,170 529,536
Long Term Debt - - 822
Other long-term obligations 30,372 42,163 1,228
Pre-consent date bankruptcy claims 501,007 --- ---
SHAREHOLDERS' (DEFICIT):
Common Stock 4,073 4,072 4,075
Other shareholders' (Deficit) (328,010) (306,334) (180,054)
Total Shareholders' (Deficit) (323,937) (302,262) (175,979)
Total Liabilities and Shareholders' $302,876 $316,071 $355,607
(Deficit)
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SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF EMCOR GROUP, INC.
Statements of Operations
(In Thousands)
For the Nine
Months Ended
September 30, Year Ended December 31,
1994 1993 1992 1991
(in thousands)
MANAGEMENT FEES FROM WHOLLY-OWNED SUBSIDIARIES $ 8,370 $ 16,632 $ 29,825 $ 27,280
Interest (expense) income from wholly-owned
subsidiaries (3,666) (2,265) 3,243 9,673
Other interest income 671 557 899 603
5,375 14,924 33,967 37,556
COSTS AND EXPENSES, NET:
General, administrative and other expenses 22,931 26,401 48,371 19,159
Interest expense 1,500 49,012 43,568 42,414
Net (gain) loss on businesses sold or held
for sale 532 (1,028) 76,078 6,628
Provision for losses on disposal of
discontinued operations - 20,350 49,491 -
24,963 94,735 217,508 68,201
(Loss) before income taxes, equity in net
(loss) income of subsidiaries and cumulative
effect of accounting change (19,588) (79,811) (183,541) (30,645)
(Benefit) for income taxes - - - (10,395)
Equity in net (loss) income of subsidiaries -
continuing operations (9,708) (54,530) (229,465) 24,962
Equity in net income (loss) of subsidiaries -
discontinued operations 9,386 11,263 (203,739) 24,263
Cumulative effect of accounting change 2,100 - 4,315 -
Net (Loss) Income $(22,010) $(123,078) $(612,430) $28,975
|
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF EMCOR GROUP, INC.
Statements of Cash Flows
(In Thousands)
For the Nine
Months Ended
September 30, Year Ended December 31,
1994 1993 1992 1991
Net (Loss) Income $(22,010) $(123,078) $(612,430) $ 28,975
Adjustment to Reconcile Net (Loss) Income
to Cash (Used In) Provided by Operating
Activities
Depreciation and amortization 301 353 3,790 2,641
Write-off deferred debt issuance cost - - 2,876 -
(Gain) loss on net assets held for sale
or sold (532) (1,028) 76,078 6,628
Provision for losses on disposal of
discontinued operations - 20,350 49,491 -
Cumulative effect of accounting change (2,100) - (4,315) -
Equity loss (income) of consolidated
subsidiaries 322 43,267 433,204 (49,225)
Other, net (21,327) - 17,962 1,743
(45,346) (60,136) (33,344) (9,238)
Change in Current Assets and Liabilities
Decrease (increase) in prepaid expenses and
other current assets 2,827 3,580 (3,135) 87
Increase (decrease) in accrued expenses and
(4,543) 61,175 11,317 (7,532)
other liabilities
Net Cash Provided by (Used in) Operations (47,062) 4,619 (25,162) (16,683)
Cash Flows from Financing Activities
Proceeds from debtor-in-possession note payable 25,000
Proceeds from long-term debt - - 60,000 30,000
Payments of long-term debt and capital lease
obligation (186) (225) (23,789) (45,375)
Proceeds from issuance of common stock and
exercise of stock options - - 1,911 2,169
Payment of preferred dividends - - (1,354) (711)
Acquisition of common stock for the treasury - - (8,130) (7,877)
Increase in notes payable, net - - 695 96,800
Increase in insurance cash collateral (12,566) - - -
Net Cash Provided by (Used in) Financing Activities 12,248 (225) 29,333 75,006
Cash Flows from Investment Activities
Proceeds from sale of businesses and other assets 4,458 43,400 138,971 10,066
(Increase) decrease in investments and amounts
due from wholly-owned subsidiaries 32,071 (100,773) (63,884) 27,611
Acquisition of businesses - - (19,581) (97,667)
Purchase of property and equipment, net of
- - (1,958) (1,392)
retirements
Net Cash (Used in) Provided by Investment
36,529 (57,373) 53,548 (61,382)
Activities
Increase (Decrease) in Cash and Cash Equivalents 1,715 (52,979) 57,719 (3,059)
Cash and Cash Equivalents at Beginning of Year 6,984 59,963 2,244 5,303
Cash and Cash Equivalents at End of Year $ 8,699 $ 6,984 $59,963 $ 2,244
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SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF EMCOR GROUP, INC.
Notes to Condensed Financial Statements
(1) Basis of Presentation
The Company's investment in subsidiaries is stated at cost plus equity in undistributed earnings (loss) of subsidiaries since dates of acquisition, less write-offs related to permanent impairment of cost in excess of net assets acquired. Net assets held for sale consist of the net assets of wholly-owned subsidiaries that the Company plans to sell. Such net assets are stated at the lower of cost or estimated net realizable value. These financial statements should be read in conjunction with the Company's consolidated financial statements.
(2) Debt in Default
For a discussion and description of pre-consent date bankruptcy claims, debt in default and long-term debt refer to Notes A, C, D and F of the consolidated financial statements of EMCOR Group, Inc. and Subsidiaries.
(3) Income Taxes
Effective January 1, 1994, the Company adopted the provisions of Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Post-employment Benefits" (SFAS 112). This standard requires that the cost of benefits provided to former or inactive employees be recognized on an accrual basis of accounting. Previously the Company recognized post-employment benefit costs (primarily short-term disability and severance costs) when paid. The cumulative effect of adopting SFAS 112 was to record a charge of $2.1 million or $0.05 per share as of January 1, 1994. Such amount has been reflected in the Consolidated Statements of Operations for the nine months ended September 30, 1994 under the caption "Cumulative Effect of Change in Accounting for Post-employment Benefits". The adoption of SFAS 112 did not have a material effect on the 1994 loss before cumulative effect of change in method of accounting for post-employment benefits.
Effective January 1, 1992, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). The adoption of SFAS 109 changed the Company's method of accounting for income taxes from the deferred method (APB 11) to an assets and liability approach. Previously, the Company deferred the past tax effect of timing differences between financial reporting and taxable income. The asset and liability approach requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable for the period and the change during the period in deferred tax assets and liabilities. Prior years' financial statements have not been restated for the accounting change. The cumulative effect of adopting SFAS 109 was to record an income tax benefit of $4.3 million or $0.11 per share as of January 1, 1992.
At September 30, 1994 and December 31, 1993 and 1992 (after having given effect to the adoption of SFAS No. 109), the valuation allowances recorded against deferred tax assets were $178.1 million, $170.1 million and $138.3 million, respectively.
(4) Guarantees
EMCOR Group, Inc. guarantees various obligations and credit agreements of its wholly-owned subsidiaries. In addition, EMCOR Group, Inc. guarantees a mortgage note payable in the unpaid principal amount of $6.0 million secured by land and building owned by a former subsidiary. EMCOR Group, Inc. also guaranties certain contracts and performance bonds of its subsidiaries.
EMCOR GROUP, INC.
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
Additions
Balance at Charged to Charged to
Beginning of Costs and Other Deductions Net Assets Balance End
Description Year Expenses Accounts <F2> <F1> Held for Sale of Year
Allowance for doubtful accounts
Nine months ended
September 30, 1994 $31,170 $1,196 $320 $(3,853) $- $28,833
Year ended December 31, 1993 $42,630 $13,663 $(892) $(24,231) $- $31,170
Year ended December 31, 1992 $29,541 $113,903 $10,591 $(78,715) $(32,690) $42,630
Year ended December 31, 1991 $14,564 $16,241 $13,091 $(14,355) $- $29,541
- --------------------------
Deductions represent uncollectible balances of accounts receivable written off, net of recoveries.
Amounts in 1992 and 1991 primarily represent valuation accounts related to companies acquired.
|
EXHIBIT INDEX
Exhibit No. Incorporated by reference to Registrant's
2(a) Disclosure Statement and Third Amended Joint Plan of
Reorganization (the "Plan of Reorganization") proposed by
EMCOR Group, Inc. (formerly JWP INC.) (the "Company" or
"EMCOR") and its affiliate, SellCo Corporation ("SellCo"),
as approved for dissemination by the United States
Bankruptcy Court, Southern District of New York (the
"Bankruptcy Court"), on August 22, 1994.
2(b) Modification to the Plan of Reorganization dated September
29, 1994.
2(c) Second Modification to the Plan of Reorganization dated
September 30, 1994.
2(d) Confirmation Order of the Bankruptcy Court dated September
30, 1994 (the "Confirmation Order"), confirming the Plan
of Reorganization, as amended.
2(e) Amendment to the Confirmation Order dated December 8,
1994.
2(f) Post-confirmation modification to the Plan of
Reorganization entered on December 13, 1994.
3(a-1) Certificate of Incorporation filed March 31, 1987 Exhibit 3(a-1) to Annual Report on Form 10-K for
fiscal year ended December 31, 1988
3(a-2) Copy of Agreement and Plan of Merger dated April 1, 1987 Exhibit (b) to Current Report on Form 8-K for August
between JWP INC., a New York corporation, and JWP INC. a 4, 1987
Delaware corporation
3(a-3) Certificate of Amendment to Certificate of Incorporation Exhibit 3(a-3) to Annual Report on Form 10-K for
filed May 17, 1990 fiscal year ended December 31, 1990
3(a-4) Certificate of Designation filed August 15, 1991 Exhibit 4.1 to Quarterly Report on Form 10-Q for the
quarter ended June 30, 1991
3(a-5) Restated Certificate of Incorporation of EMCOR filed
December 15, 1994.
3(b) By-Laws
4(a-1) Form of Subordinated Note Agreement executed April 10, Exhibit B to Current Report on Form 8-K for April 11,
1986 between the Registrant and each of several insurance 1986
companies
4(a-2) Composite Conformed Copy of Note Agreements dated as of Exhibit 4(a-8) to Annual Report on Form 10-K for
March 10, 1987 between the Registrant and each of several fiscal year ended December 31, 1986
insurance companies
4(a-3) Conformed Copy of Note Agreement dated as of December 15, Exhibit 4(a- ) to Annual Report on Form 10-K for
1987 between the Registrant and each of several insurance fiscal year ended December 31, 1987
companies
4(a-4) Conformed Copy of Senior Note Purchase Agreement dated as Exhibit 4(a-9) to Annual Report on Form 10-K for
of November 15, 1988 between Registrant and each of fiscal year ended December 31, 1988
several insurance companies
4(a-5) Conformed Copy of Senior Note Agreement dated as of Exhibit 4(a-11) to Annual Report on Form 10-K for
November 16, 1989 between Registrant and each of several fiscal year ended December 31, 1989
insurance companies
4.6 Indenture dated as of September 1, 1987, as amended by Exhibit 4(a) to Quarterly Report on Form 10-Q for the
First and Second Supplemental Indentures, pursuant to quarter ended June 30, 1990
which 7 3/4% Convertible Subordinated Debentures of NEECO,
Inc. were assumed by Registrant
4.7 Senior Note Agreement executed November 14, 1990 between Exhibit 4.13 to Form S-3 Registration Statement No.
Registrant and The Prudential Insurance Company of America 33-38381
4.8 Composite Conformed Copy of Senior Note Agreement executed Exhibit 4.14 to Form S-3 Registration Statement No.
November 28, 1990 between Registrant and each of several 33-38381
insurance companies
4.9 Conformed Copy of Senior Note Agreement executed November Exhibit 4.15 to Form S-3 Registration Statement No.
28, 1990 between Registrant and Provident National 33-43104
Assurance Co.
4.10 Conformed Copy of Senior Note Agreement executed March 14, Exhibit 4.15 to Form S-3 Registration Statement No.
1991 among the Registrant, New York Life Insurance Company 33-39550
and New York Life Insurance, an annuity corporation
4.11 Composite Conformed Copy of Senior Note Agreement executed Exhibit 4.16 to Annual Report on Form 10-K for fiscal
March 6, 1992 between the Registrant and several year ended December 31, 1991
purchasers
4.12 Form of Amended and Restated Credit Agreement dated as of Exhibit 4.12 to Annual Report on Form 10-K for fiscal
September 11, 1992 between Registrant and several banks year ended December 31, 1992
4.13 Form of Amendment dated as of September 30, 1992 between Exhibit 4.13 to Annual Report on Form 10-K for fiscal
Registrant and several banks with respect to the Amended year ended December 31, 1992
and Restated Credit Agreement
4.14 Form of Credit Agreement dated as of February 14, 1994 Exhibit 4.14 to Annual Report on Form 10-K for fiscal
among Registrant, certain subsidiaries thereof and Belmont year ended December 31, 1992
Capital Partners II, L.P.
4.15 Indenture, dated as of December 15, 1994, among EMCOR, MES
and SellCo, as guarantors, and IBJ Schroder Bank & Trust
Company, as trustee, in respect of EMCOR's 7% Senior
Secured Notes, Series A, Due 1997
4.16 Indenture, dated as of December 15, 1994, among EMCOR,
MES, as guarantor, and Shawmut Bank Connecticut, National
Association, as trustee, in respect of EMCOR's 11% Series
C Notes, Due 2001.
4.17 Indenture, dated as of December 15, 1994, between SellCo
and Shawmut Bank Connecticut, National Association, as
trustee, in respect of SellCo's 12% Subordinated
Contingent Payment Notes, Due 2004.
10(a-1) First Mortgage Indenture ("Mortgage") dated December 1, Exhibit B-1 to Form S-1, Registration Statement No. 2-
1936 of a subsidiary of Registrant, Jamaica Water Supply 3995 of JWS
Company ("JWS")
10(a-2) Supplemental Indenture to First Mortgage dated December 1, Exhibit 1 to Annual Report on Form 10-K for fiscal
1953 of JWS year ended December 31, 1953
10(a-3) Supplemental Indenture to First Mortgage dated May 1, 1962 Exhibit 1 to Current Report on Form 8-K for August
of JWS 1962 of JWS
10(a-4) Supplemental Indenture to First Mortgage dated May 1, 1970 Exhibit 4.21 to Form S-1, Registration Statement No.
of JWS 2-62590
10(a-5) Supplemental Indenture to First Mortgage dated February Exhibit 4.22 to Form S-1, Registration Statement No.
15, 1975 of JWS 2-62590
10(a-6) Supplemental Indenture to First Mortgage dated January 1, Exhibit 4.23 to Form S-1, Registration Statement No.
1978 2-62590
10(a-7) Supplemental Indenture to Mortgage dated as of April 1, Exhibit 10(a-7) to S-1, Registration Statement No. 2-
1981 of JWS 86988
10(a-8) Supplemental Indenture to Mortgage dated as of August 1, Exhibit 10(a-8) to Form S-1 Registration Statement No.
1983 of JWS 2-86988
10(a-9) Supplemental Indenture to Mortgage dated as of December 1, Exhibit 10(a-9) to Annual Report on 10-K for fiscal
1984 year December 31, 1985
10(b-1) Agreement and Plan of Merger dated as of June 3, 1991 Exhibit (c)(2) to the Schedule 14D-1
among Businessland, Inc., JWP INC., and JWP Acquisition,
Inc.
10(b-2) Asset Purchase Agreement dated July 16, 1993 by and among Exhibit 2 to Form 8-K; Date of Report; August 6, 1993
the Registrant, JWP Information Services, Inc. and ENTEX
Information Services, Inc.
10(c-1) Employment Agreement dated as of September 14, 1987 Exhibit 10(e) to Annual Report on Form 10-K for fiscal
between the Registrant and Sheldon I. Cammaker year ended December 31, 1987
10(c-2) Amendment dated March 15, 1988 to Employment Agreement Exhibit 10(f) to Annual Report on Form 10-K for fiscal
dated as of September 14, 1987 between Registrant and year ended December 31, 1987
Sheldon I. Cammaker
10(d) Letter Agreement dated November 16, 1992 between the Exhibit 10(d) to Annual Report on Form 10-K for fiscal
Registrant and Edward F. Kosnik year ended December 31, 1992
10(e) Letter Agreement dated December 21, 1992 between the Exhibit 10(e) to Annual Report on Form 10-K for fiscal
Registrant and Stephen H. Meyers year ended December 31, 1992
10(f) Amended and Restated Stock Option and Appreciation Rights Exhibit 10 to Form S-8 (No. 3-25151)
Plan
10(g) Senior Incentive Compensation and Restricted Stock Award Exhibit B to Proxy Statement for Annual Meeting of
Plan Stockholders held May 17, 1989
10(h) 1991 Stock Option Plan Exhibit A to Proxy Statement for Annual Meeting of
Stockholders held May 16, 1991
10(i) Directors' Retirement Plan Exhibit 10(i) to Annual Report on Form 10-K for fiscal
year ended December 31, 1991
10(j) 1991 Stock Option Plan for Non-Employee Directors Exhibit A to Proxy Statement for Annual Meeting of
Stockholders held May 21, 1992
10(k) 1992 Stock Option Plan Exhibit 10(k) to Annual Report on Form 10-K for fiscal
year ended December 31, 1992
10(l) Separation Agreement dated as of June 30, 1993 between Exhibit 10(l) to Annual Report on Form 10-K for fiscal
Registrant and Andrew T. Dwyer year ended December 31, 1992
10(m) Consulting Agreement dated as of June 30, 1993 between JWP Exhibit 10(m) to Annual Report on Form 10-K for fiscal
Mechanical/Electrical Services, Inc. and Andrew T. Dwyer year ended December 31, 1992
10(n) Restricted Stock Agreement dated as of November 24, 1992 Exhibit 10(n) to Annual Report on Form 10-K for fiscal
between Registrant and Edward F. Kosnik year ended December 31, 1992
10(o) Restricted Stock Agreement dated as of January 3, 1992 Exhibit 10(o) to Annual Report on Form 10-K for fiscal
between Registrant and David L. Sokol year ended December 31, 1992
10(p) Letter Agreement dated as of June 30, 1993 between Drake & Exhibit 10(p) to Annual Report on Form 10-K for fiscal
Scull Holdings Ltd. and Registrant and Steven H. Kornfeld year ended December 31, 1992
10(q) Letter Agreement dated August 21, 1992 between Registrant Exhibit 10(q) to Annual Report on Form 10-K for fiscal
and David L. Sokol year ended December 31, 1992
10(r) Employees' Severance Pay/Stay Bonus Plan, as amended and Exhibit 10(r) to Annual Report on Form 10-K for fiscal
restated as of March 16, 1994 year ended December 31, 1992
10(s) Restricted Stock Agreement dated as of January 15, 1993 Exhibit 10(s) to Annual Report on Form 10-K for fiscal
between Registrant and Stephen H. Meyers year ended December 31, 1992
10(t) Employment Agreement dated as of April 18, 1994 between Exhibit 10(t) to Annual Report on Form 10-K for fiscal
Registrant and Frank T. MacInnis. year ended December 31, 1992
10(u) 1994 Management Stock Option Plan
10(v) Reliance Insurance Companies' Underwriting and Continuing
Indemnity Agreement dated as of November 22, 1994, among
the Company, Dyn Specialty Contracting, Inc. ("Dyn"), B&B
Contracting & Supply Company ("B&B"), Dynalectric Company
("Dyn Co."), Dynalectric Company of Nevada ("Dyn-Nevada"),
Contra Costa Electric, Inc. ("Contra Costa"), Kirkwood
Electric Co., Inc. ("Kirkwood") and Reliance Surety
Company, Reliance Insurance Company, United Pacific
Insurance Company, Reliance National Indemnity Company,
Reliance National Insurance Company of New York and
Reliance Insurance Company of Illinois.
10(w) Form of Security Agreement dated as of November 22, 1994
made by each of Dyn, B&B, Dyn Co., Dyn-Nevada, Contra
Costa, and Kirkwood, in favor of and for the benefit of
Reliance Surety Company, Reliance Insurance Company,
United Pacific Insurance Company, Reliance National
Indemnity Company and Reliance Insurance Company of
Illinois.
10(x) Pledge Agreement dated November 22, 1994 between the
Company and Reliance Surety Company, Reliance Insurance
Company, United Pacific Insurance Company, Reliance
National Indemnity Company and Reliance Insurance Company
of Illinois.
10(y) Pledge Agreement dated November 22, 1994 between Dyn and
Reliance Surety Company, Reliance Insurance Company,
United Pacific Insurance Company, Reliance National
Indemnity Company and Reliance Insurance Company of
Illinois.
10(z) Subordination Agreement dated November 22, 1994 among Dyn,
Dyn Co., B&B, Dyn-Nevada, Contra Costa and Kirkwood and
Reliance Surety Company, Reliance Insurance Company,
United Pacific Insurance Company, Reliance National
Indemnity Company and Reliance Insurance Company of
Illinois.
10(aa) Credit Agreement dated December 14, 1994 among the
Company, MES, certain direct and indirect subsidiaries of
MES and Belmont Capital Partners II, L.P. and other
lenders (collectively, the "Lenders").
10(bb) Guarantor Security Agreement dated December 14, 1994 by
and among certain direct and indirect subsidiaries of MES,
the Lenders and CoreStates Bank, N.A., as agent for the
Lenders (the "Agent").
10(cc) Pledge and Security Agreement dated December 14, 1994 by
and among the Company, MES, the Lenders and the Agent.
10(dd) Credit Agreement dated December 14, 1994 among the
Company, Dyn, certain direct subsidiaries of Dyn and the
Lenders.
10(ee) Guarantor Security Agreement dated December 14, 1994 by
and among certain direct subsidiaries of Dyn, the Lenders
and the Agent.
10(ff) Pledge and Security Agreement dated December 14, 1994 by
and among the Company, Dyn, the Lenders and the Agent.
21 List of Subsidiaries
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Pursuant to Item 601(b)(4)(iii) of Regulation S-K, upon request of the Securities and Exchange Commission, the Registrant hereby undertakes to furnish a copy of any unfiled instrument which defines the rights of holders of long-term debt of the
Registrant's subsidiaries.
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- -----------------------------X
In re
:
CHAPTER 11
JWP INC.,
:
Case No.
93-B-46404 (JHG)
Debtor.
:
- ------------------------------X
ORDER (A) APPROVING THE DEBTOR'S THIRD AMENDED DISCLOSURE
STATEMENT, (B) ESTABLISHING PROCEDURES FOR SOLICITATION AND
TABULATION OF VOTES TO ACCEPT OR REJECT THE DEBTOR'S THIRD
AMENDED PLAN OF REORGANIZATION, AND (C)
SCHEDULING HEARING ON CONFIRMATION OF THE DEBTOR'S THIRD AMENDED
PLAN OF REORGANIZATION AND APPROVING NOTICE THEREOF
Upon the motion (the "Motion") of JWP INC. (the "Debtor") dated
August 9, 1994 for an order pursuant to (S)(S) 1125 and 1126 of
title 11 of the United States Code (the "Bankruptcy Code") and
Rules 3017, 3018 and 3020 of the
Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules")
scheduling (a) a hearing on approval of the Debtor's Proposed
Third Amended Disclosure
Statement, dated August 9, 1994, and a hearing (i) on
establishing procedures for solicitation and tabulation of votes
(the "Voting Procedures") to accept or
reject the Third Amended Joint Plan of Reorganization proposed by
the Debtor and its affiliate, SellCo Corporation ("SellCo"),
dated August 9, 1994 (the "Third Amended Plan"), and (ii)
scheduling a hearing on confirmation of the
Third Amended Plan and approving notice thereof; and notice of
the Motion having been given to the Official Committee of
Unsecured Creditors (the "Creditors' Committee"), the Official
Committee of Junior Creditors and Interest Holders (the "Junior
Creditors' Committee"), the United States
Trustee, the Securities and Exchange Commission (the "SEC"), all
parties who had requested a copy of the Debtor's Disclosure
Statement dated February 14, 1994 or any amendments thereto, and
all parties in interest that have filed notices pursuant to
Bankruptcy Rule 2002 in the Debtor's chapter 11 case; and
the Debtor's Second Amended Disclosure Statement, dated as of
July 21, 1994 (the "Second Amended Disclosure Statement") having
been approved by order of this Court on July 21, 1994; and the
Debtor having served proposed amendments to the Second Amended
Disclosure Statement (the "Amendments," the Second
Amended Disclosure Statement with the Amendments, the "Proposed
Third Amended Disclosure Statement"); and a hearing to consider
approval of the Amendments having been scheduled for August 22,
1994 (the "Disclosure Statement Hearing");
and due notice of the Disclosure Statement Hearing having been
given; and upon the record of the Disclosure Statement Hearing
and all of the proceedings had
before the Court; and the Court having determined after due
deliberation that the Proposed Third Amended Disclosure Statement
contains adequate information
as such term is defined in (S) 1125 of the Bankruptcy Code and
there appearing sufficient cause for approval thereof, it is
hereby
ORDERED that in accordance with (S) 1125 of the Bankruptcy Code and Bankruptcy Rule 3017(b), the Proposed Third Amended Disclosure Statement be, and it hereby is approved (as approved, the "Third Amended Disclosure Statement"); and it is further
ORDERED that the order of this Court dated July 21, 1994, (a) approving the Debtor's Second Amended Disclosure Statement, (b) establishing procedures for solicitation and tabulation of votes to accept or reject the Debtor's Second Amended Joint Plan of Reorganization proposed by the Debtor and SellCo, dated as of July 21, 1994 (the "Second Amended Plan"), and (c) scheduling a hearing on confirmation of the Debtor's Second Amended Plan and approving notice thereof, is hereby superseded by this Order; and it is further
ORDERED that the ballots (the "Ballots") and the notification of non-voting status (the "Notification") substantially in the form annexed hereto as Exhibit "A" be, and they hereby are approved; and it is further
ORDERED that, pursuant to Bankruptcy Rules 3017(c) and 3018(a), the holders of claims and interest holders of record as of July 21, 1994 (the "Record Date") in Classes 2, 3, 4(B), 4(C), 6, 7, 8, 9, 10 and 11 of the Third Amended Plan may vote to accept or reject the Third Amended Plan by indicating their acceptance or rejection of the Third Amended Plan on the Ballots provided therefor; and it is further
ORDERED that in order to be counted as a vote to accept or reject the Third Amended Plan, a Ballot must be executed by the holder of a claim or equity interest and returned to JWP INC. c/o Donlin, Recano & Company, Inc., ("Donlin Recano") either by (i) first class mail, at P.O. Box 2034, Murray Hill Station, New York, New York 10156-0701, or (ii) hand-delivery, Federal Express, overnight mail or other courier service, at 419 Park Avenue South, Suite 1206, New York, New York 10016, so that it is actually received no later than 5:00 p.m., New York time, on September 23, 1994; and it is further
ORDERED that any Ballot which has been executed and timely
received by Donlin Recano but which does not indicate an
acceptance or rejection of the Third
Amended Plan shall be deemed to be an acceptance of the Third
Amended Plan; and it is further
ORDERED that any election by the holder of a Class 4(B) or 4(C)
claim allowed in an aggregate amount greater than $10,000, to
reduce such claim in the aggregate to $10,000 and, in full
satisfaction of such claim, be treated as the
holder of a Class 4(A) claim under the Third Amended Plan, must
be made through the execution and return of the Ballot to Donlin
Recano in the manner set forth
above, so that it is actually received no later than 5:00 p.m.,
New York time on September 23, 1994; and it is further
ORDERED that any election by the holder of an allowed claim or interest in classes 7, 8, 9, 10 or 11 to receive $0.10 in lieu of each whole New Series Z Warrant that such holder is entitled to receive under the Third Amended Plan must be made through the execution and return of the Ballot to Donlin Recano in the manner set forth above, so that it is actually received no later than 5:00 p.m., New York time on September 23, 1994; and it is further
ORDERED that, solely for the purpose of voting to accept or
reject the Third Amended Plan and not for the purpose of
allowance of or distribution on account
of a claim, each claim entitled to vote to accept or reject the
Third Amended Plan be, and it hereby is, temporarily allowed in
an amount equal to the amount of such claim as set forth in the
schedules of assets and liabilities and the statement of
financial affairs filed by the Debtor as required by
Section 521 of the Bankruptcy Code and the Official Bankruptcy
Forms of the Bankruptcy Rules, and all amendments thereto (the
"Schedules") or, in the event that a proof of claim has been
timely filed, the amount set forth in such proof of
claim; provided, however, that (i) if a claim is not listed in
the Schedules, but is the subject of a timely filed proof of
claim, such claim shall be temporarily allowed for voting
purposes only and not for the purpose of
allowance or distribution in the amount set forth in such proof
of claim, (ii) if a claim for which a proof of claim has been
timely filed is filed as contingent or unliquidated either in
whole or in part, such claim shall be temporarily disallowed (to
the extent it is filed as contingent or unliquidated) for voting
purposes only and not for the purpose of allowance or
distribution, and (iii) if the Debtor has served and filed an
objection to a claim not later September 2, 1994, such claim
shall be temporarily disallowed for voting purposes only and not
for the purpose of allowance or distribution, except to the
extent and in the manner set forth in the objection; and it is
further
ORDERED that any claimant that challenges the allowance of its claim for voting purposes pursuant to the foregoing decretal paragraph of this Amended Order be, and it hereby is, required to obtain an order of this Court pursuant to Bankruptcy Rule 3018(a) temporarily allowing such claim for purposes of voting to accept or reject the Third Amended Plan prior to the last date for voting to accept or reject the Third Amended Plan; and it is further
ORDERED that the hearing on confirmation of the Third Amended Plan (the "Confirmation Hearing") shall be held before this Court at the United States Bankruptcy Court, Room 523, Alexander Hamilton Custom House, One Bowling Green, New York, New York on September 28, 1994 at 9:30 a.m., or as soon thereafter as counsel may be heard; and it is further
ORDERED that objections, if any, to confirmation of the Third
Amended Plan shall be in writing, and shall (a) state the name
and address of the objecting
party and the nature of the claim or interest of such party, (b)
state with particularity the basis and nature of each objection
to the Third Amended Plan and (c) be filed, together with proof
of service, with the Court (with a copy
to the Chambers of the Honorable Jeffry H. Gallet) and served by
4:00 p.m., New York time, on September 13, 1994 on the following
parties: (i) Stroock & Stroock & Lavan, Counsel for the Debtor,
Seven Hanover Square, New York, New
York 10004, Attention: Lawrence M. Handelsman, Esq., (ii) Weil,
Gotshal & Manges, Co-Counsel for the Creditors' Committee, 767
Fifth Avenue, New York, New York 10153, Attention: Michael F.
Walsh, Esq., (iii) Wachtell, Lipton,
Rosen & Katz, Co-Counsel for the Creditors' Committee, 51 West
52nd Street, New York, New York 10019, Attention: Chaim Fortgang,
Esq., (iv) Tenzer, Greenblatt,
Fallon & Kaplan, Counsel for the Junior Creditors' Committee, 405
Lexington Avenue, New York, New York 10174, Attention: James D.
Glass, Esq., and (v) the Office of the United States Trustee, 80
Broad Street, New York, New York 10004,
Attention: Craig Freeman, Esq.; and it is further
ORDERED that objections to the Third Amended Plan that are not timely filed may not be considered by the Court; and it is further
ORDERED that the Confirmation Hearing may be adjourned from time to time without further notice to holders of claims, holders of equity interests or other parties-in-interest other than the announcement of the adjourned hearing date in open court; and it is further
ORDERED that the Debtor be, and it hereby is, authorized and directed to mail or cause to be mailed by first-class mail, postage prepaid, no later than August 26, 1994 a copy of the notice (the "Notice") of, among other things, the Confirmation Hearing, substantially in the form annexed hereto as Exhibit "B", a copy of the Third Amended Disclosure Statement, including a copy of the Third Amended Plan (without exhibits), and a copy of this Order, to (i) all persons or entities that have filed proofs of claim with the Court on or before the Record Date, (ii) all persons or entities listed in the Debtor's Schedules and lists of equity security holders and all amendments thereto through the Record Date, (iii) all other known holders of claims or equity interests against the Debtor, if any, through the Record Date, (iv) any entity that has filed with the Court a notice of the transfer of a claim under Bankruptcy Rule 3001(e) on or before the Record Date, (v) all parties in interest that have filed a request for notice pursuant to Bankruptcy Rule 2002(i) in the Debtor's Chapter 11 case on or before the Record Date, (vi) Co-Counsel to the Creditors' Committee, (vii) Counsel to the Junior Creditors' Committee, (viii) the indenture trustees under any debt instruments of the Debtor, (ix) the Office of the United States Trustee, and (x) the Securities and Exchange Commission; and it is further
ORDERED that the Debtor be, and it hereby is, authorized and
directed to mail or cause to be mailed, together with the Notice
and the Third Amended Disclosure Statement, (i) a Ballot to the
holders of claims in Classes 2, 3, 4(B), 4(C), 6, 7, 8, 9, 10 and
11 of the Third Amended Plan and (ii) a
Notification to the holders of claims in Classes 1, 4(A) and 5;
and it is further
ORDERED that the Debtor be, and it hereby is, directed to cause the Notice to be published no less than twenty-five days prior to the date of the Confirmation Hearing in the national editions of The Wall Street Journal and The New York Times; and it is further
ORDERED that, pursuant to Bankruptcy Rule 3017(e), the Debtor be, and it hereby is, authorized to contact record holders of the Debtor's publicly traded securities to cause such record holders to forward to beneficial holders of those securities the Notice, Third Amended Plan, Third Amended Disclosure Statement and Ballot; and it is further
ORDERED that the provision of notice in accordance with the procedures set forth in this Amended Order shall be deemed good and sufficient notice of the Confirmation Hearing, the time fixed for filing objections to the Third Amended Plan and the time within which holders of claims may vote to accept or reject the Third Amended Plan; and it is further
ORDERED that the Debtor be, and it hereby is, authorized and empowered to take such steps and perform such acts as may be necessary to implement and effectuate this Order.
Dated:
New York, New York
August 22, 1994
/s/ Jeffry H. Gallet
- -----------------------------------------------------------
United States Bankruptcy Judge
|
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ------------------------------X
In re:
JWP INC., :
Debtor. :
- ------------------------------X
CHAPTER 11
No. 93-B-46404 (JHG)
THIRD AMENDED DISCLOSURE STATEMENT AND THIRD AMENDED JOINT PLAN
OF
REORGANIZATION PROPOSED BY THE DEBTOR AND ITS AFFILIATE, SELLCO
CORPORATION
STROOCK & STROOCK & LAVAN
Attorneys for JWP INC. Seven Hanover Square New York, New York
10004
212-806-5400
August 9, 1994
THIS IS NOT A SOLICITATION OF ACCEPTANCE OF THE PLAN. ACCEPTANCES MAY NOT BE SOLICITED UNTIL A DISCLOSURE STATEMENT HAS BEEN APPROVED BY THE BANKRUPTCY COURT. THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED BY THE BANKRUPTCY COURT.
TABLE OF CONTENTS
Page
I. INTRODUCTION.......................................... 1
A. About This Reorganization Case..................... 1
B. Confirmation Hearing............................... 3
C. Voting Instructions................................ 3
D. Objections......................................... 4
E. Events During the Reorganization Case.............. 5
1. Official Committees............................ 5
2. Debtor-in-Possession Financing................. 6
3. Surety Bonds................................... 7
4. Asset Sales.................................... 7
5. Avoidance Actions.............................. 8
II. SUMMARY............................................... 8
A. Summary of Classes and Treatment Under the Plan.... 8
B. Provisions for Employees........................... 13
C. Bar Date-Who Must File a Claim..................... 13
D. JWP's Senior Institutional Indebtedness............ 13
1. Old Credit Agreement........................... 13
2. Old Notes...................................... 14
E. Background Information............................. 14
1. Background of the Restructuring................ 14
2. The Standstill Agreements...................... 15
3. The "Software House" Collateral................ 15
4. The Asset Sales................................ 15
III. FINANCIAL INFORMATION................................. 18
A. Selected Historical Financial Information.......... 18
B. Unaudited Pro Forma Financial Information.......... 20
C. Projected Financial Information: 1994-1997
Assumptions........................................ 29
D. Valuation of Reorganized JWP....................... 43
IV. SUMMARY OF THE PLAN................................... 46
A. Property to be Distributed Under the Plan.......... 46
1. Senior Secured Notes........................... 46
2. Series C Notes................................. 48
3. SellCo Subordinated Contingent Payment Notes... 48
4. New Common Stock............................... 48
5. New Series X Warrants and New Series Y Warrants 49
6. New Series Z Warrants.......................... 49
7. New Securities for Debtor-in-Possession Lender. 50
8. JWP Supplemental SellCo Note................... 50
B. Classification and Treatment....................... 50
1. Unimpaired Claims Not Classified Under the Plan 50
2. Claims and Interests Classified Under the Plan. 50
C. Disputed Claims.................................... 61
D. Executory Contracts................................ 61
E. Implementation of the Plan......................... 61
1. Corporate Action............................... 61
2. 1994 Management Incentive Stock Option Plan.... 61
3. Listing of New Securities and Registration Rights 62
F. Conditions Precedent to Plan Effectiveness......... 62
1. Confirmation Order............................. 62
2. Class 4B Claims................................ 62
3. Working Capital Facility....................... 62
4. Indenture Qualification........................ 63
5. Waiver......................................... 63
6. Failure of Conditions.......................... 63
G. Releases, Setoffs and Recoupments, and Discharge.. 63
1. Releases....................................... 63
2. Setoffs and Recoupments........................ 63
3. Discharge and Injunction....................... 63
H. Retention of Jurisdiction by the Bankruptcy
Court............................................. 64
I. Miscellaneous..................................... 65
1. Fractional Shares or Debt Instruments and Cash
Option......................................... 65
2. Reservation of Warrants for the Businessland
Debentures..................................... 65
3. Business Days.................................. 65
4. Revesting of Assets............................ 65
J. Timing of the Distributions....................... 65
V. CERTAIN RISK FACTORS................................. 66
A. Payment of Senior Notes........................... 66
B. Working Capital Facility.......................... 66
C. Lack of Established Market for the New Securities. 66
D. Projections....................................... 67
E. Business Factors and Competitive Conditions....... 67
F. Dividends......................................... 67
G. Bonding Capacity.................................. 67
H. Public Utility Holding Company Act of 1935........ 67
VI. THE COMPANY.......................................... 68
A. Business.......................................... 68
1. Mechanical/Electrical Services................. 68
2. Supply of Water................................ 69
3. Information Services........................... 70
4. Other Business................................. 71
VII. REORGANIZED JWP...................................... 71
A. Business.......................................... 71
B. Corporate Structure............................... 71
1. MES............................................ 72
2. SellCo......................................... 72
VIII. MANAGEMENT AND MANAGEMENT STOCK OPTIONS.............. 73
A. Changes in Management............................. 73
B. Board of Directors of Reorganized JWP............. 73
C. Management of Reorganized JWP..................... 74
D. Description of the 1994 Management Stock
Option Plan....................................... 74
IX. LEGAL PROCEEDINGS.................................... 78
A. Shareholder Litigation............................ 78
B. Securities and Exchange Commission Investigation.. 79
C. New York County District Attorney Investigation... 79
D. Jamaica Water Supply Company...................... 79
1. Rate Related Proceedings and Rate Related
Litigation..................................... 79
2. New York City Condemnation Proceeding.......... 80
|
X. FEASIBILITY OF THE PLAN............................. 81
A. Payments on the Effective Date................. 81
B. Future Payments Under the Plan................. 82
XI. CONFIRMATION OF THE PLAN............................ 83
A. Hearing........................................ 83
B. Acceptance..................................... 83
C. Feasibility.................................... 83
D. Best Interests Test............................ 83
E. Confirmation Without Acceptance By All Impaired
Classes......................................... 84
1. Unfair Discrimination.................... 84
2. Fair and Equitable Standard............. 85
XII. ALTERNATIVES TO THE PLAN............................ 85
A. Alternative Plan of Reorganization............. 85
B. Liquidation Under Chapter 7.................... 86
XIII. SECURITIES LAW CONSIDERATIONS....................... 86
A. Issuance of Reorganization Securities.......... 86
B. Subsequent Transfers of Reorganization
Securities..................................... 86
XIV. CERTAIN FEDERAL INCOME TAX CONSEQUENCES............. 88
XV. CONCLUSION.......................................... 102
EXHIBITS
1. Plan of Reorganization (with exhibits separately bound and available upon request)
2. Creditors' Committee
3. Junior Committee
4. 1992 Financial Statements
5. Liquidation Analysis
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ----------------------------X
In re
:
CHAPTER 11
JWP INC.,
:
No. 93-B-46404 (JHG)
Debtor.
:
- ----------------------------X
THIRD AMENDED DISCLOSURE STATEMENT
I. INTRODUCTION
A. ABOUT THIS REORGANIZATION CASE
In the fall of 1993, JWP INC., a Delaware corporation ("JWP" or the "Debtor"), announced that it had reached an agreement in principle with holders of its senior debt to restructure its business and capitalization and, subject to documentation of such agreement, intended to file a prepackaged plan of reorganization. On December 21, 1993 (the "Petition Date"), an involuntary petition for a reorganization under Chapter 11 (the "Reorganization Case") of the United States Bankruptcy Code, 11 U.S.C. (S) 101 et seq. ("Bankruptcy Code") was filed against JWP in the United States Bankruptcy Court for the Southern District of New York ("Bankruptcy Court") by three subordinated debt holders asserting claims of $2,000,000, $20,000 and $50,000, respectively. On February 14, 1994 (the "Consent Date"), JWP filed a consent to the involuntary petition and an order for relief was entered. Under Sections 1107 and 1108 of the Bankruptcy Code, JWP continues to operate its businesses as a debtor-in-possession.
This Third Amended Disclosure Statement ("Disclosure Statement") is provided by JWP and its affiliate, SellCo Corporation ("SellCo"), in connection with the solicitation of votes from those holders of impaired claims and equity interests entitled to vote to accept or reject the proposed Third Amended Plan of Reorganization, dated August 9, 1994 ("Plan"), a copy of which is annexed hereto as Exhibit 1.<F1> A ballot is enclosed for each such holder. This Disclosure Statement is being provided to all other known parties in interest for information purposes. Creditors whose claims are not being impaired by the Plan are deemed to have accepted the Plan and, accordingly, are not being provided with a ballot. See the tabular description set forth under "Summary of Classes and Treatment under the Plan" immediately following this section to determine whether you are entitled to vote on the Plan.
This Disclosure Statement was approved by the Bankruptcy Court on August 22, 1994 as containing adequate information to enable a hypothetical reasonable investor typical of holders of claims against and interests in JWP to make an informed judgment about the Plan. The Bankruptcy Court's approval does not constitute a recommendation of or a determination on the merits of the Plan.
Each of the Statutory Committee of Unsecured Creditors and the
Official Committee of Junior Creditors and Interest Holders
participated in the negotiation of the Plan. BOTH COMMITTEES
RECOMMEND ACCEPTANCE OF THE PLAN BY THOSE PERSONS ENTITLED TO
VOTE. See "Events During the Reorganization Case-Official
Committees."
The Plan contemplates completion of the restructuring of JWP's business and capitalization which was begun in the Fall of 1992. During the restructuring process, the Company (i) developed an asset disposition plan and (ii) negotiated the consensual plan of reorganization, initially filed by JWP on the Consent Date, with unofficial steering committees of holders of senior debt in the aggregate principal amount of $484,366,000 under the Old Credit Agreement ("Old Credit Agreement Holders") and under the Old Notes ("Old Note Holders") (Old Credit Agreement Holders and Old Note Holders, each as defined below and referred to herein collectively as "Lenders"). See "Summary -Senior Institutional Indebtedness."
Until August 1993, JWP's principal businesses were divided into
three industry segments: Mechanical/ Electrical Services ("MES"),
Supply of Water, and Information Services ("IS"). The current
status of each such segment is described in greater detail below.
See "The Company." In summary, Reorganized
JWP intends to retain most of its core MES business, which
primarily provides mechanical and electrical systems and services
for large construction projects and commercial buildings (see
"The Company-Mechanical/Electrical Services").
JWP's two regulated water companies have not been offered for
sale by reason of rate-related proceedings and a condemnation
proceeding with respect to the New York City water properties
owned by one of those companies. The rate-related matters have
recently been resolved. Although the condemnation proceeding may
continue for some time, JWP expects to sell these companies in
the near future. See "The Company-Supply of Water," "Reorganized
JWP" and "Legal Proceedings-Jamaica Water Supply Company." The IS
business in the United States, United Kingdom, Japan, Canada, and
Germany, which provided computer and systems integration services
for medium and large-sized companies and other organizations, has
been sold. The IS business units in Belgium and France are
the subject of liquidation proceedings. See "The
Company-Information Services."
The Debtor is a holding company conducting all of its businesses through subsidiaries. Other than one domestic, one French and two Belgian subsidiaries which were engaged in the IS business, and which do not have substantial assets and are being liquidated (See "The Company-Information Services"), none of the Debtor's remaining subsidiaries ("Nondebtor Subsidiaries") has sought reorganization or liquidation under the Bankruptcy Code or any other insolvency law. The businesses and operations of the Nondebtor Subsidiaries are not subject to the Reorganization Case and will continue in the ordinary course during JWP's Reorganization Case.
Consummation of the Plan will result in the restructuring of JWP's debt and equity as described below. See "Summary of the Plan" and "Reorganized JWP." The Plan provides that, in addition to holders of administrative expense and priority claims, certain creditors (Classes 4A and 5) will remain unimpaired. Holders of impaired senior claims (Classes 2, 3, 4B and 4C) will receive a combination of debt ("New Debt Securities") and equity securities of Reorganized JWP ("New Common Stock"). The holders of JWP's Old Subordinated Debt (as defined below) (Class 6) will receive New Series X and New Series Y Warrants for New Common Stock. Holders of contingent and statutory subordinated claims (Class 7) and certain holders of impaired equity interests (Classes 8, 9, 10 and 11) may receive New Series Z Warrants for New Common Stock. (New Series X Warrants, New Series Y Warrants and New Series Z Warrants, collectively, "New Warrants") (New Debt Securities, New Common Stock and New Warrants, collectively, "New Securities"). See "Summary of the Plan."
THIS DISCLOSURE STATEMENT CONTAINS ONLY A SUMMARY OF THE PLAN. ALL DESCRIPTIONS OF THE PLAN IN THIS DISCLOSURE STATEMENT ARE QUALIFIED BY THE TERMS OF THE PLAN ITSELF WHICH ARE IN ALL INSTANCES CONTROLLING. ALL CREDITORS AND HOLDERS OF EQUITY INTERESTS ARE ENCOURAGED TO REVIEW THE FULL TEXT OF THE PLAN AND TO READ CAREFULLY THIS ENTIRE DISCLOSURE STATEMENT. PARTICULAR ATTENTION SHOULD BE GIVEN TO THE PROVISIONS AFFECTING EACH CREDITOR'S OR SECURITY HOLDER'S RIGHTS.
No person has been authorized to give any information or make any representation not contained in this Disclosure Statement, and if given or made, such information or representation must not be relied upon. The statements contained in this Disclosure Statement are made as of the date hereof, and neither delivery of this Disclosure Statement nor any exchange or issuance of New Securities pursuant to the Plan will, under any circumstances, create any implication that the information contained herein is correct at any time subsequent to the date hereof.
Holders of impaired claims and interests should not construe the contents of this Disclosure Statement as providing any legal, business, financial or tax advice. Each such holder should consult with its own legal, business, financial and tax advisors with respect to any such matters concerning this Disclosure Statement and the Plan and the transactions contemplated hereby and thereby.
B. CONFIRMATION HEARING
The Bankruptcy Court will hold a hearing to consider
confirmation of the Plan ("Confirmation Hearing") commencing at
9:30 a.m. on September 28, 1994 in Court
Room 523 located at The Alexander Hamilton Custom House, One
Bowling Green, New York, New York. The hearing may be adjourned
from time to time without further
notice other than by announcement in court on the scheduled or
adjourned date of such hearing. At the Confirmation Hearing, the
Bankruptcy Court will (i) determine whether the Plan has been
accepted by the requisite majority of each voting class (See
"Confirmation of the Plan-Acceptance"), (ii) hear and
determine all objections, if any, to the Plan and to confirmation
of the Plan, (iii) determine whether the Plan meets the
requirements of the Bankruptcy Code
(See "Confirmation of the Plan"), and (iv) determine whether the
Plan should be confirmed.
C. VOTING INSTRUCTIONS
After carefully reviewing the Plan<F2> and this Disclosure Statement and its exhibits, please indicate your vote on the enclosed Ballot, sign and date and return it in the envelope provided. In voting for or against the Plan, please use only the Ballot sent to you with this Disclosure Statement. General Unsecured Creditors in Class 4C who hold claims that are contingent, disputed or unliquidated will not be entitled to vote to accept or reject the Plan unless, upon motion of such creditor, the Bankruptcy Court has estimated such claim for voting purposes pursuant to Bankruptcy Rule 3018.
IN ORDER FOR YOUR BALLOT TO BE COUNTED, IT MUST BE COMPLETED AS
SET FORTH ABOVE AND RETURNED: IF BY MAIL, TO
IF BY HAND DELIVERY, FEDERAL EXPRESS OR OTHER COURIER, TO
JWP INC.
c/o DONLIN, RECANO & COMPANY
419 PARK AVENUE SOUTH
SUITE 1206
NEW YORK, NEW YORK 10016
ALL BALLOTS MUST BE RECEIVED NO LATER THAN 5:00 P.M., NEW YORK TIME, ON SEPTEMBER 23, 1994.
D. OBJECTIONS
Objections to confirmation of the Plan, if any, must be in
writing, must specify with particularity the provisions of the
Plan to which objection is made, and must be both filed with the
Clerk of the Bankruptcy Court and a copy
delivered to the Chambers of the Hon. Jeffry H. Gallet, Room 528
at The Alexander Hamilton Custom House, One Bowling Green, New
York, New York 10004 at or before 4:00 p.m. New York City Time on
September 13, 1994, with copies of
such objection to be delivered also at or before 4:00 p.m. New
York City time on September 13, 1994 to
STROOCK & STROOCK & LAVAN
Attorneys for JWP
Seven Hanover Square
New York, New York 10004
Attention: Lawrence M. Handelsman, Esq.
212-806-5400
WEIL, GOTSHAL & MANGES
Co-Counsel for the Creditors' Committee
767 Fifth Avenue
New York, New York 10153
Attention: Michael F. Walsh, Esq.
212-310-8000
WACHTELL, LIPTON, ROSEN & KATZ
Co-Counsel for the Creditors' Committee
51 West 52nd Street
New York, New York 10019
Attention: Chaim J. Fortgang, Esq.
Richard G. Mason, Esq.
212-403-1000
TENZER, GREENBLATT, FALLON & KAPLAN
Attorneys for the Junior Committee
405 Lexington Avenue
New York, New York 10174
Attention: James D. Glass, Esq.
212-573-4300
UNITED STATES TRUSTEE
80 Broad Street
New York, New York 10004
Attention: Craig Freeman, Esq.
212-668-2200
E. EVENTS DURING THE REORGANIZATION CASE
1. Official Committees
a. Statutory Committee of Unsecured Creditors. The Statutory Committee of Unsecured Creditors ("Creditors' Committee") was appointed, pursuant to Section 1102 of the Bankruptcy Code, by the United States Trustee for the Southern District of New York. It consists of seven members, holding claims in the aggregate amount of approximately $200 million. The members of the Creditors' Committee represent all senior creditors and are listed on Exhibit 2 hereto. The members of the Creditors' Committee are institutions holding senior debt which is treated in Classes 2 and 3 under the Plan, some of which institutions were represented on the unofficial steering committees that initially negotiated the terms of the Plan with JWP.
b. Official Committee of Junior Creditors and Interest Holders. Following the United States Trustee's denial of a request to appoint an additional creditors' committee consisting of holders of JWP's Old Subordinated Debt ("Subordinated Debtholders"), certain of those holders moved the Bankruptcy Court to direct the United States Trustee to appoint such a committee over the objections of the Debtor and the Creditors' Committee. Prior to the hearing on the motion, JWP and the Creditors' Committee, after discussions with certain Subordinated Debtholders, consented to the appointment of an Official Subordinated Debtholders' Committee (the "Subordinated Debtholders' Committee") in consideration of the proposed Subordinated Debtholders' Committee's (i) agreement to a schedule contemplating a hearing on confirmation of the Plan no later than June 23, 1994, (ii) agreement on the scope of the Subordinated Debtholders' Committee's role in the Reorganization Case, and (iii) agreement to a cap on the fees and expenses to be incurred by and on behalf of the Subordinated Debtholders' Committee.
The stipulation reflecting the agreement among the Debtor, the Creditors' Committee and the proposed Subordinated Debtholders' Committee, and approved by the Bankruptcy Court on April 1, 1994, provided, among other things, that those parties would jointly object to the appointment of any further additional committees. Subsequently, the Bankruptcy Court declined to appoint additional committees and ordered that the Subordinated Debtholders' Committee would represent all previously unrepresented creditors and interest holders and be deemed the Official Committee of Junior Unsecured Creditors and Interest Holders (the "Junior Committee")<F3>.
On April 14, 1994, the United States Trustee appointed the Junior Committee consisting of five members holding an aggregate $2,102,000 principal amount of junior subordinated debt. The members of the Junior Committee are listed on Exhibit 3 annexed hereto.
Pursuant to the stipulation, the Junior Committee's role is limited to the following: to review and analyze the valuation of JWP and its present and former subsidiaries, to investigate the treatment of holders of claims or interests junior to the Lenders in any proposed plan of reorganization, to investigate any potential avoidance claims, including claims for preference, fraudulent conveyance, improper transfers or equitable subordination, and to examine the financial dealings between JWP and its present and former Lenders. In addition, the fees and expenses of the Junior Committee, including but not limited to the fees and expenses of its attorneys and any financial advisor, shall not exceed $575,000, unless the Bankruptcy Court orders otherwise upon a determination that the incurrence of such additional fees and expenses is in the best interests of JWP's estate and necessary to protect the interests of junior creditors and equity holders.
In its investigation of the Debtor's businesses, asset sales and transactions with the Lenders, the Junior Committee served broad-ranging document demands upon the Debtor and its counsel and investment advisor and upon counsel for the Creditors' Committee. In response to the document demands, these parties produced and the Junior Committee examined several hundred thousand pages of documents relevant to its investigations. Following the document production, the Junior Committee took the depositions of four people to establish the facts with respect to the events of the past two years.
On a parallel track with the discovery, the Junior Committee's
investment advisor, Rothschild Inc., conducted several weeks of
due diligence for the purpose of establishing the reorganization
value of the Debtor. Rothschild Inc.'s valuation and the basis
on which it was made is set forth below.
Although differing from the valuation performed by the Debtor's
investment advisor, the Junior Committee valuation established
that reorganization value is not sufficient to pay senior
creditors in full. See "Financial Information-Valuation of
Reorganized JWP."
As a result of the investigation and the Rothschild Inc. valuation, the Junior Committee completed the negotiations leading to and supports the Plan which is now proposed by the Debtor and SellCo.
The Official Committees collectively represent all creditors of and interest holders in JWP and, among their other rights and duties, have monitored and will continue to monitor the progress of the Reorganization Case. The fees and expenses of any professionals retained, with approval of the Bankruptcy Court, by the Official Committees will be, subject to the further approval of the Bankruptcy Court, administrative expenses charged to JWP's estate.
2. Debtor-in-Possession Financing. In order to assure
continuity of operations during the Reorganization Case, JWP and
a substantial number of its Nondebtor Subsidiaries, as
Guarantors, entered into a credit agreement (the
"DIP Loan") with Belmont Capital Partners II, L.P.
("Belmont")<F4> that became initially effective upon the interim
approval of the Bankruptcy Court on February 16, 1994 and
approved by final order of the Bankruptcy Court on March
4, 1994. The DIP Loan provides a credit facility of up to $35
million during the Reorganization Case at an initial interest
rate of 12% per annum. The DIP Loan is secured by a perfected
first lien on substantially all of JWP's assets, including a
pledge of 100% of the capital stock of the Nondebtor
Subsidiaries which are Guarantors and, in most instances, a
perfected first lien on all of the assets of each Guarantor. The
DIP Loan is intended to be repaid on the Effective Date of the
Plan and matures by its terms on the earliest
of (i) one-year from its approval by the Bankruptcy Court, (ii)
the Effective Date of the Plan, (iii) termination of the DIP Loan
commitment, or (iv) the occurrence
of an event of default thereunder. The DIP Loan also contains an
affirmative covenant that JWP will obtain, within six months of
the initial advance under the DIP Loan, a commitment for the
financing necessary to assure implementation of the Plan. The
initial advance under the DIP Loan in the amount of
$15,000,000 occurred on February 17, 1994 and, as of the date
hereof, $25,000,000 in principal amount of borrowings were
outstanding thereunder. See "Summary of the Plan-Conditions
Precedent to Plan Effectiveness."
[FN] Assuming confirmation of the Plan on or about September 28, 1994 and an Effective Date on or before October 17, 1994, the Additional Interest Amount will be 3.5%. The calculations in this Disclosure Statement are based on the assumption of an Additional Interest Amount of 3.5%.
As of the date of this Disclosure Statement, JWP is in default
of certain covenants of the DIP Loan. Pursuant to written waivers
of default, dated April 27, 1994 and May 6, 1994, JWP has been
permitted to draw on its line of credit.
Under the circumstances, any future advances will require a
further written waiver of any defaults.
3. Surety Bonds. A crucial element of the MES business is the ability of the MES Nondebtor Subsidiaries to provide project owners or general contractors with bonds either for performance of contracts awarded ("performance bonds") or as a condition of bidding for contracts for future work ("bid bonds"). Prior to the Reorganization Case, Seaboard Surety Company ("Seaboard") was the primary source of performance and bid bonds for the largest portion of the MES business. As a condition of obtaining bonds from Seaboard, historically, JWP guaranteed the obligations of the MES Nondebtor Subsidiaries to Seaboard pursuant to a General Agreement of Indemnity ("GAI").
In order to enable the MES Nondebtor Subsidiaries to continue
to receive performance or bid bonds from Seaboard, JWP sought and
obtained the approval of the Bankruptcy Court for the terms of a
new agreement that covers any bonds executed or procured by
Seaboard after the Consent Date ("New Bonds").
Accordingly, JWP entered into a new general agreement of
indemnity ("New GAI") with Seaboard pursuant to which JWP
guaranteed the obligations of Nondebtor Subsidiaries under New
Bonds. Any claims arising under the New GAI will be
superpriority claims in the Reorganization Case, junior only to
(i) the claims of Belmont under the DIP Loan, (ii) the fees
payable to the United States Trustee pursuant to 28 U.S.C. (S)
1930 and (iii) the fees and expenses of professionals retained by
the Debtor and the Creditors' Committee, not to exceed
$1,500,000, exclusive of fees paid during the pendency of
the Reorganization Case. Superpriority claims, if any, granted to
any other bonding company which provides bonds during the
Reorganization Case shall not be afforded better treatment than
those of Seaboard. All superpriority Seaboard claims that are
fixed and liquidated as of the Effective Date will
be paid in cash, in full, on the Effective Date. All remaining
claims, i.e., contingent or unliquidated claims, under the New
GAI will be unimpaired, will not be discharged and will survive
as obligations of Reorganized JWP and MES.
A surety company, other than Seaboard, which had been the primary source of surety bonds for certain MES Nondebtor Subsidiaries, which together comprised approximately 20% of JWP's 1993 revenues of those MES subsidiaries which JWP currently plans to retain, is no longer engaged in the business of issuing such bonds. However, the absence of available bonding for these subsidiaries has not resulted in a material reduction in their backlog. The Debtor and these subsidiaries are actively engaged in discussions with another surety company which has substantially completed due diligence for the purpose of entering into a new surety bonding arrangement.
5. Avoidance Actions. Several parties in interest have asserted that an investigation into whether certain sales of assets, certain 1992 payments of asset sales proceeds in the amount of $51.9 million made in reduction of Old Credit Agreement debt and a 1992 pledge of the stock of certain Nondebtor Subsidiaries are transactions that are avoidable under the Bankruptcy Code as fraudulent conveyances, preferences or obtained through improper control. The Debtor has examined all such transactions and does not believe there is a basis for such assertions.
This Disclosure Statement sets forth the facts of those
transactions and, further, describes the Series A Secured Notes
to be distributed under the Plan, which Notes were specifically
negotiated to recognize and account for the
aforesaid $51.9 million payment by (i) issuing $51 million
principal amount of the Series A Secured Notes in respect of the
Lenders' aggregate unsecured claims only to the Old Note Holders
(Class 2) (and none to Old Credit Agreement Holders (Class 3))
(See "Background Information"), and (ii) providing to the
holders of all other senior impaired unsecured claims (except Old
Credit Agreement Holders) (Classes 4B and 4C) treatment equal to
that afforded the Lenders' aggregate unsecured claims by issuing
to Classes 4B and 4C an additional principal amount of Series A
Secured Notes in the same ratio to the aggregate Class 4B and 4C
claims as the $51 million principal amount of Series
A Secured Notes bears to the aggregate amount of allowed
unsecured claims in Class 2 and Class 3. See "Summary of the
Plan."
The $11,357,000 principal amount of Series B Secured Notes to be distributed under the Plan to Old Note Holders and Old Credit Agreement Holders, also described under "Summary of the Plan," reflects the 1992 stock pledge. The Debtor believes that the ninety-day period for which a preference might have been asserted in respect of the stock pledge expired in December 1992. The Junior Committee believes that the one-year preference period applies; even if this is true, the preference period would still have expired prior to the bankruptcy filing. The distribution of the Series B Secured Notes reflects the provisions of a December 1992 agreement between the Old Note Holders and the Old Credit Agreement Holders that the proceeds of the pledged stock (and subsequent substitute collateral) would be distributed pari passu among them.
The amount of Series A and Series B Secured Notes distributed to each of Classes 2, 3, 4B and 4C, as applicable, is taken into account in calculating the Residual Percentage of the remaining New Securities to be distributed among them. See "Background Information" and "Summary of the Plan."
II. SUMMARY
A. SUMMARY OF CLASSES AND TREATMENT UNDER THE PLAN
For a fuller description of each class and its treatment, see "Summary of the Plan-Classification and Treatment."
Unclassified Treatment
(Unimpaired)
No Solicitation
Deemed to Accept
Administrative Expense Paid in full in cash on the
Claims: all claims arising later of the Effective Date
on and after the Petition or when due unless the claim
Date for preservation of the holder has agreed to a
Estate. different treatment.
Paid in full in cash on the
later of the Effective Date
or the date such claim
becomes an allowed claim; or,
Priority Tax Claims: claims at the option of JWP, as
of governmental units under specified in Section
Section 507(a)(7) of the 1129(a)(9)(C) of the
Bankruptcy Code. Bankruptcy Code.
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Class 1 Treatment
(Unimpaired)
No Solicitation
Deemed to Accept
JWP believes that the only
priority claims will consist
of claims arising between the Allowed priority claims shall
Petition Date be paid in full in cash or, in
and the Consent Date. the case of employee claims
for vacation pay, if any,
reinstated on the Effective
Date, unless the claim holder
has agreed to a different
treatment.
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Class 2 - Old Note Holders Claims
Class 2 Treatment
(Impaired)
Vote Solicited
All claims of the Old Note (i) $51,000,000 principal
Holders arising under and amount of Series A 7% Senior
evidenced by the Old Notes, in Secured Notes of Reorganized
the aggregate principal amount JWP, plus (ii) $7,348,129
of $328,572,000, plus interest principal amount of Series B
thereon to the Petition Date 7% Senior Secured Notes of
in the amount of $29,593,112. Reorganized JWP, plus (iii)
$33,315,547 principal amount
of 11% Series C Notes of
Reorganized JWP, plus (iv)
$25,541,920 principal amount
of 12% SellCo Subordinated
Contingent Payment Notes, plus
(v) 4,997,332 shares of New
Common Stock.*
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Class 3 - Old Credit Agreement Holders Claims
Treatment
(Impaired)
Class 3 Vote Solicited
(i) $4,008,871 principal
amount of Series B 7%
Senior Secured Notes of
Reorganized JWP, plus (ii)
$18,175,748 principal amount
All claims arising under and of 11% Series C Notes
evidenced by the Old of Reorganized JWP, plus (iii)
Credit Agreement, in the $13,934,740 principal
principal amount of amount of 12% SellCo
$155,794,042, plus interest Subordinated Contingent
thereon to the Petition Payment Notes, plus (iv)
Date in the amount of 2,726,362 shares of New
$11,784,088. Common Stock.*
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Class 4 - General Unsecured Claims
Class 4 Treatment
All unsecured claims that are
not claims for administrative
expenses or priority tax See below: 4A, 4B and 4C.
claims or otherwise classified
in Class 1, 2, 3, 5, 6 or 7.
Class 4A - Convenience Class
Treatment
(Unimpaired)
No Solicitation
Deemed to Accept
All claims in Class 4 of any
holder that are $10,000 Paid in full, in cash on the
or less in the aggregate or, Effective Date or as soon
at the election of the as practicable thereafter.
holder, reduced to $10,000 in
the aggregate.
Class 4B -
Treatment
(Aggregate
4B and 4C)
(Impaired)
Vote Solicited
Other Borrowed Money Class 4
claims
All Class 4 claims which
constitute "Senior
Indebtedness" with respect to
Class 6 claims.
Class 4C -
(i) $8,427,520 principal
All Class 4 claims not amount of Series A 7%
included in Classes 4A and Senior Secured Notes, plus
4B. (ii) $8,508,704 principal
amount of 11% Series C Notes
of Reorganized JWP,
plus (iii) $6,523,340
principal amount of 12% SellCo
Subordinated Contingent
Payment Notes, plus (iv)
1,276,306 shares of New Common
Stock.*
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Class 5 - Unimpaired Contingent Claims
Treatment
Class 5 (Unimpaired)
No Solicitation
Deemed to Accept
(i) All unsecured claims that
are listed on Schedule
1 to the Plan, subject, in All Class 5 claims are
certain cases, to reinstated and the legal,
conditions precedent (see equitable and contractual
Schedule 1 to the Plan) rights of each holder of a
and (ii) all priority employee Class 5 claim are unaltered.
claims.
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Stock are calculated on the assumption that aggregate Class 4B and 4C allowed claims will be $85,000,000. If aggregate Class 4B and 4C allowed claims are greater or less than $85,000,000, the distribution of such New Securities to Classes 4B and 4C will vary. See the Table at "Summary of Plan-Classification and Treatment-General Unsecured Creditors-Class 4C" for the effect of an increase
or decrease in the aggregate amount of Class 4B and 4C claims
ultimately allowed.
Class 6 - Subordinated Debt Claims
Treatment
Class 6 (Impaired)
Vote Solicited
All claims of (i) holders of
$7,040,000 principal
amount of JWP's 73/4%
Convertible Subordinated
Debentures, due 2012, plus
interest thereon to the
Petition Date in the amount of If the claims in Classes 2, 3
$441,027 and (ii) and 4B, voting as a single
holders of $9,600,000 class, accept the Plan, (i)
principal amount of JWP's 600,000 five-year New
12% Subordinated Notes, due Series X Warrants, plus (ii)
1996, plus interest 600,000 five-year New
thereon to the Petition Date Series Y Warrants, each of
in the amount of which will entitle the
$1,411,200. holder to purchase one share
of New Common Stock.
Exercise Price:
(i) Series X: $12.55.
(ii) Series Y: $17.55.
The exercise prices of the New
Warrants are subject
to adjustment in order to
limit the recovery of the
holders of claims in Class 6
to 100% of their claims.
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Class 7 - Contingent and Statutory Subordinated Claims
Treatment
Class 7 (Impaired)
Vote Solicited
(i) The indemnification or
contribution claims, if
any, by current or former
officers and directors of
JWP or by other parties in If each of Classes 4C and 7
connection with the accepts the Plan, Class 7
claims asserted in AUSA Life will receive 1,388 two-year
Insurance Company, New Series Z Warrants,
et al. v. Andrew T. Dwyer et each of which will entitle the
al., 93 CIV. 6830 holder to purchase one
(CLB) (S.D.N.Y.) (the "Old share of New Common Stock at
Note Holders the exercise price of $50.00.
Litigation"), and (ii) any
intercompany claims that the If either of Classes 4C or 7
Court determines should be does not accept
subordinated to the Plan, Class 7 will not
general unsecured claims. receive or retain any
property under the Plan.*
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Class 8 - Old Preferred Stock Interests
Treatment
Class 8 (Impaired)
Vote Solicited
If each of Classes 4C, 6, 7
and 8 accepts the Plan,
Equity interests evidenced by Class 8 will receive 29,297
the issued and two-year New Series Z
outstanding shares of JWP's Warrants, each of which will
4.25% Convertible entitle the holder to
Exchangeable Preferred Stock. purchase one share of New
Common Stock at the
exercise price of $50.00. If
any of Classes 4C, 6, 7 or
8 does not accept the Plan,
neither Class 8 nor any
class junior to it will
receive or retain any property
under the Plan.*
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Class 9 - Old Common Stock and Certain Related Interests
Treatment
Class 9 (Impaired)
Vote Solicited
Equity interests evidenced by
(i) the issued and
outstanding shares of JWP's
Old Common Stock If each of Classes 4C, 6, 7,
and (ii) options, warrants, or 8, 9, 10 and 11 accepts the
rights, contractual or Plan, Class 9 will receive
otherwise, to acquire Old 195,667 two-year New
Common Stock, Series Z Warrants, each of
including (a) options issued which will entitle the
pursuant to the 1986 holder to purchase one share
Incentive Stock Option and of New Common Stock
Appreciation Plan; at the exercise price of
1991 Stock Option Plan; and $50.00. If any of Classes 4C,
1992 Stock Option 6, 7, 8, 9, 10 or 11 does not
Plan and (b) equity interests accept the Plan, Class 9
under the $43,000,000 will not receive or retain any
principal amount of property under the
Businessland, Inc. 51/2% Plan.*
Convertible Subordinated
Debentures, due 2007
and the related Share Issuance
Agreement, dated
August 6, 1993, between JWP
and ENTEX
Information Services, Inc.
Class 10 - Members of the Plaintiff Class Certified in In re JWP
INC. Securities Litigation.
Treatment
Class 10 (Impaired)
Vote Solicited
Claims against JWP in
connection with Old If each of Classes 4C, 6, 7,
Common Stock, within the 8, 9, 10 and 11 accepts the
meaning of Section Plan, Class 10 will receive
510(b) of the Bankruptcy Code, 22,059 two-year New
including those of Series Z Warrants, each of
(i) members of the plaintiff which will entitle the
class in the Shareholder holder to purchase one share
Litigation (ii) current or of New Common Stock
former officers or at the exercise price of
directors or other defendants $50.00. If any of Classes 4C,
asserting or capable 6, 7, 8, 9, 10 or 11 does not
of asserting reimbursement, accept the Plan, Class 10
indemnification or will not receive or retain any
contribution claims in property under the
connection with the Plan.*
Shareholder Litigation.
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Class 11 - Warrants of Participation
Treatment
Class 11 (Impaired)
Vote Solicited
If each of Classes 4C, 6, 7,
Equity interests evidenced by 8, 9, 10 and 11 accepts the
the 1,152,622 Plan, Class 11 will receive
Warrants of Participation 1,589 two-year Series Z
dated as of July 1, 1969. Warrants, each of which will
entitle the holder to
purchase one share of New
Common Stock at the
exercise price of $50.00. If
any of Classes 4C, 6, 7, 8,
9, 10 or 11 does not accept
the Plan, Class 11 will not
receive or retain any property
under the Plan.*
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Plan-Classification and Treatment."
B. PROVISIONS FOR EMPLOYEES
Because the Plan and the Reorganization Case relate only to JWP and not to its Nondebtor Subsidiaries, the rights of trade creditors and employees of such Nondebtor Subsidiaries are not affected by the filing of the Reorganization Case. Following the Consent Date, JWP obtained orders of the Bankruptcy Court designed to ensure that the employees of JWP are also unaffected by the filing.
Pursuant to the terms of the Plan, JWP intends that salaries or wages, as the case may be, expense reimbursements, accrued paid vacation, health-related benefits, and similar employee benefits of employees of JWP will be unimpaired under the Plan. To ensure the continuity of its work force and to accommodate further the unimpaired treatment of employee benefits, JWP sought the approval of the Bankruptcy Court to pay all accrued pre-petition salaries or wages and expense reimbursement, to permit employees to utilize their paid vacation time which accrued prior to the Petition Date and to continue paying medical benefits under JWP's health plan. The Bankruptcy Court has authorized the payment of pre-petition wages, including payment of medical benefits and utilization of accrued paid vacation time, up to $2,000 per employee. The Bankruptcy Court has also (i) approved a severance and stay bonus plan adopted by JWP in June 1993, as modified,<F7> and (ii) authorized JWP's contributions to the employee savings and retirement plans. Employee claims and benefits not paid or honored, as the case may be, prior to consummation of the Plan will be paid or honored in full upon consummation of the Plan or as soon thereafter as such payment or other obligation becomes due or performable. JWP believes the only employee claims that may remain on the Effective Date will be for unutilized vacation time.
C. BAR DATE - WHO MUST FILE A CLAIM
JWP has filed schedules listing every known creditor whose claim is proposed to be impaired under the Plan. Any person or entity asserting a claim that is proposed to be impaired under the Plan and whose claim is listed as contingent, unliquidated or disputed or who disagrees with the liquidated amount for which its claim is listed was required to file a proof of claim with the Bankruptcy Court. By a notice mailed on March 1, 1994 and published in the national editions of The Wall Street Journal and The New York Times on March 9, 1994, creditors were advised to examine the schedules filed with the Bankruptcy Court to determine whether they must file proofs of claim. All other impaired creditors listed on the schedules filed with the Bankruptcy Court are deemed to have allowed claims. Holders of equity interests were not required to file proofs of claim or interest unless they were asserting claims not based solely on the ownership of such interests.
The Bankruptcy Court fixed April 8, 1994 as the last date on which any creditor who was required to file a proof of claim must have filed such proof of claim ("Bar Date"). If such proof of claim was not timely filed, the impaired creditor will not participate in any distributions to which it might otherwise be entitled under the Plan and will be forever barred from asserting its claim against JWP.
Holders of claims arising from JWP's rejection of an executory contract or unexpired lease were not required to file claims by the Bar Date and will be given notice of such rejection and a period of twenty (20) days from such notice to file a proof of claim.
D. JWP'S SENIOR INSTITUTIONAL INDEBTEDNESS
The principal senior claims against JWP which are being impaired under the Plan are, in the aggregate, approximately $525,743,200. Those claims arise under the credit agreement and senior notes described below.
Fleet Bank (formerly Norstar Bank), as Agent and Issuing Bank,
and Credit Suisse, Bank of America National Trust and Savings
Association and Chemical Bank as co-lead managers ("Old Credit
Agreement") initially affording JWP an
unsecured credit facility, to which Banks JWP owed the aggregate
of approximately $155,794,042 principal amount and $11,784,088 of
accrued interest, totalling $167,578,130 at December 21, 1993
("Old Credit Agreement Debt").
2. Old Notes. A group of insurance companies or their successors and assigns (the "Old Note Holders") holding senior unsecured debt (the "Old Notes") issued by JWP, as follows:
Principal and
Interest Unpaid
Issued in the at December 21,
Notes Principal Amount 1993
- ---------------------------------------------- ---------------- ---------------
9.10% Senior Serial Notes due March 31, 1994.. $ 5,000,000 $ 5,390,647
9.33% Senior Serial Notes due March 31, 1995.. 5,000,000 5,412,445
9.51% Senior Serial Notes due March 31, 1996.. 5,000,000 5,421,727
9.65% Senior Serial Notes due March 31, 1997.. 5,000,000 5,428,944
9.83% Senior Serial Notes due March 31, 1998.. 5,000,000 5,439,120
9.10% Senior Notes due March 6, 2002.......... 60,000,000 64,768,016
9.95% Senior Notes due November 15, 2005...... 60,000,000 65,417,449
9.56% Senior Notes due November 30, 1997...... 5,000,000 5,421,827
10.25% Senior Notes due December 1, 1998...... 50,000,000 54,594,252
10.35% Senior Notes due November 30, 2005..... 50,000,000 54,648,074
10.27% Senior Notes due November 30, 2005..... 20,000,000 21,836,163
10.95% Senior Notes due December 15, 2002..... 30,000,000 33,095,314
9.25% Senior Notes due December 15, 1996...... 40,000,000 31,291,135
---------------- ---------------
TOTAL......................................... $340,000,000 $358,165,112
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E. BACKGROUND INFORMATION
1. Background of the Restructuring. JWP's unaudited 1992 financial statements (annexed hereto as Exhibit 4) reflect a net loss of approximately $600 million and negative cash flow from operations of approximately $50 million. These losses and negative cash flow were brought on by several circumstances, including rapid technology changes and price wars in the IS business, the costs of integrating numerous acquired MES and IS business units, and weakened economic conditions in the United States, Canada and the United Kingdom, particularly, in the construction industry, all of which combined to depress JWP's operating margins and to create a liquidity crisis. Consequently, JWP was unable to obtain an increased revolving credit facility in the Summer of 1992. From September 1992 until February 1994 when the DIP Loan was made, JWP did not have available undrawn credit facilities. Cash flow from operations was insufficient to meet JWP's debt service obligations and working capital requirements. Accordingly, JWP funded its operations from working capital and the proceeds of sales of business units and other assets.
In the second half of 1992, JWP developed an asset disposition
program to sell certain operations that were determined to be
non-core to its MES and domestic IS businesses. It was
subsequently determined that the Water Supply
business which had been identified for sale would not be sold,
due to litigation and uncertainties related to certain regulatory
proceedings. See "Legal Proceedings-Jamaica Water Supply
Company." Thereafter, in March 1993,
JWP's Board of Directors concluded that the personal computer
industry did not
provide the stable operating environment that JWP needed to
restructure, and
the decision was made to sell the domestic IS business.
Discussions with Lenders commenced in the second half of 1992 as JWP implemented the first phase of the asset disposition program. The asset disposition program was intended to cut costs, to raise funds to reduce indebtedness, and to narrow the focus of JWP's operations. A portion of the sales proceeds ($51,900,000) was used in October of 1992 to repay Old Credit Agreement Holders, pursuant to the terms of the Old Credit Agreement. These payments gave rise to negotiations with the Old Note Holders in late 1992, with the result that JWP, the Old Note Holders and the Old Credit Agreement Holders agreed on December 10, 1992 that the Old Note Holders would have a $51 million priority as against the Old Credit Agreement Holders from future asset sales and the cash flow of JWP (the "Intercreditor Agreement"). The asset sales did not provide sufficient cash to stabilize the working capital required for JWP's remaining business. As a result, JWP's business prospects began to deteriorate and its backlog started to decline rapidly in the face of adverse publicity and JWP's inability promptly to restructure its indebtedness.
After April 1993, JWP did not make principal payments or
interest payments on any of this indebtedness. As of the Petition
Date, JWP's principal indebtedness outstanding under its Old Note
Agreements and its Old Credit Agreement
aggregated $484,366,000. As of December 21, 1993, the principal
amount of the Old Subordinated Debt was $16,640,000.
2. The Standstill Agreements. Beginning in late 1992, JWP proposed a series of standstill agreements with its Lenders (the "Standstill Agreements") intended to afford JWP sufficient time to develop a plan to raise funds for debt repayment, reduce costs, and narrow the focus of JWP's operations. Although agreements in principle were reached concerning forbearance of remedies while reduced debt service was paid, no Standstill Agreements were actually executed. Since April 30, 1993, no standstill agreement in principle has been in place and JWP ceased making principal and interest payments. However, interest continued to accrue, until the Petition Date, under the terms of the respective loan agreements, which in certain circumstances include default rate premiums of an additional 2% and, in one case, 4%. At the Petition Date, the accrued interest on the aggregate debt to the Lenders was $41,377,200.
3. The "Software House" Collateral. On September 11, 1992, JWP pledged the stock of its subsidiary Software House, Inc. ("Software House") and certain other subsidiaries as collateral for its obligations under its Revolving Credit Agreement. In 1992, JWP sold substantially all of the assets of these subsidiaries (other than Software House) and applied the proceeds (which constituted a portion of the aforementioned $51,900,000) to reduce indebtedness under the Revolving Credit Agreement. Pursuant to the Intercreditor Agreement, it was agreed that all net proceeds from the sale or other disposition of Software House and other amounts received by the Lenders would be shared in accordance with the terms of the Intercreditor Agreement. However, no further principal payments were made to the Lenders after the 1992 asset sales except for the net proceeds, in the amount of $656,250, from the sale of Maris Equipment Company ("Maris") which was deposited with Fleet Bank as agent.
Subsequently, in May 1993 Software House sold substantially all of its assets and the Lenders agreed to permit JWP to use the net proceeds of approximately $11,357,000 for working capital upon the pledge by JWP of substitute collateral for Software House. JWP pledged as substitute collateral for Software House the stock of three of its subsidiaries consisting of University Energy Services of California Inc., Maris and JWP Telecom Inc. At or about the time the sale of Maris was consummated and as a condition to the Lender's consent to such consummation, JWP pledged as additional collateral the stock of its subsidiaries, JWP Pacific International Inc. and JWP Energy Products Inc.
Accordingly, the only secured portion of the obligations owing to the Lenders by JWP is secured at present by the outstanding capital stock of JWP Telecom, Inc., University Energy Services of California Inc., JWP Energy Products Inc., JWP Pacific International Inc., the stock of Maris and certain remaining assets of Maris (consisting of a $3.7 million note made by the purchaser of the Maris assets and guarantees and other rights and property relating to the sale).
4. The Asset Sales. Since September 1992, JWP, either itself or through its subsidiaries, has sold more than twenty businesses and certain other miscellaneous assets, generating approximately $143 million in cash proceeds. $51.9 million of these proceeds were paid in 1992 in respect of principal under the Old Credit Agreement. In 1993, approximately $656,250 was paid to and is being held by Fleet Bank, as agent, from the proceeds of the sale of Maris. In addition, the Bank of Montreal received $2.79 million in 1993 in reduction of a line of credit from the sale of real estate ("Scarborough building") on which it held a mortgage. The balance of the cash sales proceeds in the amount of approximately $87.97 million was or will be used by JWP for working capital and to maintain the operations of its remaining businesses.
The following table lists businesses and other assets sold since September 1992 and cash proceeds thereof.
Asset Sales Completed Since September 1992
(Dollars in Thousands)
Gross Cash Cash Received Total Gross
Received From Purchaser Amount of Cash
Transaction At Closing After Closing Received
- ----------------------------------------------------- ------------ -------------- --------------
September 1992-December 1992
JWP Amcec Corporation, JWP Air Technologies, Inc. and
Enviro-Gro Technologies Company(1)................... $ 68,900,000 $19,142,000 $ 88,042,000
NetFrame shares...................................... 1,400,000 -0- 1,400,000
------------ -------------- --------------
$ 70,300,000 $19,142,000 $ 89,442,000
January 1993 to date
New England Fertilizer Company Partnership Interest.. $ 2,500,000 $ -0- $ 2,500,000
A to Z Equipment Corp. .............................. 2,372,108 111,034 2,483,142
Businessland Canada, Ltd.(2)......................... 6,850,635 194,801 7,045,436
Software House, Inc.................................. 12,807,500 198,726 13,006,226
Sutter Hill Industries Inc........................... 1,407,840 443,081 1,850,921
Scarborough, Ontario building-Comstock(3)............ 2,793,960 -0- 2,793,960
NetFrame shares...................................... 2,062,500 -0- 2,062,500
Case/Acme Systems, Inc............................... 500,000 500,000 1,000,000
JWP Information Services, Inc........................ -0- -0- -0-
Hetra Computer & Communication Industries, Inc....... 827,107 621,944 1,449,051
JWP Information Services Ltd. (UK)(4)................ 2,620,571 -0- 2,620,571
Transtel Communications Ltd.(5)...................... 9,000 80,661 89,661
Huen Electric, Inc................................... 3,007,392 -0- 3,007,392
Afgo Engineering Corp. of Washington................. 325,000 -0- 325,000
Businessland Holding Ltd. (Japan).................... 2,700,000 -0- 2,700,000
Maris Equipment Company(6)........................... 350,000 306,250 656,250
JWP Controls Inc..................................... 1,616,049 -0- 1,616,049
JWP McPhee Inc....................................... 500,000 1,050,000 1,550,000
JWP Network Integration Services, Inc................ 2,277,804 -0- 2,277,804
Kerby Saunders-Warkol, Inc........................... 375,554 -0- 375,554
Resource Recovery Technologies, Inc. shares.......... 2,299,885 -0- 2,299,885
JWP Holdings GmbH.................................... 716,100 -0- 716,100
JWP Technical Services Corp.(7)...................... 402,000 402,000
JWP Pacific International(8)......................... 1,049,985 -0- 1,049,985
------------ -------------- --------------
$ 50,370,989 $ 3,506,497 $ 53,877,486
TOTALS............................................... $120,670,989 $22,648,497 $143,319,486
============ ============== ==============
- ------------------------------------------------------------------------------------------------
(1) Total gross amount received includes $21,044,000 repayment of working
capital advances from JWP INC. to the various operations.
(2) C$9,078,000 converted at C$1:US$0.7761
(3) C$3,600,000 converted at C$1:US$0.7761
(4) Pounds1,747,047 converted at Pounds1:US$1.50
(5) Pounds59,734 converted at Pounds1:US$1.50
(6) All cash proceeds have been directed into a creditor escrow account at Fleet Bank.
(7) Cash proceeds pledged to and reside in an account under the control of
Belmont Capital Partners, L.P. pursuant to the DIP Loan.
(8) Initial collection of balance sheet net assets; operations being liquidated.
|
In 1993, JWP's liquidity continued to worsen. This cash drain was a result of weakened operating performance, the required infusion of working capital into operating units, extraordinary legal, accounting and financial advisory fees, and the funding of a cash escrow account for payment of claims under JWP's partial self-insurance program, which was required because of JWP's inability to obtain letters of credit for this purpose.
In August 1993, JWP concluded Reorganized JWP should be built
around a smaller domestic and international MES business that
would be less volatile, require less capital and bonding, be
easier to control and manage and result in a significant
reduction in overhead costs. A number of factors were
considered in determining which MES units to retain and which to
sell. Subsidiaries that are to be retained generally have lower
bonding and capital requirements, can generate steady cash flow
from recurring maintenance and service revenues to
service Reorganized JWP's debt, operate in markets where growth
potential exists, have the management infrastructure to support
systems and significant growth and offer the opportunity for high
returns on net assets. The
international MES companies are to be retained to provide access
to markets which could provide higher margins and serve as a
buffer from U.S. business cycles.
III. FINANCIAL INFORMATION
A. SELECTED FINANCIAL INFORMATION
(Dollars in millions, except per share data)
The following table sets forth certain historical consolidated
financial data of JWP for the five years ended December 31, 1993.
This information has been derived from the Consolidated Financial
Statements of JWP, including the
respective notes thereto, included elsewhere herein and should be
read in conjunction with Management Discussion and Analysis of
JWP INC. and Subsidiaries Financial Statements and Results of
Operations and the unaudited pro forma financial information
included elsewhere herein. The information
presented for each of the four years ended December 31, 1993 is
unaudited. See "Financial Statements" (Exhibit 4 hereto) and "Pro
Forma Financial Information". See Note 1 to the Consolidated
Financial Statements regarding JWP's ability to continue as a
going concern, the class action lawsuit filed
against JWP, debt in default and the restatement of JWP's
Consolidated Financial Statements for the year ended December 31,
1991 and 1990. See also Notes (a) and (b) below with respect to
the restatement of the 1990 and 1991 financial statements,
respectively.
SELECTED HISTORICAL FINANCIAL DATA
(Dollars in millions, except per share data)
Years Ended December 31,
-----------------------------------------------------------------
1993 1992 1991 1990 1989
----------- ----------- --------------- --------------- ---------
(Unaudited) (Unaudited)
(Unaudited) (Unaudited) As Restated (b) As Restated (a)
Statement of Operations Data (a) (b) (c) (d):
Revenues:
Mechanical/Electrical Services........................... $2,194.7 $2,404.5 $2,318.1 $2,057.6 $1,547.6
Cost of sales............................................ 2,043.5 2,160.7 1,973.6 1,726.2 1,275.7
Selling, general and Administrative...................... 216.7 440.7 286.9 248.6 191.9
Restructuring charges.................................... - 38.7 - - -
----------- ----------- --------------- --------------- ---------
Total cost and expenses.................................. 2,260.2 2,640.1 2,260.5 1,974.8 1,467.6
Operating (Loss) Income.................................. (65.5) (235.6) 57.6 82.8 80.0
Interest expense, net.................................... (50.2) (44.2) (43.9) (36.6) (29.1)
Gain (loss) on net assets held for sale (sold)........... 1.0 (76.1) (6.6) - -
(Credit) provision for income taxes...................... (0.7) 7.6 2.4 17.5 18.7
----------- ----------- --------------- --------------- ---------
(Loss) income from continuing operations................. (114.0) (363.5) 4.7 28.7 32.2
(Loss) income from discontinued operations (e)
(Loss) income from discontinued operations, net of income
taxes.................................................... 11.3 (203.7) 24.3 21.6 14.4
(Loss) from disposal of businesses....................... (20.1) (49.5) - - -
----------- ----------- --------------- --------------- ---------
(Loss) income from discontinued operations............... (9.1) (253.2) 24.3 21.6 14.4
Cumulative effect of change in method of accounting for
income taxes............................................. - 4.3 - - -
Net (loss) income........................................ $(123.1) $(612.4) $29.0 $50.3 $46.6
=========== =========== =============== =============== =========
(Loss) income per share (a)(b)(c)(d):
Continuing operations.................................... $(2.84) $(9.00) $0.10 $0.75 $0.91
Discontinued operations (e).............................. (0.22) (6.24) 0.63 0.57 0.40
Cumulative effect of change in method of accounting for
income taxes............................................. - 0.11 - - -
----------- ----------- --------------- --------------- ---------
Net (loss) income per share.............................. $(3.06) $(15.13) $0.73 $1.32 $1.31
=========== =========== =============== =============== =========
Balance sheet data (at end of period) (a)(b):
Working capital (deficit)................................ (452.3) (364.9) 368.1 377.3 314.9
Property, plant and equipment, net....................... 39.3 51.1 323.4 249.0 226.4
Total assets............................................. 806.4 907.6 2,233.8 1,484.2 1,242.5
Long-term debt, including current maturities............. 4.5 6.0 463.0 381.3 326.7
Debt in default.......................................... 501.0 501.0 - - -
Capital lease obligations................................ 2.6 3.9 27.0 30.0 28.4
Shareholders' (deficit) equity........................... (302.3) (175.0) 456.1 370.5 311.9
Book value per common share.............................. (7.95) (4.84) 10.82 10.00 8.36
Other data:
Capital expenditures..................................... 17.3 68.4 58.8 44.2 43.6
Depreciation and amortization............................ 35.2 69.0 49.1 33.9 23.6
|
See accompanying notes to Selected Historical Data
NOTES TO SELECTED HISTORICAL FINANCIAL DATA
(a) JWP has restated its previously reported financial statements for the year ended December 31, 1990. As a result, net income for the year ended December 31, 1990 has been reduced from the previously reported amount of $59.3 million to $50.3 million and earnings per share reduced from $1.56 per share to $1.32 per share. The restatement of 1990 operating results reflects pre-tax charges consisting of $8.3 million related to continuing operations and $1.3 million to discontinued operations. The 1990 restatement of continuing operations reflects $4.8 million of adjustments to correct the accounting for goodwill and a net $3.5 million reduction in the carrying value of certain assets, primarily long-term investments. The 1990 restatement had the effect of decreasing shareholders' equity at December 31, 1990 by $9.1 million.
(b) JWP has restated its previously reported financial statements
for the year ended December 31, 1991. As a result, net income
for the year ended December 31, 1991 has been reduced from
the previously reported amount of $60.3 million to $29.0
million and earnings per share has been reduced from
$1.54 per share to $0.73 per share. The 1991 restatement
reflected pre-tax charges of $47.9 million, of which $36.7
million relates to continuing operations and $11.2 million
applicable to discontinued operations. The
1991 restatement of continuing operations reflected a $4.5
million increase
in insurance reserves, a $6.6 million loss from the sale of a
business
which the Company had decided to sell in 1991 and a $25.6
million reduction
in the carrying value of certain assets, principally
receivables.
Substantially all of the restated 1991 charges applicable to
discontinued
operations related to JWP's Information Services business and
included $9.9
million of costs and expenses relating to the acquisition of
Businessland,
Inc., which was acquired by JWP in August 1991. These costs
and expenses
were previously charged to reserves established as part of
the acquisition.
The 1991 restatement, together with the 1990 restatement,
described in Note
(a) above, had the effect of decreasing previously reported
shareholders'
equity at December 31, 1991 by $40.4 million.
(c) The Statement of Operations data include the results of the purchased businesses from acquisition dates except for the acquisition of Neeco, Inc. ("Neeco") on May 22, 1990. The acquisition of Neeco was accounted for as a pooling of interests and, accordingly, all financial data has been restated to include the accounts of Neeco, which data are included in discontinued operations.
(d) Net (loss) income per share has been adjusted to reflect a three-for-two stock split effected July 16, 1990 and a three-for-two stock split effected June 12, 1989.
(e) The Statement of Operations data has been reclassified for all periods presented to reflect JWP's Information Services and Supply of Water businesses as discontinued operations.
B. UNAUDITED PRO FORMA FINANCIAL INFORMATION
The unaudited Pro Forma Consolidated Balance Sheet as of
December 31, 1993 and the unaudited Pro Forma Consolidated
Statements of Operations for the year
ended December 31, 1993 set forth below have been prepared using
the principles of Fresh Start Accounting as required by the
American Institute of Certified Public Accountants' Statement of
Position 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code" and are based on the
historical unaudited consolidated financial statements of JWP,
adjusted to give effect to the Plan. The unaudited Pro Forma
Consolidated Balance Sheet reflects adjustments as if the Plan
described above had occurred on December 31, 1993
and also gives effect to other adjustments described therein. The
unaudited Pro Forma Consolidated Statements of Operations for the
year ended December 31, 1993 reflects adjustments as if the Plan
had occurred on January 1, 1993.
The pro forma financial information should be read in
conjunction with the historical consolidated financial
statements, including the notes thereto, and
Management's Discussion and Analysis of Financial Condition and
Results of Operations, included in Exhibit 4 to the Disclosure
Statement. The pro forma financial information does not purport
to be indicative of the financial
position or results that actually would have been obtained had
the restructuring been completed as of the date and for the
period presented or that may be expected in the future.
The pro forma data should be read together with the other
information contained herein under the headings "Selected
Historical Financial Information," and in Exhibit 4 hereto,
"Management Discussion and Analysis of
JWP and Subsidiaries Financial Statements and Results of
Operations for the three years ended December 31, 1992
(unaudited)" and "Management Discussion and Analysis of JWP and
Subsidiaries Financial Information for the two
years ended December 31, 1993 (unaudited)" and the unaudited
Consolidated Financial Statements of JWP and Subsidiaries and
related notes thereto as of December 31,
1992 and 1991 and for the three years ended December 31, 1992 and
the unaudited Condensed Consolidated Financial Statements of JWP
and Subsidiaries and related notes thereto as of December 31,
1993 and 1992 and for the two years ended December 31, 1993.
PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1993
(Unaudited)
Pro Forma Adjustments to record Proposed Plan Confirmatio
--------------------------------------------------------
Debt
Discharge
& Exchange FreshStart ProForma
of Stock Adjustments Reorganized
Historical (Note (b)) (Note (g)) (Note (h))
------------ ----------------- ------------ ------------
(In thousands)
ASSETS
Current Assets
Cash and cash equivalents.................................. $ 39,534 $ - $ - $39,534
Accounts receivable, net................................... 455,944 - - 455,944
Costs and estimated earnings in excess of billings on
uncompleted contracts...................................... 61,987 - (2,259) 59,728
Inventories................................................ 5,221 - - 5,221
Prepaid expenses and other................................. 13,240 - - 13,240
Net assets held for sale................................... 20,454 - - 20,454
------------ ----------------- ------------ ------------
Total Current Assets....................................... 596,380 - $(2,259) 594,121
------------ ----------------- ------------ ------------
Net assets held for sale................................... 63,161 (20,787)(c) - 42,374
Investments, notes and other long-term receivables......... 19,737 - - 19,737
Property, plant and equipment, net......................... 39,266 - (6,360) 32,906
Other assets
Excess of cost of acquired businesses over net assets, less
amortization............................................... 58,973 - (58,973) -
Miscellaneous.............................................. 28,925 - (3,688) 25,237
------------ ----------------- ------------ ------------
87,898 - (62,661) 25,237
------------ ----------------- ------------ ------------
Total Assets............................................... $806,442 $(20,787) $(71,280) $714,375
============ ================= ============ ============
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Current Liabilities
Notes payable.............................................. $ 172 $ - $ - $ 172
New working capital facility (a)........................... - - - -
Current maturities of long-term debt and capital lease
obligations................................................ 2,327 10,613 (c) (529) 12,411
Debt in default............................................ 501,007 (501,007)(c) - -
Accounts payable........................................... 209,867 (400)(d) - 209,467
Billings in excess of costs and estimated earnings on
uncompleted contracts...................................... 115,179 - - 115,179
Other accrued expenses and liabilities..................... 220,152 (91,959)(d) 21,079 149,272
------------ ----------------- ------------ ------------
Total Current Liabilities.................................. 1,048,704 (582,753) 20,550 486,501
------------ ----------------- ------------ ------------
Long-term debt............................................. 2,538 127,957 (c) (14,720) 115,775
------------ ----------------- ------------ ------------
Other long-term obligations and deferred credits........... 57,462 (29,493)(d) 3,000 30,969
------------ ----------------- ------------ ------------
Shareholders' (Deficit) Equity
Old Series A Preferred Stock............................... 21,250 (21,250)(e) - -
Old Common Stock........................................... 4,072 (4,072)(e) - -
New Common Stock........................................... - 933 (e) - 933
Old Warrants of Participation.............................. 576 (576)(e) - -
New Warrants............................................... - - (e) 2,179 2,179
Capital surplus............................................ 204,247 24,965 (e) (151,194) 78,018
Cumulative translation adjustment.......................... (6,068) - 6,068 -
(Deficit).................................................. (526,339) 463,502 (f) 62,837 -
------------ ----------------- ------------ ------------
Total Shareholders' (Deficit) Equity....................... (302,262) 463,502 (80,110) 81,130
------------ ----------------- ------------ ------------
Total Liabilities & Shareholders' (Deficit) Equity......... $ 806,442 $ (20,787) $(71,280) $714,375
============ ================= ============ ============
|
See Notes to Pro Forma Consolidated Balance Sheet
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(Unaudited)
The following notes set forth an explanation of the assumptions used in preparing the unaudited Pro Forma Consolidated Financial Statements. All amounts are in thousands, except per share data.
(a) Excludes any outstanding balances under an anticipated post-confirmation domestic working capital facility of approximately $40 million. The Company expects that the average outstanding balance for the first year of the facility will approximate $15 million.
(b) Reflects adjustments relating to discharge of debt and exchange of newly issued debt and equity securities under the restructuring.
(c) Reflects the discharge of old debt and issuance of new debt under the restructuring as follows:
Historical Restructure Pro
Carrying Discharge/ Forma
Amount Exchange Balance
---------- ----------- ---------
Senior Notes Payable under Revolving Credit Facility............... $155,795 $(155,795) -
Senior Notes Payable under various indentures...................... 328,572 (328,572) -
Subordinated Note Payable.......................................... 9,600 (9,600) -
Convertible Subordinated Debentures................................ 7,040 (7,040) -
---------- -----------
Total Debt in Default.............................................. $501,007 $(501,007) -
========== ===========
Other Senior Notes (included in current maturities of long-term
debt).............................................................. $ 744 $ (744) -
========== ===========
New 7% Series A Senior Secured Notes (included in long-term
debt).............................................................. - $60,781 $ 60,781
=========== =========
New 7% Series B Senior Secured Notes (included in current
maturities of long-term debt)...................................... - $11,357 $11,357
=========== =========
New 11% Series C Senior Subordinated Notes (included in
long-term debt).................................................... - $62,176 $62,176
=========== =========
New 12% SellCo Subordinated Contingent Payment Non-Recourse Notes.. - 47,668 47,668
Estimated Discount to Reflect Amounts Available to Redeem
Non-Recourse SellCo Notes.......................................... - (26,881) (26,881)
----------- ---------
Total SellCo Subordinated Contingent Payment Notes
(included in net assets held for sale-long-term)................... - $20,787 $20,787
=========== =========
New 8% Supplemental SellCo Note (included in long-term
debt).............................................................. - $ 5,000 $ 5,000
=========== =========
Total.............................................................. $501,751 $(341,650) $160,101
========== =========== =========
|
The proforma adjustments to the recorded debt balances reflect the differences between the historical carrying amounts of the old debt securities and the face amount of the new debt securities issued under JWP's restructuring plan. The 7% Series B Senior Secured Notes are included in current maturities of long-term debt because JWP anticipates that such notes will be redeemed within one year from the net proceeds of sales of related assets.
It has been assumed that the Additional Interest Amount payable
to Belmont will be equivalent to a 3.5% share of the Series A
Senior Secured Notes, the Series C Notes, the SellCo Subordinated
Contingent Payment Notes and the New
JWP equity securities, including warrants (but excluding the
Management Stock Options). Accordingly, the total face amount of
the new debt securities, the new warrants and the number of New
JWP Common Shares issued reflect the
additional 3.5% distribution to Belmont. An equivalent 3.5%
amount of Series B Senior Secured Notes is assumed to be paid in
cash in lieu of additional Series B Senior Secured Notes.
(d) Reflects reduction of recorded amounts of accrued interest, insurance reserves, other impaired liabilities and unexpired
leases to be rejected by JWP as follows:
(In thousands)
--------------------------------------
Accounts Accrued Long-term
Payable Expenses Liabilities Total
-------- -------- ----------- --------
Accrued interest.............................. $ - $ 43,315 $ - $ 43,315
Insurance reserves............................ - 9,600 26,800 36,400
Amount due to JWP Information Services, Inc... - 24,933 - 24,933
Foreign debt guarantees....................... - 6,037 - 6,037
Stock price guarantees........................ - 5,118 - 5,118
Preferred dividends in arrears................ - 2,257 - 2,257
Unexpired leases.............................. - - 1,718 1,718
Director's retirement benefits................ - - 975 975
Other impaired claims......................... 400 699 - 1,099
-------- -------- ----------- --------
Total......................................... $ 400 $ 91,959 $29,493 $121,852
======== ======== =========== ========
|
(e) Reflects the elimination of the recorded book value of Old Common Stock, Old Preferred Stock and Warrants of Participation upon consummation of the restructuring and the issuance of 1,502,591 New Warrants and 9,326,425 shares of New Common Stock, $.10 par value.
(f) Deficit was reduced by the following:
(g) JWP has accounted for the reorganization using fresh-start reporting.
Accordingly, all assets and liabilities are restated to
reflect their reorganization value, which approximates
estimated fair value at the date of confirmation assuming a
reorganization equity value of $81,130 including
$2,179 allocated to the New Warrants on the basis of a
valuation made by
JWP's financial advisor. See "Financial
Information-Valuation."
The following table summarizes the estimated adjustments to record the reorganization under fresh-start accounting in accordance with AICPA Statement of Position 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code. The adjustments made to the respective asset and liabilities categories are preliminary estimates. The allocation of reorganization equity value to the individual assets and liabilities will be made after consummation of the restructuring.
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(Unaudited) (Continued)
Footnote (g) (continued)
Fresh Start Accounting Adjustments (In thousands)
Costs in Net Assets Property
Excess of Held Plant & Misc.
Billings For Sale Equipment Goodwill Assets Deficit
---------- ---------- ---------- ----------- ---------- ---------
Assets
To record discounted value of 12% SellCo Notes using a dis-
count rate of 14%............................................... 3,819 3,819
To record accrued interest to maturity on 12% SellCo Notes
based upon discounted proforma carrying value and assum-
ing a discount rate of 14%...................................... (3,819) (3,819)
To eliminate goodwill and other intangible assets............... (58,973) (5,488) (64,461)
To reflect costs and estimated earnings in excess of billings at
estimated fair market value..................................... (2,259) (2,259)
To reflect fixed assets at estimated fair market value.......... (6,360) (6,360)
To reflect unamortized debt issuance expense on post-confir-
mation working capital credit facility.......................... 1,800
---------- ---------- ---------- ----------- ----------
$ (2,259) $ 0 $ (6,360) $ (58,973) $ (3,688)
========== ========== ========== =========== ==========
|
Current Other Cumulative
Maturities Accrued Long-Term Long-Term New Capital Translation
Long-Term Debt Expenses Debt Liabilities Warrants Surplus Adjustments
-------------- -------- ---------- ----------- -------- ----------- -----------
Liabilities
To record 7% Series A and Series B
Senior Notes at estimated fair
market value using a discount
rate of 12%......................... (529) (4,200) 4,729
To record 11% Series C Senior Sub-
ordinated Notes at estimated fair
market value using a discount
rate of 14%......................... (9,282) 9,282
To record 8% Supplemental SellCo
Note at estimated fair market
value using a discount rate of
14%................................. (1,238) 1,238
To reflect liability for cash to be
paid in lieu of issuance of certain
Series B Senior Notes............... 412 (412)
To adjust for above fair market
value leases........................ 2,000 3,000 (5,000)
To reflect accrued severance and
other post-employment liabili-
ties................................ 3,000 (3,000)
To reflect accrued interest on Debt-
or-in Possession financing.......... 1,367 (1,367)
To reflect accrued professional and
other fees related to confirmation
of the proposed plan................ 7,500 (7,500)
To reflect accrued debt issuance
costs on post-confirmation work-
ing capital facility................ 1,800
To record potential Federal and
State income tax liability arising
from the sale of water compa-
nies................................ 5,000 (5,000)
Equity
To eliminate cumulative translation
adjustment.......................... 6,068 (6,068)
To eliminate deficit................ (229,212) 229,212
To record estimated fair value of
new warrants........................ 2,179 (2,179)
To record reorganization equity
value in excess of par value of
common stock........................ 78,018 (78,018)
-------------- -------- ---------- ----------- -------- ----------- ----------- ---------
$(529) $21,079 $(14,720) $3,000 $2,179 $(151,194) $6,068 $62,837
============== ======== ========== =========== ======== =========== =========== =========
|
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(Unaudited) (Continued)
(h) See "Historical and Pro Forma Capitalization" of JWP which sets forth the unaudited consolidated capitalization of JWP as of December 31, 1993 as if the Plan became effective on such date.
(i) JWP has a net operating loss carryforward for U.S. income tax purposes which approximates $500 million and which expires in years through 2008.
The proforma financial statements assume that the amount of
net operating loss carryforwards available to offset
post-confirmation
taxable income
will be subject to restrictions and substantial reductions
governed by
Section 382 of the Internal Revenue Code.
Additionally, the pro forma financial statements assume that any
net deferred tax asset which may be recognized for financial
reporting purposes will be offset by a valuation allowance of the
same amount, which valuation allowance
would be attributable to the uncertainty of the realization of
the re-confirmation net operating loss carryforward.
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(Unaudited) (Concluded)
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
(In thousands, except per share data)
(Unaudited)
Pro Forma Adjustments
------------------------------
Operations
Sold, or Other
Held for Sale Pro Forma Pro Forma
Historical (Note (a)) Adjustments Reorganized
----------- ------------- ---------------- --------------
Revenues................................... $2,194,735 $(340,413) $ - $1,854,322
Costs and Expenses
Cost of sales.............................. 2,043,558 (313,390) - 1,730,168
Selling, general and administrative........ 216,709 (32,938) (20,269)(b) 163,502
----------- ------------- ---------------- --------------
2,260,267 (346,328) (20,269) 1,893,670
----------- ------------- ---------------- --------------
Operating (Loss)........................... (65,532) 5,915 20,269 (39,348)
Interest expense, net...................... (50,187) 476 30,699 (c) (19,012)
Gain on sale of businesses................. 1,028 (1,028) - -
----------- ------------- ---------------- --------------
(Loss) Before Income Taxes................. (114,691) 5,363 50,968 (58,360)
(Credit) provision for income taxes........ (700) - - (700)
----------- ------------- ---------------- --------------
(Loss) From Continuing Operations.......... (113,991) 5,363 50,968 (57,660)
----------- ------------- ---------------- --------------
Discontinued Operations
(Loss) from operations..................... 11,263 (11,263) - -
(Loss) from disposal of businesses......... (20,350) 20,350 - -
----------- ------------- ---------------- --------------
(Loss) from discontinued operations........ (9,087) 9,087 - -
----------- ------------- ---------------- --------------
Net (Loss)................................. (123,078) 14,450 50,968 (57,660)
Old Preferred Stock Dividend Requirements.. (1,806) - 1,806 (d) -
----------- ------------- ---------------- --------------
Net Loss Attributable to Common Stock...... $(124,884) $14,450 $52,774 $(57,660)
=========== ============= ================ ==============
(Loss) Per Share
Continuing operations...................... $(2.84) $(6.18)(e)
Discontinued operations.................... (0.22) -
----------- --------------
Net (Loss)................................. $(3.06) $(6.18)(e)
Average Number of Common Shares
Outstanding................................ 40,817 9,326 (e)
=========== ==============
|
See Notes to Pro Forma Consolidated Statement of Operations
(Unaudited)
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF
OPERATIONS
YEAR ENDED DECEMBER 31, 1993
(Unaudited)
(a) Reflects adjustments to JWP's historical condensed consolidated statement of operations to eliminate revenues, cost and expenses, interest and losses on sale or disposal in respect to businesses sold or held for sale.
(b) Reflects the following adjustments to selling, general and administrative expenses:
(In thousands)
To eliminate amortization of goodwill and other
intangibles....................................... $(5,882)
To eliminate legal, consulting and other
professional fees arising from shareholder
litigation, debt restructuring and the restatement
of JWP's financial statements...................... (12,000)
To reduce depreciation expense as a result of
fair market value adjustment to fixed.............. (1,387)
To reduce rent expense for above fair market value
leases............................................. (1,000)
--------------
$(20,269)
==============
|
(c) Reflects the following adjustments to interest expense:
(In thousands)
To eliminate interest expense related to exchanged
debt................................................ $(48,697)
To record interest expense on 7% Series A Senior
Notes based upon the proforma discounted carrying
value and assuming a discount rate of 12%............ 6,668
To record interest expense on 7% Series B Senior
Notes based upon the proforma discounted carrying
value and assuming a discount rate of 12%............ 1,170
To record interest expense on 11% Series C
Subordinated Notes based upon the proforma discounted
carrying value and assuming a discount rate of 14%.... 7,665
To record interest expense on 8% SellCo Recourse
Notes based upon the proforma carrying value and
assuming a discount rate of 14%...................... 545
To record interest expense on post-confirmation
working capital credit facility assuming an average
of $15 million outstanding at 9%..................... 1,350
To record amortization of debt issuance costs on
post-confirmation working capital credit facility.... 600
-----------
$(30,699)
===========
|
(d) Reflects elimination of dividends on old preferred stock.
(e) Proforma net loss per common share is calculated based upon the number of shares new common stock outstanding upon confirmation of the restructuring.
HISTORICAL AND PRO FORMA CAPITALIZATION
The following unaudited table sets forth the unaudited consolidated capitalization of JWP at December 31, 1993, and the unaudited consolidated pro forma capitalization of JWP as of such date as adjusted to give effect to the restructuring as if it became effective on such date. The pro forma information presented below assumes a revaluation of JWP's assets and liabilities pursuant to principles of Fresh-Start Accounting. The information presented below should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and the unaudited Pro Forma Financial Information and related notes appearing elsewhere herein. See "Financial Statements" and "Pro Forma Financial Information."
Pro Forma Adjustments to Record
Plan Confirmation (a)
-------------------------------------
Debt
Discharge and
Historical Exchange of Fresh Start Pro Forma
(Unaudited) Stock Adjustments (Unaudited)
----------- ------------- ----------- -----------
($ in thousands)
Notes Payable Comstock Canada....................... $172 $- $- $172
New Working Capital Facility........................ - - - -
Current Maturities of Long-Term Debt and Capital
Lease Obligations................................... 2,327 (744) - 1,583
New 7% Series B Senior Notes........................ - 11,357 (529) 10,828
Debt in Default:
Senior Notes Payable Under Revolving
Credit Facility..................................... 155,795 (155,795) - -
Senior Notes Payable Under Various Indentures....... 328,572 (328,572) - -
Subordinated Notes Payable.......................... 9,600 (9,600) - -
Convertible Subordinated Debentures................. 7,040 (7,040) - -
----------- ------------- ----------- -----------
Total Short-Term Debt............................... 503,506 (490,394) (529) 12,583
Long-Term Debt:
New 7% Series A Senior Notes........................ - 60,781 (4,200) 56,581
Capital Lease Obligations and Other Long-Term
Debt (b)............................................ 4,699 - - 4,699
New 12% Sellco Subordinated Non-Recourse
Notes............................................... - 20,787 - 20,787
New 11% Series C Senior Subordinated Notes.......... - 62,176 (9,282) 52,894
New 8% Supplemental SellCo Note..................... - 5,000 (1,238) 3,762
----------- ------------- ----------- -----------
Subtotal Long-Term Debt............................. 4,699 148,744 (14,720) 138,723
Less Reclassification of New 12% Sellco Notes to Net
Assets Held for Sale................................ - (20,787) - (20,787)
----------- ------------- ----------- -----------
Total Long-Term Debt................................ 4,699 127,957 (14,720) 117,936
Shareholders' Deficit (Equity):
Old Series A Preferred Stock........................ 21,250 (21,250) - -
Old Common Stock.................................... 4,072 (4,072) - -
New Common Stock.................................... - 933 - 933
Warrants of Participation........................... 576 (576) - -
New Warrants........................................ - - 2,179 2,179
Capital Surplus..................................... 204,247 24,965 (151,194) 78,018
Cumulative Translation Adjustment................... (6,068) - 6,068 -
(Deficit)........................................... (526,339) 463,502 62,837 -
----------- ------------- ----------- -----------
Total Shareholders' (Deficit) Equity................ (302,262) 463,502 (80,110) 81,130
Total Capitalization................................ $205,943 $101,065 $(95,359) $211,649
=========== ============= =========== ===========
- ------
(a) See Notes to Pro Forma Balance Sheet (Unaudited) for a discussion of the
pro forma adjustments.
(b) Includes $2,161 of long-term capital lease obligations which are included
in the caption "Other long-term obligations" in JWP's consolidated balance
sheet as of December 31, 1993.
|
C. PROJECTED FINANCIAL INFORMATION: 1994-1997 ASSUMPTIONS
1. Basis of Presentation
The following projections have been prepared by management to
present the effects of the restructuring and consummation of the
Plan and to assess whether Reorganized JWP could meet its
restructured financial obligations, but are not
facts and should not be relied upon as being necessarily
representative of future results. The estimates and assumptions
underlying the projections are inherently uncertain, being based
upon events that have not taken place, are
subject to significant economic, competitive and other
uncertainties and contingencies beyond Reorganized JWP's control
and involve judgments based upon past performance and industry
trends which may not necessarily be indicative of
future performance or trends. Consequently, there can be no
assurance that the projected results can be realized, or that
actual results will not be higher or lower than those projected.
Management believes that the basis for such
projections is reasonable, taking into account the purpose for
which they were prepared. However, the projections were not
prepared with a view towards compliance with the published
guidelines of the Securities and Exchange
Commission or the American Institute of Certified Public
Accountants regarding projections or forecasts. JWP's independent
auditors, have neither examined, reviewed, performed agreed-upon
procedures, nor compiled the following projections and,
consequently, do not express an opinion or any
other form of assurance with respect thereto. Management
believes, however, that the projections are presented on a basis
consistent with generally accepted accounting principles as
applied to JWP's historical financial statements.
There can be no assurance that the assumptions underlying the
projections will prove correct or that Reorganized JWP's actual
ability to cover its future principal and cash interest payment
obligations will not differ from the information reflected below.
See "Key Assumptions." CREDITORS HOLDING IMPAIRED
CLAIMS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THE FOLLOWING
PROJECTIONS IN DETERMINING WHETHER TO VOTE TO ACCEPT OR REJECT
THE PLAN.
The estimates and assumptions underlying the projections are based on matters as they exist on the date hereof, and not as of any future date. No representation is made as to the completeness or accuracy of the material contained herein, nor should it be relied upon as a promise or representation as to future performance. The projections include levels of revenues that have not been realized. Moreover, Reorganized JWP may be vulnerable to competitive pressures because of its liquidity needs, which are publicly known. These factors may adversely affect Reorganized JWP's businesses, its growth opportunities and relationships with its customers, suppliers, bonding companies and employees. Neither JWP nor Reorganized JWP intends to update or otherwise revise the following projections to reflect circumstances existing after the date hereof or to reflect the occurrence of unanticipated events, even in the event that any or all of the underlying assumptions are shown to be in error, except as required by applicable law.
The projections should be read together with the other information contained herein under the headings "Selected Financial Information," and, in Exhibit 3 hereto, "Management's Discussion and Analysis of Consolidated Financial Statements and Results of Operations for the three years ended December 31, 1993".
2. Projected Operating Results
JWP projections for 1994-1997 are the consolidation of the
operating forecasts that were initially prepared by the
individual business units'
management. These forecasts were thereafter reviewed by JWP
management. The forecast represents further shrinkage of JWP's
mechanical and electrical businesses to provide, among other
things, the cash required to repay the
indebtedness of a reorganized JWP. The forecast does not
incorporate any strategies to offset JWP's dependence on either
the new construction market or bonding availability.
The operating business forecasts have been prepared based upon the assumption that (i) bonding becomes more readily available for large and longer term projects by mid-1994, (ii) the market conditions throughout the forecast period will remain highly competitive with excess capacity and low margins, and (iii) working capital financing is available. However, the projections for the forecast period do not include any such large size projects unless they are currently included in the backlog.
Generally, JWP and the operating company management believe that 1994 will be weaker for the contracting market, particularly in the Midwest U.S., Canada and the United Kingdom. This is based on the expected continued overall weaknesses in each of these markets and, because of JWP's financial difficulties during late 1992 and 1993, potential customers were hesitant to award business to JWP companies thereby resulting in a significant decrease in backlog as of the end of 1993. In addition, certain operating units experienced higher than normal revenues in 1993 relating to large, one-time projects.
Should JWP remain in bankruptcy beyond fall 1994, the operating
businesses will be confronted with continued pressures with
respect to generating new awards beyond those assumptions
inherent in these financial projections. These
businesses had assumed that in fall 1994, the parent company
would emerge from bankruptcy and, therefore, the cloak of
financial instability would be lifted. Should this assumption
prove to be incorrect, potential customers may be likely
to continue to hesitate in awarding projects to JWP's operating
businesses. This may have a negative affect on JWP's projected
financial performance, particularly for 1994 and 1995. The
operating businesses will continue to
review and assess their operating cost structures in the normal
course to attempt to mitigate any resultant revenue or gross
profit pressures.
3. Pro forma Balance Sheet Adjustments
In preparing the estimated condensed balance sheet as of
December 31, 1993, pro forma adjustments were made to the
estimated December 31, 1993 balance
sheet to account for the proposed debt discharge and exchange of
stock and for fresh start accounting and other reorganization
adjustments. Additionally, JWP has prepared an estimated pro
forma capitalization table as of December 31,
1993, which reflects the estimated pro forma debt and equity
structure upon confirmation of the reorganization plan. The pro
forma consolidated balance sheet and capitalization table, each
as of December 31, 1993, are presented herein.
The year end 1993 balance sheet incorporates JWP's estimate of certain restructuring transactions to reflect the debt and other obligations of the holding company which would be exchanged as a result of the reorganization. The exchanged obligations include indebtedness (principal and accrued interest) under JWP's revolving credit agreement, senior note agreements, guarantees of foreign indebtedness relating to financing agreements for JWP's former information services operations in France and Belgium, an amount due to JWP's former information services company in the United States (currently under control of a trustee appointed by the U.S. Bankruptcy Court pursuant to a Chapter 7 filing), and miscellaneous other indebtedness and guarantees.
It is assumed that pursuant to JWP's plan of reorganization that all subsidiary operating company obligations and indebtedness, including those relating to domestic and foreign working capital lines of credit and surety credit, will be unimpaired.
Additionally, it is assumed that JWP's preferred stock, common stock, warrants of participation and stock options will have minimal recovery under the reorganization plan by way of issuance of new warrants.
It is assumed for purposes of the projections that as of
January 1, 1994, JWP adopted "Fresh Start Accounting" as set
forth in Statement of Position 90-7, "Financial Reporting By
Entities In Reorganization Under The Bankruptcy Code",
issued by the American Institute of Certified Public Accountants.
(This statement will be adopted upon emergence from bankruptcy.)
Pursuant to Statement of Position 90-7, JWP's assets and
liabilities will be revalued and will be adjusted to their
estimated fair values, and JWP's retained deficit eliminated.
The net assets were revalued to be equal to the
post-restructuring equity value of the new JWP-estimated at $81.1
million as of December 31, 1993 by JWP's financial advisor. See
"Estimated Pro Forma Capitalization"
which sets forth the unaudited estimated pro
forma consolidated capitalization of Reorganized JWP as of
December 31, 1993 as if the Plan became effective on such date. A
subsequent re-valuation was completed as of March 31,
1994 based upon the financial results for the first quarter of
1994 (see attached exhibits). JWP's financial advisor concluded
that on the basis of the information received from JWP, there was
no material change in the net asset valuation.
Finally, it has been assumed that the Additional Interest Amount payable to Belmont will be equivalent to a 3.5% share of the Series A Senior Secured Notes, the Series C Notes, the Sellco Subordinated Contingent Payment Notes and the New JWP equity securities, including warrants (but excluding the Management Stock Options). Accordingly, the total face amount of the new debt securities, the new warrants and the number of New JWP Common Shares issued reflect the additional 3.5% distribution to Belmont. An equivalent 3.5% amount of Series B Senior Secured Notes is assumed to be paid in cash in lieu of additional Series B Senior Secured Notes.
4. The Retained Operating Companies
The consolidated projections include those operating units which JWP presently intends to keep as part of its on-going organization. The principal units are:
JWP Welsbach Electric Corp.
JWP/J.C. Higgins Corp.
JWP Penguin Air Conditioning Corp.
JWP Forest Electric Corp.
JWP/Zack Inc.
JWP/Hyre Electrical Co. of Indiana, Inc.
JWP Gowan Inc.
Heritage Air Systems, Inc.
JWP West (d/b/a University Mechanical
Contractors)
Gibson Electric Co., Inc.
JWP Trautman & Shreve, Inc.
Hansen Mechanical Contractors, Inc.
Comstock Canada
Drake & Scull Engineering Limited
Dynalectric group of companies
Businesses which are intended to be sold are consolidated into Sellco Net Assets at their estimated realizable value. Transaction expenses, taxes and any retained liabilities relating to the sales of the designated companies are assumed to reduce the proceeds available to repay the Series A and B Senior Secured Notes, SellCo Recourse Notes, and the SellCo Subordinated Contingent Payment Notes, as described below.
The debt to be repaid from currently planned asset sales includes the $60.8 million Series A 7% Senior Secured Notes, the $11.4 million Series B 7% Senior Secured Notes and the 12% SellCo Subordinated Contingent Payment Notes. The non-recourse SellCo Subordinated Contingent Payment Notes are reflected as an offset to SellCo Net Assets in the amount of $20.8 million, which amount is equal to the estimated net proceeds to be realized from the SellCo Net Assets less any retained liabilities not assumed by the prospective purchasers and less the principal amount of and accrued interest on the Series A and B Senior Secured Notes, and the face amount of the $5 million 8% Supplemental SellCo Note. The projections assume that the retained liabilities will include federal and state income taxes payable on the gain on the sale of the water companies. If the sales proceeds are insufficient to cover the full face amount of the non-recourse SellCo Subordinated Contingent Payment Notes, such remaining debt would be extinguished for a nominal amount.
The following operating businesses are included in SellCo Net Assets:
JWP Brandt Engineering Co. Inc.
Wachtel, Duklauer & Fein Incorporated
University Mechanical Contractors Inc. (WA)
Superior Engineering Corporation
University Cogeneration, Inc.
Jamaica Water Supply Company & Sea Cliff
Water Co.
General Energy Development, Inc.
These operations are assumed to be sold by June 30, 1995. Prior to such sales, these operations are assumed to be break-even on a cash flow basis. Also included in Sellco Net Assets are net cash proceeds and the face amount of various receivables, notes and other assets, net of liabilities, taken as consideration for the previously concluded sales of various businesses. Presently, JWP has already concluded the sale of substantially all of the assets of Kerby Saunders-Warkol, Inc. and JWP Technical Services. In addition, JWP Pacific International is currently being liquidated.
5. Insurance Expense Provision/Cash and Letters of Credit Collateral
The insurance premiums and estimated future claims payouts for the then-existing plan year are included in the operating companies projected results within cost of work and selling, general and administrative expenses.
Under JWP's insurance program, JWP has posted cash and letters
of credit as security collateral with the insurance carriers to
cover the estimated future unpaid liability for the present and
prior plan years. At December 31, 1993, there were approximately
$36.4 million in letters of credit outstanding to
JWP's insurance carriers as security for the estimated future
claims payouts relating to prior plan years. Since the plan year
ended September 30, 1992 JWP has been unable to obtain letters of
credit covering the then current plan
year's projected future liability. Therefore, JWP has been
required to post cash collateral with the insurance carriers in
lieu of the letters of credit.
The cash in this collateral account was $21.4 million as of
December 31, 1993. Moreover, since October 1, 1992 JWP has not
been able to fully apply the cash collateral held by its
insurance carriers to pay the plan year loss payouts-i.e., JWP
has had to fund additional amounts of monies despite having cash
in its collateral accounts.
For the purposes of these projections JWP is assuming that (i)
it will retain the residual liability relating to prior years'
claims for these future payouts for the operations to be sold,
(ii) all amounts billed to the on-going
operating units for estimated future payouts will be passed
through to the insurance carrier as cash collateral for this
liability, (iii) existing letters
of credit covering prior plan years and any liability for payouts
from the plan years prior to October 1, 1992 not covered by
letters of credit will be
impaired and treated as Class 4B claims pursuant to the Plan,
(iv) no new letters of credit will be available to cover the
current or future plan years' estimated ultimate payout
liabilities or to post with the insurance
carriers as a means to recover the cash collateral account
balance, (v) any excess cash collateral, above an amount to cover
the projected remaining future payout liabilities, will be
released back to JWP during 1995, and (vi) beginning
January 1, 1996 JWP is able to fully utilize specific plan year
cash collateral on deposit with its insurance carriers to fund
loss payouts as the losses are paid by the carrier.
6. Long Term Debt/Working Capital Lines of Credit/Interest Expense
JWP assumes that it will have a new $40 million working capital line of credit upon the confirmation of the Plan and that its foreign subsidiaries will maintain their existing lines of credit.
For the forecast period, the average amounts outstanding under
various working capital lines of credit and the interest rates
are as
follows:
Average Outstandings
---------------------------------
Interest Rate 1994 1995 1996 1997
------------- ---- ---- ---- ----
(Amounts in $millions)
Domestic U.S. Working Capital Line.. 9%-10% 15.0 22.5 15.0 15.0
Foreign Working Capital Lines....... 8%-12% 9.2 4.3 4.3 4.3
|
The $62.2 million Series C Notes have an 11% coupon, with interest during the first eighteen months being paid-in-kind. This paid-in-kind interest is added to the principal balance. This debt does not carry any mandatory repayment provisions during the projection period. The final maturity will be seven years from the date of issuance.
JWP's financial advisors estimate that the fair market rates of interest on the $62.2 million 11% Series C Notes, the $60.8 million Series A 7% Senior Secured Notes, the $11.4 million Series B 7% Senior Secured Notes and the $5 million 8% Supplemental SellCo Note are 14%,12%,12% and 14%, respectively. Each of these indebtedness obligations have been recorded at their respective present values which, because the estimated market rates of interest are greater than the stated coupon rates, are less than the face amounts.
Interest expense is shown net of interest income. Cash balances are assumed to earn interest at 3% per annum based on the average year-end amount.
7. Income Tax Provision
As of December 31, 1993, JWP has net operating loss carry-forwards ("NOLs") available to offset future U.S. federal tax liabilities which is estimated to exceed $500 million. The NOL relates to taxable years prior to the confirmation of the restructuring plan. JWP has conservatively assumed that usage of these NOLs will be limited by Section 382(l)(6) of the Internal Revenue Service Code (the "Code") after the confirmation of the Plan. The annual limitation at JWP's estimated 35% marginal federal income tax rate is approximately $1.71 million, or a maximum total benefit of approximately $23.9 million over a fourteen year period.
JWP estimates that it will have a net deferred tax asset as of the confirmation date which primarily resulted from differences due to the excess of amounts previously expensed for financial reporting purposes over amounts deducted for income tax purposes. This net deferred tax asset has been offset by a valuation allowance of the same amount. The valuation allowance is attributed to the uncertainty of the realization of the NOL.
The projections incorporate fresh start reporting which
requires JWP to report Federal income tax expense on income
before utilization of the pre-confirmation NOLs. As a result,
pursuant to the Statement of Financial
Accounting Standards 109, any tax benefit taken pursuant to
Section 382 of the Code in a given year is not credited to income
but instead is credited directly to shareholders' equity.
U.S. state income taxes were calculated at an effective rate of 8%. However, to the extent that the total estimated U.S. state taxes in a given year aggregate less than a minimum franchise tax amount, the minimum franchise tax amount is projected to be paid. Foreign taxes are assumed to be paid at an effective rate of 33%.
The $62.2 million 11% Series C Notes, the Supplemental SellCo Note and the SellCo Subordinated Contingent Payment Notes are assumed to be subject to the applicable high yield discount obligation provisions of Section 163(e)(5) of the Code. Accordingly, a portion of the interest expense on this indebtedness is assumed to be non-deductible for federal and state tax purposes, with the balance of the interest expense being deductible only when paid.
8. Capital Expenditures
Each of the individual operating units have projected the
annual amounts of capital expenditures for plant and equipment.
Such total amounts approximate the historical levels of
expenditures over the past three years.
In addition, certain expenditures have been projected at the
corporate level to provide for overall implementation of and
enhancements to JWP's systems of internal control
and its management information systems.
9. Working Capital Requirements
The primary components of working capital-accounts receivable,
costs in excess of billings, accounts payable and billings in
excess of costs-are assumed to increase based upon increases in
revenue. However, for 1994, JWP is
projecting a decrease in working capital, primarily due to the
collection of certain accounts receivable and costs in excess of
billings, partially offset by a reduction in billings in excess
of costs, relating to various large construction projects that
have been substantially completed during 1993 or are
estimated to be completed during 1994. Moreover, the cash flow
projections for 1994 assume that significant restructuring
advisory expenses are paid during 1994. The
operating businesses also have on-going working capital
management plans to improve-i.e., lower-working capital
utilization. Certain working capital
improvements are included in the projections.
10. Cash Balances
The cash balances of JWP in the estimated proforma consolidated balance sheets do not necessarily represent the amount of cash on hand available for JWP's operations. Pursuant to various foreign financing agreements, the cash balances in Canada and the U.K./European operations are "fenced off" from the remainder of the domestic U.S. operations-i.e., such cash is generally assumed to be only available to support the operations and debt of the foreign companies. Moreover, the cash balances do not reflect the amount of "float", or checks written against such balances, or the amounts required on a going-concern basis to fund various local payroll accounts. In summary, the cash generally available to support the domestic operations, the new working capital facility, the $62.2 million 11% Series C Notes and the $5 million Supplemental SellCo Note is substantially less than the overall balance stated on the estimated proforma balance sheets.
At December 31, 1993, the estimated cash balances are comprised as follows:
U.S. U.K. Canada Total
-------- ------- ------ --------
($ millions)
Book Balance....... $34.3 $3.0 $0.1 $37.4
Float/Restricted... (11.9) (2.4) 0.0 (14.3)
-------- ------- ------ --------
Total "Available".. $22.4 $0.6 $0.1 $23.1
======== ======= ====== ========
|
Additionally, the total foreign and domestic U.S. cash balances as of the end of each of the projection years, excluding amounts classified on the balance sheet as "Restricted Cash" in the U.S. to provide for certain insurance and tax liabilities, are estimated as follows:
1994 1995 1996 1997
----- ----- ----- ------
($ millions)
U.S..... $29.5 $51.6 $63.0 $77.5
U.K..... 5.5 13.9 12.4 16.3
Canada.. 4.9 8.2 10.2 13.1
----- ----- ----- ------
Total... $39.9 $73.7 $85.6 $106.9
===== ===== ===== ======
|
ESTIMATED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1993
(Unaudited)
Pro Forma Adjustments to record
Proposed Plan Confirmation
--------------------------------------------------------
Fresh Start
Debt and Other
Discharge Reorganization
As Exchange Adjustments Pro Forma
Reclassified (a) of Stock Note (f) Estimated
---------------- -------------- -------------- ---------
(In millions)
ASSETS
Current Assets
Cash and cash equivalents.................................. $37.4 $37.4
Accounts receivable, net................................... 441.5 441.5
Costs in excess of billings................................ 62.3 $(2.3) 60.0
Inventories................................................ 5.4 5.4
Prepaid expenses and other................................. 10.1 10.1
Sellco Net Assets.......................................... 12.2 $ 12.2
---------------- -------------- -------------- ---------
Total Current Assets....................................... 568.9 (2.3) 566.6
---------------- -------------- -------------- ---------
SellCo Net Assets.......................................... 98.1 (20.8)(b) - 77.3
Investments, Notes and Other Long-Term Receivables......... 10.7 10.7
Insurance Funds Held in Escrow............................. 21.4 21.4
Property, Plant and Equipment, net......................... 40.5 (6.3) 34.2
Other Assets
Excess of cost of acquired businesses over net assets, less
amortization............................................... 59.0 (59.0) -
Miscellaneous.............................................. 7.5 (3.7) 3.8
---------------- -------------- -------------- ---------
66.5 - (62.7) $ 3.8
---------------- -------------- -------------- ---------
Total Assets............................................... $806.1 $(20.8) $(71.3) $714.0
================ ============== ============== =========
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Current Liabilities
Notes payable.............................................. $ 0.2 $ 0.2
Current maturities of long-term debt....................... 1.9 $10.7 (b) $(0.5) 12.1
Current maturities of capital lease obligations............ 0.6 0.6
Debt in default............................................ 501.0 (501.0)(b) -
Accounts payable........................................... 207.6 (0.4)(c) 207.2
Billings in excess of costs................................ 115.4 115.4
Federal income taxes payable............................... 1.6 1.6
State, foreign and local income taxes payable.............. 2.7 2.7
Accrued payroll............................................ 38.3 (0.2)(c) 3.0 41.1
Accrued expenses, other.................................... 179.5 (91.7)(c) 11.0 98.8
---------------- -------------- -------------- ---------
Total Current Liabilities.................................. 1,048.8 (582.6) 13.5 479.7
---------------- -------------- -------------- ---------
Long-Term Debt............................................. 2.5 128.0 (b) (14.8) 115.7
Capital Lease Obligations.................................. 2.2 2.2
Other Long-Term Liabilities................................ 54.9 (29.6)(c) 10.0 35.3
---------------- -------------- -------------- ---------
Total Liabilities.......................................... 1,108.4 (484.2) 8.7 632.9
---------------- -------------- -------------- ---------
Shareholders' (Deficit) Equity
Old Series A Preferred Stock............................... 21.2 (21.2)(d) -
Old Common Stock........................................... 4.1 (4.1)(d) -
New Common Stock........................................... - 0.9 (d) 0.9
Old Warrants of Participation.............................. 0.6 (0.6)(d) -
New Warrants-Reorganized JWP............................... - - 2.2 2.2
Capital surplus............................................ 204.2 25.0 (d) (151.2) 78.0
Cumulative translation adjustment.......................... (6.1) 6.1 -
Retained Earnings (Deficit)................................ (526.3) 463.4 (e) 62.9 -
---------------- -------------- -------------- ---------
Total Shareholders' (Deficit) Equity....................... (302.3) 463.4 (80.0) 81.1
---------------- -------------- -------------- ---------
Total Liabilities and Shareholders' (Deficit) Equity....... $806.1 $(20.8) $(71.3) $714.0
================ ============== ============== =========
|
See Notes to Estimated Pro Forma Consolidated Balance Sheet.
NOTES TO ESTIMATED PRO FORMA CONSOLIDATED BALANCE
SHEET
(Unaudited)
The following notes set forth an explanation of the assumptions used in preparing the unaudited Estimated Pro Forma Consolidated Balance Sheet as of December 31, 1993. All amounts are in millions.
(a) To reclassify certain assets and liabilities as SellCo Net Assets and to reclassify certain assets and liabilities included in Net Assets Held For Sale as part of the continuing operation.
JWP INC. and SUBSIDIARIES
ESTIMATED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1993
(unaudited)
Reclassify
NAHFS,
SellCo As
Historical Net Assets Reclassified
---------- ---------- ------------
(in millions)
ASSETS
Current Assets
Cash and Cash Equivalents................................................. $39.5 $(2.1) $37.4
Accounts Receivable, net.................................................. 455.9 (14.4) 441.5
Costs in Excess of Billings............................................... 62.1 0.2 62.3
Inventories............................................................... 5.2 0.2 5.4
Prepaid Expenses and Other................................................ 13.2 (3.1) 10.1
Net Assets Held For Sale ("NAHFS")........................................ 20.5 (20.5) -
SellCo Net Assets......................................................... - 12.2 12.2
---------- ---------- ------------
Total Current Assets...................................................... 596.4 (27.5) 568.9
Net Assets Held For Sale ("NAHFS")........................................ 63.1 (63.1) -
SellCo Net Assets......................................................... - 98.1 98.1
Investments, Notes and Other Long Term Receivables........................ 19.7 (9.0) 10.7
Insurance Funds Held in Escrow (1)........................................ 21.4 - 21.4
Plant, Property and Equipment, net........................................ 39.3 1.2 40.5
Other Assets
Excess of cost of acquired businesses over net assets, less amortization.. 59.0 - 59.0
Miscellaneous............................................................. 7.5 - 7.5
---------- ---------- ------------
66.5 - 66.5
---------- ---------- ------------
Total Assets.............................................................. $806.4 $(0.3) $806.1
========== ========== ============
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Current Liabilities
Notes Payable............................................................. $0.2 - $0.2
Current Maturities of Long Term Debt and Capital Lease Obligations........ 2.3 0.2 2.5
Debt in Default........................................................... 501.0 - 501.0
Accounts Payable.......................................................... 209.9 (2.3) 207.6
Billings in Excess of Costs............................................... 115.2 0.2 115.4
Federal Income Taxes Payable (2).......................................... 1.6 - 1.6
State Income Taxes Payable (2)............................................ 2.7 - 2.7
Accrued Payroll (2)....................................................... 37.9 0.4 38.3
Accrued Expenses, Other (2)............................................... 177.9 1.6 179.5
---------- ---------- ------------
Total Current Liabilities................................................. 1,048.7 0.1 1,048.8
Long Term Debt and Capital Lease Obligations.............................. 4.7 - 4.7
Other Long Term Liabilities............................................... 55.3 (0.4) 54.9
---------- ---------- ------------
Total Liabilities......................................................... $1,108.7 $(0.3) $1,108.4
Shareholders' (Deficit) Equity
Preferred Stock........................................................... 21.2 - 21.2
Common Stock.............................................................. 4.1 - 4.1
Warrant of Participation.................................................. 0.6 - 0.6
Cumulative Translation Adjustment......................................... (6.1) - (6.1)
(Deficit)................................................................. (526.3) - (526.3)
---------- ---------- ------------
Total Shareholders' (Deficit) Equity...................................... $(302.3) - $(302.3)
---------- ---------- ------------
Total Liabilities and Shareholders' (Deficit) Equity...................... $806.4 $(0.3) $806.1
========== ========== ============
- ------
(1) Included in Condensed Consolidated Balance Sheet in "Other assets,
miscellaneous"
(2) Included in December 31, 1993 Condensed Consolidated Balance Sheet in
"Other accrued expenses and liabilities".
|
NOTES TO ESTIMATED PRO FORMA CONSOLIDATED BALANCE
SHEET-(Continued)
(Unaudited)
(b) Reflects the discharge of old debt and issuance of new debt under the Plan as follows:
Historical Restructure Pro
Carrying Discharge/ Forma
Amount Exchange Balance
---------- ----------- --------
(in millions)
Senior Notes Payable Under Revolving Credit Facility........... $155.8 $(155.8) -
Senior Notes Payable Under Various Indentures.................. 328.6 (328.6)
Subordinated Note Payable...................................... 9.6 (9.6) -
Convertible Subordinated Debentures............................ 7.0 (7.0) -
---------- -----------
Total Debt in Default.......................................... $501.0 $(501.0) -
========== ===========
Other Senior Notes (included in current maturities of
long-term debt)................................................ $0.7 $(0.7) -
========== ===========
New 7% Series A Senior Secured Notes (included in long term
debt).......................................................... - $60.8 $ 60.8
New 7% Series B Senior Secured Notes (included in current
maturities of long term debt).................................. - 11.4 11.4
New 11% Subordinated Notes (included in long-term debt)........ - $62.2 $62.2
New 12% SellCo Subordinated Contingent Payment Notes........... - 47.7 47.7
Estimated Discount to Reflect Amounts Available to Repay SellCo
Notes.......................................................... - $(21.9) $(21.9)
---------- ----------- --------
$25.8 $25.8
New 8% Supplemental SellCo Note (included in long-term debt)... - $ 5.0 $ 5.0
=========== ========
Total SellCo Subordinated Contingent Payment Notes (deducted
from long term portion of SellCo Net Assets)................... - $20.8 $20.8
=========== ========
Total.......................................................... $501.7 $(341.5) $160.2
========== =========== ========
|
The proforma adjustments to the recorded debt balances reflect the differences between the historical carrying amounts of the old debt securities and the estimated face amount of the new debt securities issued under the plan. The 7% Series B Senior Secured Notes are included in the current maturities of long term debt because JWP anticipates that such notes will be redeemed within approximately one year from the net proceeds of sales of collateral assets.
(c) Reflects reduction of recorded amounts of accrued interest, impaired claims and unexpired leases to be rejected by JWP as follows:
Other
Accounts Accrued Accrued Long-Term
Payable Expenses Payroll Liabilities Total
-------- -------- ------- ----------- ------
(in millions)
Payables................................... $0.4 $- $- $- $0.4
Insurance related liabilities.............. - 9.6 - 26.8 36.4
Accrued interest........................... - 43.3 - - 43.3
Intercompany balance due to JWP Information
Services, Inc. ............................ - 24.9 - - 24.9
Foreign debt guarantees.................... - 6.0 - - 6.0
Stock price guarantees..................... - 5.1 - - 5.1
Preferred dividends in arrears............. - 2.3 - - 2.3
Unexpired leases........................... - - - 1.7 1.7
Other impaired claims...................... - 0.5 0.2 1.1 1.8
-------- -------- ------- ----------- ------
Total...................................... $ 0.4 $91.7 $0.2 $29.6 $121.9
======== ======== ======= =========== ======
|
NOTES TO ESTIMATED PRO FORMA CONSOLIDATED BALANCE
SHEET-(Continued)
(Unaudited)
(d) Reflects the elimination of the recorded book value of Old Common Stock, Old Preferred Stock and Warrants of Participation upon consummation of the Plan and the issuance of 9,326,425 shares of New Common Stock, $.10 par value.
(e) Deficit was reduced by the following:
Net reduction in debt upon discharge of old debt
and issuance of new debt.
See Note (b) above........................................ $341.5
Reduction in recorded amounts of accrued interest,
debt and stock price guarantees, estimated amounts
accrued in respect of unexpired leases to be rejected,
and other impaired claims.
See Note (c) above....................................... 121.9
$463.4
(f) JWP has accounted for the reorganization using fresh-start reporting. Accordingly, all assets and liabilities are restated to reflect their reorganization value, which approximates estimated fair value at the date of reorganization assuming a reorganization equity value of $81.1 million on the basis of a valuation made by JWP's financial advisors. See "Financial Information-Valuation." The following table summarizes the estimated adjustments required to record the reorganization under fresh-start accounting. The adjustments made to the individual assets and liabilities are preliminary estimates. The allocation of reorganization value to individual assets and liabilities will be made after consummation of the Plan.
NOTES TO ESTIMATED PRO FORMA CONSOLIDATED BALANCE SHEET-(Continued)
(Unaudited)
Footnote (f)-(continued)
Table to Note (f)
Fresh Start and Other Reorganization Adjustments
Cost in Property Retained
Excess of Plant & Misc. Earnings
Billings Equipment Goodwill Assets (Deficit)
----------- --------- --------- ----------- ---------
(in millions)
ASSETS
To eliminate goodwill and other
intangible assets....................... (59.0) (5.5) (64.5)
To reflect cost in excess of billings at
estimated net present value............. (2.3) (2.3)
To reflect fixed assets at estimated
fair market value....................... (6.3) (6.3)
To reflect unamortized debt issuance
expense on post-confirmation
working capital credit facility......... - - - 1.8 1.8
----------- --------- --------- -----------
$(2.3) $(6.3) $(59.0) $(3.7)
=========== ========= ========= ===========
|
Warrants-
Long-term Reor
Debt, Long- Other - Cumulative
Current Accrued Accrued term Long-term ganized Capital Translation
Portion Payroll Expenses Debt Liabilities JWP Surplus Adjustments
--------- ------- -------- -------- ----------- --------- --------- -----------
LIABILITIES
To record 7% Series A and Series B
Senior Notes at estimated fair
market value using a discount rate
of 12%.................................. (0.5) (4.2) 4.7
To record 11% Series C Notes at
estimated fair market value using
a discount rate of 14%.................. (9.3) 9.3
To record 8% Supplemental SellCo
Notes at estimated fair market
value using a discount rate of
14%..................................... (1.3) 1.3
To adjust for above fair market value
for leases.............................. 5.0 (5.0)
To reflect accrued severance and
other post-employment liabilities....... 3.0 (3.0)
To reflect accrued interest on
Debtor-in-Possession financing.......... 1.3 (1.3)
To reflect accrued professional and
other fees related to confirmation
of the Plan............................. 7.5 (7.5)
To reflect liability for payment in
lieu of issuance of certain Series B
Senior Notes............................ 0.4 (0.4)
To reflect accrued debt issuance
costs on post-confirmation
working capital facility................ 1.8 (1.8)
To record potential Federal and
State income tax liability arising
from sale of water companies............ 5.0 (5.0)
To reflect issuance of new warrants..... 2.2 (2.2)
To eliminate cumulative translation
adjustments............................. 6.1 (6.1)
To eliminate deficit.................... (229.2) 229.2
To record reorganization equity
value in excess of par value of
common stock............................ - - - - - - 78.0 - (78.0)
--------- ------- -------- -------- ----------- --------- --------- ----------- ---------
$(0.5) $3.0 $11.0 $(14.8) $10.0 $2.2 $(151.2) $6.1 $62.9
========= ======= ======== ======== =========== ========= ========= =========== =========
|
JWP INC.
PROJECTED PRO FORMA CONSOLIDATED BALANCE SHEETS
(unaudited)
Estimated
Proforma
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
--------- -------- -------- -------- --------
(in millions)
ASSETS
Cash and Cash Equivalents................... $ 37.4 $ 39.9 $ 73.7 $85.6 $106.9
Accounts Receivable......................... 441.5 363.3 377.1 411.8 430.2
Costs in Excess of Billings................. 60.0 53.3 51.1 54.7 56.7
Inventories................................. 5.4 5.4 6.1 6.6 6.7
Prepaid Expenses and Other.................. 10.1 8.5 10.0 10.9 11.4
SellCo Net Assets........................... 12.2 72.4 0.0 0.0 0.0
--------- -------- -------- -------- --------
Total Current Assets........................ 566.6 542.8 518.0 569.6 611.9
SellCo Net Assets........................... 77.3 0.0 0.0 0.0 0.0
Investments, Notes & Long Term Receivables.. 10.7 14.9 13.7 13.7 13.7
Insurance Funds Held in Escrow.............. 21.4 35.8 43.9 51.2 56.4
Other Restricted Cash....................... 0.0 4.8 5.1 5.1 0.1
Property, Plant & Equipment................. 88.1 95.4 104.5 113.8 123.5
Less: Accumulated Depreciation.............. 53.9 63.6 73.6 82.9 92.8
--------- -------- -------- -------- --------
Property, Plant & Equipment, Net............ 34.2 31.8 30.9 30.9 30.7
Other Assets
Intangibles-Other........................... 3.8 2.7 1.8 0.9 0.6
--------- -------- -------- -------- --------
TOTAL ASSETS................................ $714.0 $632.8 $613.4 $671.4 $713.4
========= ======== ======== ======== ========
LIABILITIES
Notes Payable............................... $ 0.2 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Long-Term Debt, Current Portion............. 12.1 64.4 0.3 0.3 0.3
Capital Lease Obligation, Current Portion... 0.6 0.4 0.2 0.2 0.2
Accounts Payable............................ 207.2 177.0 190.3 209.1 216.8
Billings in Excess of Costs................. 115.4 79.5 81.3 85.1 87.8
Federal Income Taxes Payable................ 1.6 1.6 1.6 6.6 1.6
Other Income Taxes Payable.................. 2.7 2.6 5.6 4.4 4.4
Accrued Payroll and Benefits................ 41.1 37.8 38.8 39.6 40.2
Accrued Expenses, Other..................... 98.8 82.0 82.4 83.4 84.4
--------- -------- -------- -------- --------
Total Current Liabilities................... 497.7 445.3 400.5 428.7 435.7
Long-Term Debt.............................. 115.7 66.5 71.5 73.1 74.9
Capital Lease Obligation, Long-Term......... 2.2 1.2 0.9 0.5 0.2
Other Long-Term Liabilities................. 35.3 50.1 58.2 58.9 62.6
--------- -------- -------- -------- --------
TOTAL LIABILITIES........................... $632.9 $563.1 $531.1 $561.2 $573.4
--------- -------- -------- -------- --------
SHAREHOLDER'S EQUITY (DEFICIT):
Warrants-Reorganized JWP.................... 2.2 2.2 2.2 2.2 2.2
Paid in Capital/Common Stock-12/31/93....... 78.9 78.9 78.9 78.9 78.9
Pre-Reorganization Tax Benefits............. 0.0 0.0 3.4 8.3 10.0
--------- -------- -------- -------- --------
Total Shareholders' Equity (Deficit)........ 81.1 81.1 84.5 89.4 91.1
Retained Earnings
Beginning of Year........................... 0.0 0.0 (11.4) (2.2) 20.8
Net Income/(Loss)........................... 0.0 (11.4) 9.2 23.0 28.1
--------- -------- -------- -------- --------
Ending Year Retained Earnings............... 0.0 (11.4) (2.2) 20.8 48.9
--------- -------- -------- -------- --------
TOTAL SHAREHOLDERS' EQUITY.................. $81.1 $69.7 $82.3 $110.2 $140.0
--------- -------- -------- -------- --------
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY...................................... $714.0 $632.8 $613.4 $671.4 $713.4
========= ======== ======== ======== ========
|
See accompanying "Notes To Estimated Pro Forma Consolidated
Balance
Sheet" and "Projected Financial Information: 1994-1997
Assumptions."
JWP INC.
PROJECTED CONSOLIDATED INCOME STATEMENTS
(unaudited)
(for the twelve months ended)
---------------------------------------
12/31/94 12/31/95 12/31/96 12/31/97
--------- --------- --------- ---------
($ Millions)
Revenue..................................... $1,515.5 $1,660.4 $1,823.9 $1,928.8
Cost of Sales............................... 1,369.0 1,490.0 1,631.8 1,721.5
--------- --------- --------- ---------
Gross Profit................................ 146.5 170.4 192.1 207.3
Gross Margin %.............................. 9.7% 10.3% 10.5% 10.7%
Selling, General & Administrative Expense... 137.1 136.7 146.2 153.2
S, G & A % Revenue.......................... 9.0% 8.2% 8.0% 7.9%
Operating Income............................ 9.4 33.7 45.9 54.1
Operating Margin %.......................... 0.6% 2.0% 2.5% 2.8%
Interest Expense, Net....................... 18.0 17.4 9.4 9.2
--------- --------- --------- ---------
Income Before Taxes......................... (8.6) 16.3 36.5 44.9
Income Taxes................................ 2.8 7.1 13.5 16.8
--------- --------- --------- ---------
Net Income (Loss)........................... $(11.4) $ 9.2 $23.0 $28.1
========= ========= ========= =========
|
JWP INC.
PROJECTED CONSOLIDATED STATEMENTS OF CASH FLOW
(unaudited)
(for the twelve months ended)
---------------------------------------
12/31/94 12/31/95 12/31/96 12/31/97
--------- --------- --------- ---------
($ Millions)
Net Income.................................. $(11.4) $ 9.2 $23.0 $28.1
Non-cash expenses
Depreciation................................ 8.1 7.7 7.0 7.6
Amortization................................ 1.1 0.9 0.9 0.3
Non-Cash Interest/Accretion................. 16.5 9.2 1.9 2.1
Pre-Reorganization Tax Benefits Taken....... 0.0 3.4 4.9 1.7
Change in Operating Assets and Liabilities.. 0.4 5.6 (11.6) (13.8)
--------- --------- --------- ---------
Cash Flow From Operations................... 14.7 36.0 26.1 26.0
Reduction in SellCo Net Assets.............. 17.2 72.4 0.0 0.0
Payment of subsidiary & corporate debt...... (14.8) (68.7) (0.7) (0.7)
--------- --------- --------- ---------
Cash Flow From Financing Activities......... 2.4 3.7 (0.7) (0.7)
Sale of Miscellaneous Assets................ 0.4 0.0 0.0 0.0
Capital Expenditures........................ (7.2) (7.8) (8.0) (8.5)
Decrease (Increase) in Other Assets, Net.... (7.8) 1.9 (5.5) 4.5
--------- --------- --------- ---------
Cash From (Used In) Investment Activities... (14.6) (5.9) (13.5) (4.0)
Increase In Cash............................ $2.5 $33.8 $11.9 $21.3
========= ========= ========= =========
Cash At Beginning Of Period................. $37.4 $39.9 $73.7 $85.6
Cash At End of Period....................... $39.9 $73.7 $85.6 $106.9
|
See accompanying "Notes to Estimated Pro Forma Consolidated
Balance Sheet" and "Projected Financial Information:
1994-1997-Assumptions."
ESTIMATED PRO FORMA CAPITALIZATION
The following unaudited table sets forth the unaudited estimated consolidated capitalization of JWP at December 31, 1993, and the unaudited estimated consolidated pro forma capitalization of JWP as of such date as adjusted to give effect to the restructuring as if it became effective on such date. The pro forma information presented below assumes a revaluation of JWP's assets and liabilities pursuant to principles of Fresh-Start Accounting. The information presented below should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and the unaudited Pro Forma Financial Information and related notes appearing elsewhere herein. See "Financial Statements" and "Pro Forma Financial Information."
Pro Forma Adjustments to Record
Plan Confirmation (a)
-------------------------------------------------
Estimated
Historical Discharge and Pro Forma
12/31/93 Exchange of Fresh Start 12/31/93
(Unaudited) Stock Adjustments (Unaudited)
----------- ------------- ----------- -----------
(in millions)
Notes Payable
Comstock Canada and miscellaneous domestic
companies............................................. $0.2 $- $- $0.2
New Working Capital Facility.......................... - - - -
Current Maturities of Long-Term Debt and Capital
Lease Obligations(b).................................. 2.5 (0.7) - 1.8
New 7% Series B Senior Notes.......................... - 11.4 (0.5) 10.9
Debt in Default:
Senior Notes Payable Under Revolving Credit Facility.. 155.8 (155.8) - -
Senior Notes Payable Under Various Indentures......... 328.6 (328.6) - -
Subordinated Notes Payable............................ 9.6 (9.6) - -
Convertible Subordinated Debentures................... 7.0 (7.0) - -
----------- ------------- ----------- -----------
Total Short-Term Debt................................. 503.7 (490.3) (0.5) 12.9
----------- ------------- ----------- -----------
Long-Term Debt:
Capital Lease Obligations and Other Long-Term Debt.... 4.7 - - 4.7
New 7% Series A Senior Notes.......................... - 60.8 (4.2) 56.6
New 12% SellCo Subordinated Notes..................... - 20.8 - 20.8
New 11% Series C Notes................................ - 62.2 (9.3) 52.9
New 8% Supplemental SellCo Notes...................... - 5.0 (1.2) 3.8
----------- ------------- ----------- -----------
Subtotal Long-Term Debt............................... 4.7 148.8 (14.7) 138.8
Less Reclassification of New 12% SellCo Notes to
SellCo Net Assets..................................... - (20.8) - (20.8)
----------- ------------- ----------- -----------
Total Long-Term Debt.................................. 4.7 128.0 (14.7) 118.0
----------- ------------- ----------- -----------
Shareholders' Deficit (Equity):
Old Series A Preferred Stock.......................... 21.2 (21.2) - -
Old Common Stock...................................... 4.1 (4.1) - -
New Common Stock...................................... - 0.9 - 0.9
Old Warrants of Participation......................... 0.6 (0.6) - -
Warrants-Reorganized JWP.............................. - - 2.2 2.2
Capital Surplus....................................... 204.2 25.0 (151.2) 78.0
Cumulative Translation Adjustment..................... (6.1) - 6.1 -
(Deficit)............................................. (526.3) 463.4 62.9 -
----------- ------------- ----------- -----------
Total Shareholders' (Deficit) Equity.................. (302.3) 463.4 (80.0) 81.1
----------- ------------- ----------- -----------
Total Capitalization.................................. $206.1 $101.1 $(95.2) $212.0
=========== ============= =========== ===========
- ------
(a) See Notes to Estimated Pro Forma Balance Sheet (Unaudited) for a discussion
of the pro forma adjustments.
(b) Includes $0.2 miscellaneous capital lease obligations that have been
excluded from the previously presented "Historical And Pro Forma
Capitalization" table.
|
D. VALUATION OF REORGANIZED JWP
1. Lazard Freres & Co., Financial Advisor to the Debtor. In connection with the distribution of the New Securities under the Plan, it is necessary to determine the enterprise value of Reorganized JWP for the purpose of creating a capital structure of Reorganized JWP and to allocate that structure among creditors and interest holders. Accordingly, JWP directed its financial advisor, Lazard Freres & Co. ("Lazard"), to make a determination of the enterprise value of Reorganized JWP as of an assumed date of January 1, 1994, based on information made available by JWP to Lazard. "Enterprise value" is the going concern present value of Reorganized JWP on an unleveraged basis.
[FN] For illustrative purposes, the following description
explains how Lazard arrived at the total enterprise value
of Reorganized JWP of $228.9 million
|
(which is between the range of $225 million and $250 million).
First, Lazard
calculated the operating asset value of MES at $108.9 million,
using the
methodology described in the footnote immediately preceding. To
that, Lazard
added the present value of the Dynalectric companies, of $26
million, as well
as the present value of the various assets and operations to be
sold as part
of the Plan of Reorganization, which Lazard calculated at $88.9
million.
Lazard based its valuation of the Dynalectric companies on
Lazard's attempts
in 1993 to sell the Dynalectric companies as a separate company
to a third
party. The Lazard valuation of JWP's interest in Jamaica Water
Securities
Company was based on Lazard's view of what the public market
equity value,
net of taxes payable as a result of the sale, of the water
companies would be
in 1994. The values of the assets to be sold, aside from the
water companies,
as part of the Plan of Reorganization, were provided by JWP
management, in
part based upon transactions which have already been
consummated
or for which
agreements to sell have been reached with third parties and in
part based
upon JWP management's estimate of the net realizable value of
the
various
assets and operations including taking into account the
expected
timing of
any of these dispositions. Finally, to these various asset
values, Lazard
added the present value of Reorganized JWP's net operating
losses
in
accordance with the methodology described in the footnote
immediately
preceding.
Lazard relied on the accuracy and reasonableness of the
projections and the underlying assumptions as prepared by
management of JWP. Lazard's valuation
assumes that the operating results projected by JWP will be
achieved in all material respects, including revenue growth,
improvements in operating margins, earnings and cash flow,
improvement in the collection of accounts
receivable and other techniques for managing working capital,
expenses and other elements, as well as that Reorganized JWP will
have access to working capital financing
and that its access to surety and bid bonds will continue.
Certain of the projected results are materially better than
certain historical results of
operations of JWP. No assurance can be given that the projected
results will be achieved. To the extent that the valuation is
dependent on JWP's achievement of
the projections, the valuation must be considered speculative.
Lazard has also assumed that general financial and market
conditions as of the assumed
Effective Date of the Plan will not differ materially from those
conditions prevailing as of the date of this Disclosure
Statement.
As a result of its analysis, reviews, discussions and
considerations and
based upon economic, monetary and market conditions existing on
the date hereof, Lazard estimates that the enterprise value of
Reorganized JWP and its subsidiaries as of January 1, 1994 would
be in a range of between $225 million to $250 million. Lazard
estimates the equity value of Reorganized JWP at $81.1
million.<F10> It is not a prediction of the future trading
prices of securities of Reorganized JWP. Events occurring after
the date hereof could materially affect the assumptions used in
preparing this valuation and Lazard has not undertaken
to reaffirm or to revise this valuation or otherwise comment on
any events occurring after the date hereof.<F11>
2. Rothschild Inc. Financial Advisor to the Junior Committee. Rothschild Inc. ("Rothschild") was retained by the Junior Committee to perform financial advisory services including, but not limited to, an enterprise valuation of Reorganized JWP.
In conducting its analyses to develop the enterprise valuation, Rothschild reviewed, analyzed and considered certain information including but not limited to:
(a) historical financial information for JWP;
(b) projected financial statements for 1994 to 1997 for JWP prepared by management of JWP;
(c) information provided by JWP's management regarding assets held for sale;
(d) analyses, reports and information prepared and provided by Lazard, JWP's financial advisor;
(e) various reports, memoranda, analyses and correspondence by JWP and other parties to the bankruptcy produced by them through document discovery requested by counsel to the Junior Committee;
(f) market valuations of companies in businesses similar to those of JWP;
(g) conditions in the capital markets and general economic conditions; and
[FN] Lazard did, however, review the Debtor's financial statements for the fiscal quarter ended March 31, 1994 (see Exhibit 4 hereto) and concluded that the enterprise value would be slightly higher, but not of a material difference. Based on such financial statements, Lazard also concluded that there is no change in the equity value.
Rothschild also conferred with the senior management of JWP and Jamaica Water Supply Company to discuss and review the business of the operating subsidiaries of JWP and the aforementioned projections which management prepared.
In arriving at its conclusion as to valuation, Rothschild relied on the accuracy of the information and reasonableness of the projections and underlying assumptions provided by JWP's management.
Based on the analyses of the above information, and other information deemed relevant by Rothschild, Rothschild believes that as of January 1, 1994, the enterprise value of Reorganized JWP is between $345 million and $415 million<F12>. While Rothschild believes that this is the inherent value of Reorganized JWP, it is unlikely that this value will be reflected in the trading value of the Reorganized JWP securities in the near term.
3. Differences in Enterprise Value. Although the financial advisors for the Debtor and the Junior Committee, Lazard and Rothschild, arrived at significantly different estimated enterprise values for JWP, it is important to note that the financial advisors express their own independent opinions. It is not unusual, as in this case, for highly qualified experts to arrive at different valuations utilizing essentially the same information. In conducting valuation analyses, experts may use similar techniques but still come to different conclusions based on the judgmental nature by which such techniques are applied.
Rothschild valued the ongoing operating assets of JWP by
discounting the cash flows attributable to the assets, after
extending JWP's projections by one year
to 1998, using a discount rate of between 18% and 22% and a
terminal multiple of EBITDA in 1998 of between 5.0 and 7.0 times.
In addition to the value of the discounted cash flows, Rothschild
also considered the value of excess cash in
JWP, investments held by JWP, other than assets held for sale,
and of the possible substitution of cash held in escrow for
insurance purposes by letters of credit.
Rothschild valued Jamaica Water Supply Company and Sea Cliff Water Company based on Rothschild's view of the likely trading value of those companies as public companies. The value attributed to JWP's interest in the Water Companies was calculated by taking account of the value attributable to minority shareholders and the taxes payable by JWP on the sale of its interest.
The values of assets held for sale as part of the reorganization
of JWP, other than the Water Companies, were provided by the
management of JWP and reviewed
by Rothschild. Rothschild calculated the present value of assets
held for sale using an average 9 month period to the receipt of
proceeds and a discount rate of 20%.
Rothschild valued JWP's net operating losses assuming that the Internal Revenue Service adopts Lazard's equity valuation for JWP and by using a discount rate of between 18% and 22%.
IV. SUMMARY OF THE PLAN
The following discussion is qualified in its entirety by the provisions of the Plan, which is annexed hereto as Exhibit 1.
In addition to administrative expense claims and priority tax claims, which will be paid in full in accordance with the Bankruptcy Code, the Plan divides all other claims against and equity interests in JWP into eleven classes.
CLASS STATUS - ------------------------------- --------------------------- Class 1: Priority Claims...... Unimpaired-not entitled to vote Class 2: Old Note Claims...... Impaired-entitled to vote Class 3: Old Credit Agreement Claims....................... Impaired-entitled to vote Class 4A: Convenience: $10,000 and under.................... Unimpaired-not entitled to vote Class 4B: Other Borrowed Money Claims....................... Impaired-entitled to vote Class 4C: General Unsecured Claims Impaired-entitled to vote Class 5: Unimpaired Contingent Claims...................... Unimpaired-not entitled to vote Class 6: Subordinated Debt Claims Impaired-entitled to vote Class 7: Contingent and Statutory |
Subordinated Claims............ Impaired-entitled to vote Class 8: Old Preferred Stock..... Impaired-entitled to vote Old Common Stock (including Employee Stock Options
Class 9: and Other Rights)....... Impaired-entitled to vote Class 10: Class Action Plaintiffs Impaired-entitled to vote Class 11: Warrants of Participation..................... Impaired-entitled to vote |
A. PROPERTY TO BE DISTRIBUTED UNDER THE PLAN
The reorganization of JWP will result, under the Plan, in a corporate restructuring that will, among other things, reflect the New Securities and, in the case of New Debt Securities, the sources of payment therefor. Reorganized JWP will have two significant wholly-owned subsidiaries:
- -- MES Corporation ("MES"), a newly-organized nondebtor subsidiary and a holding company which will own, directly and indirectly, the wholly-owned Nondebtor subsidiaries that constitute the continuing core business operations providing mechanical/electrical services.
- -- SellCo Corporation ("SellCo"), a newly-organized non-debtor subsidiary and a holding company which is a co-proponent of the Plan and will own, directly and indirectly, the Nondebtor Subsidiaries which constitute the operating businesses that are actively being marketed or held for eventual sale.
Reorganized JWP will also retain, as direct subsidiaries, the five Nondebtor Subsidiaries listed on Schedule 4 of the Plan, the stock of which is pledged as the substitute for the original Software House Collateral (see "Background Information-Software House Collateral") and Dyn Specialty Contracting, Inc. (see "Reorganized JWP").
In addition to the cash payments to be made in respect of administrative expense, priority tax and Class 4A claims, the following New Securities will be distributed, as applicable, under the Plan to Classes 2, 3, 4B, 4C, 6, 7 8, 9, 10 and 11:
1. Senior Secured Notes. Reorganized JWP will issue to Classes 2, 3, 4B and 4C, as applicable, two series of senior secured notes:
- -- Series A Senior Secured Notes (the terms of which are described immediately below): as a result of the Intercreditor Agreement, Series A Senior Secured Notes are to be issued (i) in the principal amount of $51 million to the Old Note Holders and (ii) to the holders of Class 4B Borrowed Money Claims and Class 4C General Unsecured Claims in the principal amount necessary to provide the same percentage of their aggregate unsecured debt as the percentage $51 million is of the aggregate unsecured debt in the amount of $514,386,200 held by the Old Note Holders and Old Credit Agreement Holders. $51 million equals 9.9% of $514,386,200. Thus, the principal amount of Series A Senior Secured Notes issued to Class 4B and Class 4C will be equal to 9.9% of the aggregate Class 4B and 4C claims ultimately allowed. See below "Classification and Treatment-General Unsecured Creditors-Class 4C" for a table setting forth the range of Series A Senior Secured Notes that could be issued to Classes 4B and 4C.
- -- Series B Senior Secured Notes in the principal amount of $11,357,000 recognizes the secured portion of the debt held by the Lenders. See "Background Information."
The terms of the two series of senior secured notes are:
a. Series A Senior Secured Notes. Three-year Series A 7% Senior Secured Notes ("Series A Secured Notes") to be issued by Reorganized JWP in the initial principal amount of (a) $51,000,000 to the Class 2 Old Note Holders, plus (b) to holders of the Class 4B Borrowed Money Claims and Class 4C General Unsecured Claims, the amount that bears the same ratio to the aggregate allowed claims of Classes 4B and 4C as $51,000,000 bears to the aggregate allowed unsecured claims of the Old Note Holders and the holders of Old Credit Agreement Debt, plus (c) to Belmont, the Additional Interest Amount unless Reorganized JWP elects to pay such Additional Interest Amount in cash. The Series A Secured Notes will be guaranteed by SellCo, which guaranty shall be secured by a priority pledge of the capital stock of each of the Nondebtor Subsidiaries which constitute SellCo listed on Schedule 5 of the Plan, subject only to the Working Capital Lien (see "Summary of the Plan-Conditions Precedent-Working Capital Facility"), will also be guaranteed by MES, and will be secured by, among other things, a first priority pledge of the capital stock of MES* and SellCo, a first priority security interest in the Series A Substitute Collateral, a second priority security interest in the Series B Substitute Collateral, and a second priority pledge of the capital stock of the Nondebtor Subsidiaries consisting of the substitute collateral for the original Software House Collateral listed on Schedule 4 of the Plan. There is a mandatory redemption of $10,000,000 principal amount, less any prepayments pursuant to the Indenture governing the Series A Secured Note, on the second anniversary of the Effective Date. Interest on the Series A Secured Notes, commencing on the Effective Date, shall be compounded semi-annually and payable by the issuance of additional Series A Secured Notes. For a full description of the terms, conditions and covenants of the Series A Secured Notes and the form of Series A Secured Note, see the Series A Secured Note Indenture annexed to the Plan as Exhibit A.
* In the event of a default under either the Series A Secured Note or the Series B Secured Notes, foreclosure on the pledge of the capital stock of MES may be subject to a "standstill" agreement with a working capital lender for a period to be negotiated between the Creditors Committees and a working capital lender.
interest in the Series A Substitute Collateral. Interest on the Series B Secured Notes shall be compounded semi-annually, commencing on the Effective Date, and payable by the issuance of additional Series B Secured Notes. For a full description of the terms, conditions and covenants of the Series B Secured Notes and the form of Series B Secured Note, see the Series B Secured Note Indenture annexed to the Plan as Exhibit B.
2. Series C Notes. Reorganized JWP will issue to Classes 2, 3, 4B and 4C, $60,000,000 principal amount of seven-year Series C 11% subordinated notes ("Series C Notes"), plus, to Belmont, the Additional Interest Amount (unless Reorganized JWP elects to pay such Additional Interest Amount in cash). The Series C Notes will be senior indebtedness of Reorganized JWP, but subordinate to (i) the Series A and Series B Secured Notes and (ii) up to $100 million of a new working capital credit facility of Reorganized JWP or MES, and will be guaranteed by MES subject to payment in full of the Series A and Series B Secured Notes. Interest, commencing on the Effective Date, on the Series C Notes shall be payable, semi-annually, by the issuance of additional Series C Notes for the first eighteen months after the Effective Date and, thereafter, payable quarterly in cash. For a full description of the terms, conditions and covenants of the Series C Notes and the form of Series C Note, see the Series C Note Indenture annexed to the Plan as Exhibit C.
3. SellCo Subordinated Contingent Payment Notes. As the means of segregating asset sales proceeds under the Plan for the benefit of impaired creditors, SellCo will issue to Classes 2, 3 and 4B $46,000,000 principal amount of ten-year 12% subordinated notes (the "SellCo Subordinated Contingent Payment Notes"), plus, to Belmont, the Additional Interest Amount (unless Reorganized JWP elects to pay such Additional Interest Amount in cash). The SellCo Subordinated Contingent Payment Notes will be junior and subordinated indebtedness of SellCo so long as any portion of indebtedness on account of the Series A or Series B Secured Notes or the guaranty of SellCo in respect thereof remain outstanding. The SellCo Subordinated Contingent Payment Notes will be secured by a pledge of the capital stock of the Nondebtor Subsidiaries owned by SellCo and listed on Schedule 5 to the Plan, subject only to the Working Capital Lien and the lien in favor of the Series A Secured Notes and the Series B Secured Notes, and a first priority pledge of the JWP Supplemental SellCo Note. See Paragraph 8 below for a summary of the terms of the JWP Supplemental SellCo Note. Subject to the prior payment in full of the Series A Secured Notes and the Series B Secured Notes and establishment of a cash reserve for the payment of capital gains taxes arising from the sales of Nondebtor Subsidiaries, the Sellco Subordinated Contingent Payment Notes will be mandatorily prepayable to the extent of Net Cash Proceeds from the sale of stock or the assets of such Nondebtor Subsidiaries. Interest, commencing on the Effective Date, on the SellCo Subordinated Contingent Payment Notes will be compounded semi-annually and payable in additional SellCo Subordinated Contingent Payment Notes until the earlier to occur of payment in full of the original principal amount of such Notes or the maturity date. If, at any time after the fifth anniversary of the Effective Date and prior to the maturity date, the value, as determined by an independent appraiser selected by Reorganized JWP, of the consolidated assets of SellCo (excluding the JWP Supplemental SellCo Note) and the Nondebtor Subsidiaries listed on Schedule 5 of the Plan is less than $250,000, then the SellCo Subordinated Contingent Payment Notes will be deemed canceled. For a full description of the terms and conditions of the SellCo Subordinated Contingent Payment Notes and the form of SellCo Subordinated Contingent Payment Note, see the SellCo Subordinated Contingent Payment Note Indenture, annexed to the Plan as Exhibit D.
5. New Series X Warrants and New Series Y Warrants. Reorganized JWP will issue to holders of Old Subordinated Debt (Class 6) two series of five-year warrants (which, together with the warrants described in Paragraph 6 below are, collectively, "New Warrants"), each of which will entitle the holder thereof to purchase one share of New Common Stock: (i) 600,000 New Series X Warrants, plus to Belmont the Additional Interest Amount; exercise price: $12.55 per share and (ii) 600,000 New Series Y Warrants, plus to Belmont the Additional Interest Amount; exercise price: $17.55 per share. If the market value of the New Common Stock has reached and remained at $30.46 per share for ten of the preceding fifteen trading days at any time prior to the expiration of five years from the date of issuance, the holders of Class 6 claims, upon exercise of the New Series X Warrants and the New Series Y Warrants, will have received, in value, the full amount of their claims. At that time, Reorganized JWP will notify the registered holders of such Warrants that the New Series X Warrants and New Series Y Warrants will expire in fifteen days, thereby giving such holders a final opportunity to exercise such Warrants to purchase New Common Stock. The New Series X Warrants and New Series Y Warrants will contain certain antidilution and other provisions. For a full description of the terms and conditions of the New Series X Warrants and the New Series Y Warrants, see the forms of Warrant Agreements annexed to the Plan as Exhibits O and P, respectively.
6. New Series Z Warrants. Reorganized JWP will issue to holders
of other subordinated claims (Class 7) and impaired equity
interests (Classes 8, 9, 10 and 11) 250,000 two-year New Series Z
Warrants, each of which will entitle its
holder to purchase one share of New Common Stock; exercise price:
$50.00, which are allocated among such classes. See
"Classification and Treatment" for such allocations. The New
Series Z Warrants will contain antidilution and other
provisions similar to the New Series X Warrants and New Series Y
Warrants. Persons entitled to receive New Series Z Warrants may
elect, instead, to receive $.10 for each such Warrant. See
"Implementation of the Plan." For a full description of the New
Series Z Warrants, see the form of Warrant Agreement annexed to
the Plan as Exhibit R.
The New Series Z Warrants being issued to Classes 7, 8, 9, 10
and 11 have an exercise price of $50.00 per share, which, based
on the total number of shares of Reorganized JWP to be
outstanding at the Effective Date, equates to an
enterprise value of approximately $650 million for Reorganized
JWP. Since Lazard values the Reorganized JWP as of January 1,
1994 at a range of $225 million to $250 million, and Rothschild
values Reorganized JWP as of January 1,
1994 at a range of $345 million to $415 million, in all
probability, the New Series Z Warrants will have little value
upon the Effective Date of the Plan.
There is also no certainty that the New Common Stock will trade
at above $50 per share within the two year period by which the
New Series Z Warrants must be exercised. However, the Debtor
projects that the net income of the Reorganized
JWP will increase from a loss of $11.4 million for 1994 to net
income of $23.0 million in 1996. See "Financial
Information-Projected Consolidated Income Statements." To the
extent that Reorganized JWP achieves or exceeds
these projections, and dependent upon prevailing stock market
multiples for similar securities, it is likely that the
improvement in earnings will be reflected in
the market price of the New Common Stock.
Pursuant to the Plan, holders of New Series Z Warrants have the option to receive $.10 in lieu of a warrant, provided that Reorganized JWP shall not be required to make any payment of less than one ($1) dollar. Lazard and Rothschild believe that the value of $.10 per warrant exceeds the market price at which the New Series Z Warrants are likely to trade after the Effective Date of the Plan.
The exercise price of the New Series X and New Series Y
Warrants being distributed to Class 6 is lower than the exercise
price of the New Series Z
Warrants, and the exercise term of the New Series X and New
Series Y Warrants is longer than the term of the New Series Z
Warrants. This difference is
attributable to a number of factors, including that Class 6 is
entitled to priority in distribution pursuant to the Bankruptcy
Code and that equitable subordination claims that could be
asserted by Class 6 would not be available
to the equity classes receiving the Series Z Warrants.
Although the Debtor and the Creditors' Committee deny any basis
for equitable subordination of the Lenders' claims, in an effort
to avoid the risks and delay
inherent in such litigation, the parties negotiated the issuance
of the New Series X and New Series Y Warrants to the Class 6
creditors.
Despite the fact that, based upon the valuations by Lazard and
Rothschild, there is insufficient value in Reorganized JWP to
satisfy all creditors, and therefore there is no obligation under
the Bankruptcy Code to provide any distribution to holders of
equity interests, the Junior Committee, after protracted
negotiations, successfully negotiated the issuance and
distribution of New Series Z Warrants to Classes 7, 8, 9, 10 and
11. The exercise price of $50 a share equates to an enterprise
value of approximately $650 million for Reorganized JWP. This
enterprise value is approximately equivalent to the total amount
of allowed claims that have priority in distribution to the
holders of equity interests pursuant to the Bankruptcy Code.
7. New Securities For Debtor-in-Possession Lender. The Plan authorizes the issuance of additional Series A Secured Notes, Series B Secured Notes, Series C Notes, SellCo Subordinated Contingent Payment Notes, New Common Stock and New Warrants to Belmont in respect of the Additional Interest Amount. See "Events during the Reorganization Case" and "Implementation of the Plan."
8. JWP Supplemental SellCo Note. JWP will also issue an intercompany note to SellCo (the "JWP Supplemental SellCo Note") in the principal amount approximately equal to the net cash proceeds, less $1,000,000, generated by sales of businesses between December 1, 1993 and the date on which such Note is issued which would have been, under the Plan, subsidiaries of SellCo. Such net cash proceeds, initially intended to be paid as a prepayment of the Series A Secured Notes, were used by JWP for working capital needs. It is estimated that the principal amount of the JWP Supplemental SellCo Note will be approximately $5,000,000. The JWP Supplemental SellCo Note will (a) be senior indebtedness of Reorganized JWP, (b) accrue interest at the rate of 8% per annum, compounded semi-annually, and payable upon maturity and (c) mature on the earlier of (i) ten years or (ii) one day prior to the date, but not earlier than five years from the Effective Date, upon which the SellCo Subordinated Contingent Payment Notes are deemed canceled upon a determination that the value of the assets of SellCo (excluding the JWP Supplemental SellCo Note) is less than $250,000.
B. CLASSIFICATION AND TREATMENT
1. Unimpaired Claims Not Classified Under the Plan.
Administrative Expense and Priority Tax Claims. Administrative
expense claims are those expenses, incurred by JWP after the
Consent Date, which are necessary
to preserve the estate, including usual ordinary course costs,
wages and salaries, taxes, and such professional fees as are
approved by the Bankruptcy Court. JWP intends to pay all
administrative expenses of operations as they
become due in the Reorganization Case. Fees of professionals
employed at the expense of the estate, whose compensation is
subject to the approval of the Bankruptcy Court, will be paid in
the amounts awarded after entry of an order
by the Bankruptcy Court. JWP is unable, at this time, to estimate
the amount of professional fees that will be sought or that may
be allowed. Several parties have expressed an intent to challenge
the reorganization values developed by Lazard Freres & Co., the
investment adviser relied on by the Debtor and its
senior creditors. If there is significant or protracted
litigation in connection with the confirmation process and the
Plan, it is likely that professional fees will escalate to a
currently undeterminable amount.
Priority tax claims, under Section 507(a)(7) of the Bankruptcy
Code, consist,
generally, of taxes that are or were due within the three years
prior to the
Petition Date, except that tax claims arising between the
Petition Date and the Consent Date, if any, will have priority
under Section 507(a)(2) of the
Bankruptcy Code. The Plan provides that payment of priority tax
claims will be made, at JWP's option, either in cash on the
Effective Date (or as soon as
practicable thereafter) or, pursuant to Section 1129(a)(9)(C) of
the Bankruptcy Code, by deferred cash payments over a period of
six years from the date of
assessment, with interest thereon at a rate to be determined by
the Bankruptcy Court. JWP estimates that allowed priority tax
claims are not likely to exceed $288,000.
2. Claims and Interests Classified Under the Plan.
a. Unimpaired Claims.
(1) Priority Claims-Class 1. Class 1 consists of priority claims under Section 507(a) of the Bankruptcy Code other than claims for administrative expenses or claims of a governmental unit under Section 507(a)(7). In addition to administrative expense and priority tax claims, which are separately treated, the only claims afforded priority under Section 507(a) of the Bankruptcy Code that JWP believes would be relevant to the Reorganization Case and the Plan would be (i) for debts other than wages and benefits incurred between the Petition Date and the Consent Date and (ii) those for wages, salaries and employee benefit plans. JWP estimates that claims incurred between the Petition Date and the Consent Date will not exceed $359,000.
Since JWP has been authorized by the Bankruptcy Court to pay
virtually all employee claims prior to confirmation of the Plan,
JWP does not believe there will be any Class 1 priority
wage-related claims other than, perhaps,
unutilized vacation time which will be reinstated. In the event
JWP has not paid all wage, salary and employee benefit plan
claims promptly after the
Consent Date, such claims will nonetheless remain unimpaired and
be classified in Class 5. Holders of Class 1 claims are deemed to
have accepted the Plan and are not entitled to vote on the Plan.
Allowed Class 1 claims will be paid in
full, in cash, on the Effective Date or as soon as practicable
thereafter.
(2) Convenience Class-Class 4A. A claimant who holds General Unsecured Claims of $10,000 or less in the aggregate or who elects to reduce his claims to $10,000 in the aggregate is unimpaired and classified in Class 4A. Holders of allowed Class 4A claims will be paid in full in cash on the Effective Date or as soon as practicable thereafter. A holder of a General Unsecured Claim in Class 4 who elects Class 4A treatment by reducing his claims, in the aggregate, to $10,000 accepts payment under the Plan as payment in full. JWP has scheduled and received proofs of claim in Class 4A that are, in the aggregate, approximately $220,000. In addition, it is anticipated that holders of Class 4B claims of up to $30,000 may elect to reduce their claims to $10,000, which election could add up to approximately $30,000 to the allowed Class 4A claims.
Holders of Class 4A claims are unimpaired and are not entitled to vote on the Plan.
(3) Unimpaired Contingent Claims-Class 5. JWP has determined it is essential to the feasibility of the Plan, and to Reorganized JWP's ability to preserve the value of the New Securities, that certain significant ordinary course obligations remain unimpaired. In addition to (a) administrative expense and priority tax claims (unclassified) and (b) claims arising between the Petition Date and the Consent Date (Class 1), employee claims that have not been otherwise addressed in the Plan and claims of certain bonding companies that satisfy the requirements of subsection H of Article III of the Plan, as described below, unimpaired claims are those listed on Schedule 1 to the Plan and are classified in Class 5. On the Effective Date, Class 5 claims will be reinstated and will have the same legal status as if the Reorganization Case had not been filed, with the rights and obligations of Reorganized JWP and the Class 5 claimant unaltered.
In addition to the employee claims discussed above, the
unimpaired claims include what are essentially contingent and/or
unliquidated obligations, such as guarantees made by JWP to
certain bonding companies in respect of bonds
issued for the account of operating Nondebtor Subsidiaries (which
guarantees constitute the largest part of the unimpaired claims)
that are required to maintain operations of the Nondebtor
Subsidiaries. Such guarantee claims could
be in the range of $700 million to $1.5 billion. Based on past
experience, JWP believes these contingent obligations are
unlikely to become fixed, liquidated
liabilities of Reorganized JWP. Impairment of these claims,
however, (in particular, the bonding companies' contingent
claims) could result in significant disruption of the businesses
and operations of the Nondebtor
Subsidiaries and, possibly, the liquidation of JWP and the
Nondebtor Subsidiaries. The legal, equitable and contractual
rights of Class 5 creditors will remain unaltered under the Plan.
similar instruments pursuant to which bonds were executed or
procured prior to
the Effective Date of the Plan shall remain in full force and
effect and (C)
the terms of Section 4 of the agreement attached to the Plan as
Exhibit K shall
be effective as against Reorganized JWP, MES and those certain
Nondebtor Subsidiaries and shall be deemed to have been
incorporated into the Plan by reference. The claims of a Bonding
Company listed on Schedule 1 that has refused to execute such an
agreement will be classified and treated as Class 4B claims which
JWP will seek to have expunged under Section 502(e) of the
Bankruptcy Code, following notice and a hearing to the affected
Bonding Company. At least one of the bonding companies has stated
that it does not believe that its contingent claims are subject
to expungement under Section 502(e).
Holders of Class 5 claims are deemed to have accepted the Plan and are not entitled to vote on the Plan.
b. Impaired Claims.
There are six classes of impaired claims.
In addition to the claims of the Lenders (Class 2 and 3), the remaining claims which constitute "Senior Indebtedness" under the Indentures covering the Old Subordinated Debt (Class 6) are classified in Class 4B for the purpose of effectuating the terms of the Intercreditor Agreement without affecting the distributions to Class 4B. For all other purposes under the Plan, the claims in Class 2, 3 and 4B are treated as a single class of senior indebtedness claims against JWP.
(1) Old Note Claims-Class 2. Holders of claims under the Old Notes are impaired. Old Note claims aggregate $328,572,000 principal amount, plus interest thereon of $29,593,112.
Holders of Class 2 allowed claims will receive their Ratable Shares of (i) $51,000,000 principal amount of Series A 7% Senior Secured Notes of Reorganized JWP; plus (ii) the Class 2 Series B Percentage of $11,357,000 principal amount of Series B 7% Senior Secured Notes of Reorganized JWP reflecting the Class 2 Percentage of the aggregate allowed claims of Classes 2 and 3 after deducting the $51,000,000 distribution of the Series A Secured Notes; plus (iii) the Class 2 Residual Percentage of (A) $60,000,000 principal amount of 11% Series C Notes of Reorganized JWP, (B) $46,000,000 principal amount of 12% SellCo Subordinated Contingent Payment Notes and (C) 9,000,000 shares of New Common Stock.
Based on the Lazard valuation and depending upon the aggregate
amount of
Class 4B and 4C claims ultimately allowed, JWP estimates that the
consideration to be received by Class 2 claimants will have a
value of approximately $.40 for
each dollar of allowed Class 2 claims. Based on the Rothschild
valuation and
using the model developed by Lazard, such consideration will have
a value of $.64 for each dollar of allowed Class 2 claims.
Holders of Class 2 claims are impaired and entitled to vote on the Plan together with the holders of claims in Classes 3 and 4B as a single class.
(2) Old Credit Agreement Claims-Class 3. Holders of claims under the Old Credit Agreement are impaired. Old Credit Agreement claims aggregate $155,794,000 principal amount, plus interest thereon of $11,784,088.
Holders of Class 3 allowed claims will receive their Ratable
Shares of: (i) the Class 3 Series B Percentage of $11,357,000
principal amount of Series B 7%
Senior Secured Notes of Reorganized JWP reflecting the Class 3
Percentage of the aggregate allowed claims of Classes 2 and 3
after deducting the $51,000,000
distribution of the Series A Secured Notes to the holders of
Class 2 Claims; plus (ii) the Class 3 Residual Percentage of (A)
$60,000,000 principal amount of 11% Series C Notes of Reorganized
JWP, (B) $46,000,000 principal amount of
12% SellCo Subordinated Contingent Payment Notes and (C)
9,000,000 shares of New Common Stock.
Based on the Lazard valuation and depending upon the amount of Class 4B claims ultimately allowed, JWP estimates that the consideration to be received by Class 3 claimants will have a value of approximately $.27 for each dollar of allowed Class 3 claims. Based on the Rothschild valuation and using the model developed by Lazard, such consideration will have a value of approximately $.50 for each dollar of allowed Class 3 claims.
Holders of Class 3 claims are impaired and entitled to vote on the Plan together with the holders of claims in Classes 2 and 4B as a single class.
(3) Other Borrowed Money Claims-Class 4B. Other Borrowed Money Claims consist of claims which constitute "Senior Indebtedness" (other than the claims of Classes 2 and 3) under the Indentures governing the Old Subordinated Debt claims in Class 6, including the claims held by three banks (the "Letter of Credit Banks") which have outstanding letters of credit ("Letters of Credit"), in one case, guaranteed by JWP, in the aggregate amount of approximately $36 million to collateralize obligations under JWP's partial self-insurance program and which, in addition, hold promissory notes of JWP. In order to effectuate the terms of the Intercreditor Agreement between the holders of claims in Classes 2 and 3, the allowed claims of Class 4B are treated, for distribution purposes, with the allowed claims of Class 4C. See the discussion of Class 4C recoveries immediately below. Holders of Class 4B claims are impaired and entitled to vote on the Plan together with the holders of claims in Classes 2 and 3 as a single class.
(4) General Unsecured Creditors-Class 4C. General Unsecured Creditors consist of all creditors not included in Classes 2, 3, 4A, 4B, 5, 6 and 7, together with (i) parties to executory contracts or unexpired leases which are rejected by JWP after the Consent Date and at or prior to the confirmation of the Plan, and (ii) any bonding company (other than Wellington Guarantee and Reliance Insurance Corp.), which provided performance or bid bonds to Nondebtor Subsidiaries and is listed on Schedule 1 to the Plan, which fails to enter into an agreement, substantially in the form annexed to the Plan as Exhibit K, establishing the terms and conditions on which such bonding company's claims shall remain in Class 5 and be reinstated and unimpaired.
Certain claims in Class 4C are contingent, unliquidated and, in some cases, disputed claims. If any such Class 4C Creditor has filed a proof of claim in the Reorganization Case (see "Bar Date-Who Must File a Claim"), JWP intends either to seek estimation of such claim by the Bankruptcy Court pursuant to Section 502(c) of the Bankruptcy Code or, in appropriate cases such as contingent indemnification or contribution claims, to seek to have such claims disallowed and expunged under Section 502(e) of the Bankruptcy Code.
Holders of allowed Class 4B and 4C claims will receive their
Ratable Shares
of (i) the principal amount of Series A 7% Senior Secured Notes
that bears the
same ratio to the aggregate amount of allowed claims of Class 4B
and 4C as $51,000,000 bears to the aggregate amount of allowed
unsecured claims of Classes 2 and 3; plus, (ii) the Class 4B and
4C Residual Percentage of (A)
$60,000,000 principal amount of 11% Series C Notes of Reorganized
JWP; (B) $46,000,000 principal amount of 12% SellCo Subordinated
Contingent Payment Notes and (C) 9,000,000 shares of New Common
Stock.
Holders of allowed Class 4C claims are impaired and entitled to vote on the Plan. Holders of contingent, disputed or unliquidated Class 4C claims may only vote if the Bankruptcy Court has estimated such holder's claim for voting purposes pursuant to Bankruptcy Rule 3018.
JWP has estimated the aggregate Class 4B and 4C claims that
will ultimately be allowed by the Bankruptcy Court will be
approximately $85,000,000. Based on that assumption and the
Lazard valuation, JWP estimates that the consideration
to be received by Class 4B and 4C claimants will have a value of
approximately $.34 for each dollar of the aggregate allowed Class
4B and 4C claims. Based on the Rothschild valuation and using the
model developed by Lazard, such
consideration will have a value of approximately $.58 for each
dollar of the aggregate allowed Class 4B and 4C claims. HOWEVER,
THERE CAN BE NO ASSURANCE THAT ALLOWED CLASS 4B AND 4C CLAIMS
WILL NOT EXCEED JWP'S ESTIMATE, THEREBY HAVING A SUBSTANTIAL
EFFECT ON THE RATABLE SHARES OF THE SERIES C NOTES, SELLCO
SUBORDINATED CONTINGENT PAYMENT NOTES AND NEW COMMON STOCK TO BE
DISTRIBUTED UNDER THE PLAN TO CLASSES 2, 3, 4B AND 4C. IF, PRIOR
TO CONFIRMATION, JWP ESTIMATES THAT THE AGGREGATE CLASS 4B AND 4C
CLAIMS LIKELY TO BE ALLOWED BY THE BANKRUPTCY COURT WILL EXCEED
$100,000,000, THE PLAN WILL NOT BE CONFIRMED
UNLESS SUCH CONDITION IS WAIVED, IN WRITING, BY THE HOLDERS OF AT
LEAST TWO-THIRDS IN AMOUNT OF EACH OF CLASS 2 AND CLASS 3 CLAIMS
WHICH HAVE VOTED ON THE PLAN. SHOULD THE ALLOWED CLASS 4B AND 4C
CLAIMS REACH, FOR EXAMPLE, $150,000,000 AND THE PLAN BE
CONFIRMED, THE ESTIMATED VALUES OF THE RECOVERIES
TO EACH OF CLASSES 2, 3, 4B AND 4C WOULD DECREASE TO $.38, $.24
AND $.31 BASED ON THE LAZARD VALUATION AND $.58, $.51 AND $.44
BASED ON THE ROTHSCHILD VALUATION FOR EACH DOLLAR OF ALLOWED
CLAIMS, RESPECTIVELY, FROM THE VALUES
ESTIMATED AT $85 MILLION OF ALLOWED CLASS 4B AND 4C CLAIMS.
For example, the Letter of Credit Banks have outstanding
Letters of Credit, in one case, guaranteed by JWP, in the amounts
of $12 million, $16 million and
$8 million, respectively which collateralize obligations under
JWP's partial self-insurance program.<F16> One of the Letter of
Credit Banks had filed a proof
of claim in the approximately amount of $27 million, but
subsequently settled
its claim for approximately $18 million. The two other Letter of
Credit Banks
have filed proofs of claim based on the Letters of Credit and
related JWP
promissory notes in amounts that are far in excess of the face
amounts of the
respective Letters of Credit. If the claims of these two Letter
of Credit Banks are allowed in the full amounts asserted, the
Debtor's estimate of $85 million
as the likely amount of aggregate allowed Class 4B and 4C claims
would be exceeded by approximately $25 million.
In addition, the Debtor has scheduled an intercompany claim owing to its subsidiary JWP Information Services Inc. ("JWPIS") in the amount of $24.9 million. See "The Company-Information Services." The Chapter 7 trustee for JWPIS (the "JWPIS Trustee") has filed a proof of claim in the amount of $50 million. If the claim of the JWPIS Trustee is allowed in full, the Debtor's estimate of $85 million as the likely amount of aggregate Class 4B and 4C claims would be further exceeded by $25.1 million.
The following table illustrates the range of the distributions that would be made to Classes 2, 3, 4B and 4C, depending upon the amount of Class 4B and 4C claims that are ultimately allowed.
If Class 4B and 4C allowed claims are: Class 2 Class 3 Classes 4B and 4C
- ---------------------------------------------------------- ----------- ----------- -----------------
$50,000,000 Series A Notes................................ $51,000,000 $0 $4,957,365
Series B Notes................................ 7,348,129 4,008,871 0
Series C Notes................................ 35,381,587 19,302,904 5,315,509
SellCo Subordinated Contingent Payment Notes.. 27,125,883 14,798,893 4,075,224
New Common Stock shares....................... 5,307,238 2,895,436 797,326
$60,000,000 Series A Notes................................ $51,000,000 $0 $5,948,838
Series B Notes................................ 7,348,129 4,008,871 0
Series C Notes................................ 34,765,597 18,966,843 6,267,560
SellCo Subordinated Contingent Payment Notes.. 26,653,625 14,541,246 4,805,129
New Common Stock shares....................... 5,214,840 2,845,026 940,134
$70,000,000 Series A Notes................................ $51,000,000 $0 $6,940,311
Series B Notes................................ 7,348,129 4,008,871 0
Series C Notes................................ 34,170,689 18,642,283 7,187,028
SellCo Subordinated Contingent Payment Notes.. 26,197,529 14,292,417 5,510,055
New Common Stock shares....................... 5,125,603 2,796,342 1,078,054
$80,000,000 Series A Notes................................ $51,000,000 $0 $7,931,784
Series B Notes................................ 7,348,129 4,008,871 0
Series C Notes................................ 33,595,799 18,328,643 8,075,558
SellCo Subordinated Contingent Payment Notes.. 25,756,779 14,051,960 6,191,261
New Common Stock shares....................... 5,039,370 2,749,296 1,211,334
$85,000,000 Series A Notes................................ $51,000,000 $0 $8,427,520
Series B Notes................................ 7,348,129 4,008,871 0
Series C Notes................................ 33,315,547 18,175,748 8,508,704
SellCo Subordinated Contingent Payment Notes.. 25,541,920 13,934,740 6,523,340
New Common Stock shares....................... 4,997,332 2,726,362 1,276,306
$90,000,000 Series A Notes................................ $51,000,000 $0 $8,923,256
Series B Notes................................ 7,348,129 4,008,871 0
Series C Notes................................ 33,039,933 18,025,383 8,934,684
SellCo Subordinated Contingent Payment Notes.. 25,330,615 13,819,460 6,849,925
New Common Stock shares....................... 4,955,990 2,703,807 1,340,203
If Class 4B and 4C allowed claims are: Class 2 Class 3 Classes 4B and 4C
- ----------------------------------------------------------- ----------- ---------- -----------------
$100,000,000 Series A Notes................................ $51,000,000 $0 $9,914,729
Series B Notes................................ 7,348,129 4,008,571 0
Series C Notes................................ 32,502,161 17,731,994 9,765,844
SellCo Subordinated Contingent Payment Notes.. 24,918,324 13,594,529 7,487,147
New Common Stock shares....................... 4,875,324 2,659,799 1,464,877
$125,000,000 Series A Notes................................ $51,000,000 $0 $12,393,412
Series B Notes................................ 7,348,129 4,008,871 0
Subordinated Notes............................ 31,231,327 17,038,673 11,730,000
Sellco Subordinated Contingent Payment Notes.. 23,944,017 13,062,983 8,993,000
New Common Stock shares....................... 4,684,699 2,555,801 1,759,500
$150,000,000 Series A Notes................................ $51,000,000 $0 $14,872,094
Series B Notes................................ 7,348,129 4,008,871 0
Subordinated Notes............................ 30,056,132 16,397,530 13,546,338
Sellco Subordinated Contingent Payment Notes.. 23,043,035 12,571,440 10,385,526
New Common Stock shares....................... 4,508,420 2,459,630 2,031,951
|
(5) Subordinated Debt Claims-Class 6. Class 6 consists of claims against JWP:
i) by the holders of $7,040,000 principal amount of JWP's 73/4% Convertible Subordinated Debentures, due 2012, plus interest thereon to the Petition Date in the amount of $441,027; and
ii) by holders of $9,600,000 principal amount of JWP's 12% Subordinated Notes, due 1996, plus interest thereon to the Petition Date in the amount of $1,411,200.
The Plan provides for the issuance to each holder of an allowed
Class 6 claim its Ratable Share of 600,000 New Series X Warrants
and 600,000 New Series Y
Warrants, but only if (i) Class 6 accepts the Plan by the
requisite majority, (ii) such holder has delivered to Reorganized
JWP the instrument or instruments
on which its claim is based on or before the first anniversary of
the Effective Date and (iii) the claims in Classes 2, 3 and 4B
vote to accept the Plan in accordance with Section 1126(c) of the
Bankruptcy Code.
Class 6 is impaired and is entitled to vote on the Plan.
CLASSES RECEIVING NEW SERIES Z WARRANTS
The Plan provides for the issuance of 250,000 two-year New
Series Z Warrants, each of which will entitle the holder to
purchase one share of New Common Stock
at the exercise price of $50.00. The Series Z Warrants are
allocated among Class 7 (Other Subordinated Claims, described
below) and the impaired equity interests described below (Classes
8, 9, 10 and 11). If Class 7 does not accept the Plan, none of
the classes of equity interests will retain any
property or receive any distributions under the Plan. However, if
all of the claims in Class 7 are subsequently disallowed or
expunged, the failure of Class 7 to accept the Plan will not
preclude distributions to the classes of impaired
equity interests which accept the Plan, if they are not otherwise
subject to the "cram-down" provisions of the Bankruptcy Code. See
"Confirmation of the Plan."
The Junior Committee, in conjunction with Rothschild,
determined the appropriate allocations of the New Series Z
Warrants. In allocating the New Series Z Warrants, a uniform
market analysis of the various claims and
interests in Classes 7 through 11 was applied as of October 2,
1992, the date following JWP's announcement of its restated
financial statements which gave rise to the market decline of
JWP's stock and the commencement of the
shareholder litigation and the litigation by the Old Noteholders.
See "Legal Proceedings-Shareholder Litigation."
As of October 2, 1992, the market value of the outstanding Old
Common Stock was $157,921,948; the liquidation preference of the
Old Preferred Stock was $21,250,000; and the market value of the
Warrants of Participation was $1,152,649. The total value of the
Equity Interests and the Liquidation
Preference of the Old Preferred Stock was therefore $180,324,597
as of the close of business on October 2, 1992 (the "Equity
Value").
The allocation of New Series Z Warrants is based upon the
proportionate value
that the claims or interests of Classes 7, 8, 9, 10 and 11 bear
to the Equity Value.
No fractional New Series Z Warrants will be issued.
Accordingly, if any holder of a claim or interest in any of
Classes 7, 8, 9, 10 or 11 does not hold
a sufficient claim or interest to equate to the issuance of one
warrant, no distribution will be made to such claimant or
interest holder under the Plan.
All New Series Z Warrants which are not distributed as a result
of fractional share interests shall be distributed in a
proportionate manner, to the extent practicable, to the members
of each of Classes 7, 8, 9, 10 and 11 who do
receive New Series Z Warrants from the undistributed portion of
the New Series Z Warrants allocable to such class.
Persons entitled to receive New Series Z Warrants may elect, instead, to receive $.10 in cash for each whole New Series Z Warrant (the "Cash Election"). However, Reorganized JWP is not obligated to distribute cash in lieu of New Series Z Warrants unless the claim or interest holder is entitled to receive at least $1.00, in the aggregate, in lieu of New Series Z Warrants. See the descriptions of the treatment of Classes 7, 8, 9, 10 and 11 below to determine whether a claim or interest holder in each such class would be entitled to make the Cash Election.
(6) Other Subordinated Claims-Class 7. Holders of:
i) the indemnification or contribution claims, if any, by current or former officers and directors of JWP or by other parties in connection with the claims asserted in the Old Note Holders Litigation, and
ii) any intercompany claims that the Court determines should be subordinated to general unsecured claims, are impaired and are entitled to vote on the Plan.
Since all of the Class 7 claims, except for the potential Class
7 intercompany claim filed by the Chapter 7 Trustee of JWP
Information Services, Inc. ("JWPIS") (See "The
Company-Information Services") are contingent and
unliquidated indemnification claims, the Debtor intends to move
before the Bankruptcy Court for an order estimating each such
contingent, unliquidated claim at $100 solely for purposes of
voting to accept or reject the Plan,
without prejudice to the right of any party in interest to object
to the allowance of such claim for purposes of receiving a
distribution under the Plan.
If each of Classes 4C and 7 accepts the Plan, 1,388 New Series Z Warrants will be reserved for holders of Class 7 claims, each of which will entitle the holder to purchase one share of New Common Stock at the exercise price of $50.00. In the event, however, that either of Classes 4C or 7 does not accept the Plan, Class 7 will not receive or retain any property under the Plan. IF CLASS 7 DOES NOT ACCEPT THE PLAN, NO CLASS JUNIOR TO IT WILL RECEIVE ANY DISTRIBUTION UNDER THE PLAN UNLESS ALL OF THE CLAIMS IN CLASS 7 HAVE BEEN DISALLOWED OR EXPUNGED.
The Debtor, the Creditors' Committee and the Junior Committee
believe that it
is improbable that the contingent unliquidated claims of Class 7
will ever
ripen into liquidated claims. In all probability, the legal fees
of the directors and officers that may be incurred in connection
with the defense of the litigation by the Old Noteholders will be
paid by their insurers. It is also assumed that the plaintiffs in
the Old Noteholders Litigation will settle
within the policy limits of the insurance policies that cover
these claims and, therefore, will not seek to recover judgments
against the directors and officers individually.
Nonetheless, in an exercise of caution, the Debtor has reserved New Series Z Warrants in an amount equivalent to a cumulative $1 million dollar liquidated claim by Class 7. This amount equates to 0.555% of JWP's Equity Value. Class 7 will therefore be entitled to receive 0.555% of the New Series Z Warrants, or 1,388 Warrants.
These Warrants will be reserved in the event that Class 7
claimants actually do incur any payment expenses, and such
Warrants will be issued in the
proportion that any such claimant's payment or expenses bears to
the aggregate of $1 million. A holder of an allowed Class 7 claim
in the amount of $720 would be entitled to one whole New Series Z
Warrant. Accordingly, a holder of an allowed Class 7 claim in the
amount of $7,200 or greater would be entitled to
make the Cash Election.
c. Impaired Equity Interests.
There are four classes of impaired equity interests.
(1) Old Preferred Stock-Class 8. Holders of the equity interests evidenced by JWP's issued and outstanding shares of Series A Convertible Exchangeable Preferred Stock ($1 par value) are impaired and are entitled to vote on the Plan. The Plan provides that if each of Classes 4C, 6, 7 and 8 accepts the Plan, 29,297 New Series Z Warrants will be issued to the holders of interests in Class 8, each of which will entitle the holder to purchase one share of New Common Stock at an exercise price of $50.00. In the event, however, that any of Classes 4C, 6, 7 or 8 does not accept the Plan, Class 8 will not retain or receive any property under the Plan.
After deduction of the 1,388 New Series Z Warrants allocable to Class 7, which, pursuant to the Bankruptcy Code, has priority in distribution to interest holders, there will be a remaining balance of 248,612 New Series Z Warrants available for distribution. Since the Old Preferred stock represented 11.784% of JWP's Equity Value, the Old Preferred Stock will receive 11.784% of the available 248,612 Warrants, or 29,297 New Series Z Warrants.
The amount of Old Preferred Stock necessary to receive one whole warrant is 15 shares. Accordingly, in order to make the Cash Election, 150 shares or more of Old Preferred Stock would be necessary.
(2) Old Common Stock and Certain Related Interests-Class 9. Holders of:
i) JWP's issued and outstanding shares of common stock ($.10 par value) ("Old Common Stock"),
ii) options granted under JWP's 1986 Incentive Stock Option and Appreciation Plan, JWP's 1991 Stock Option Plan, and JWP's 1992 Stock Option Plan ("Employee Stock Options"), and
iii) Other Rights including equity interests under the Businessland, Inc. 51/2% Convertible Subordinated Debentures, due 2007 ("Businessland Debentures"), and the related Share Issuance Agreement, dated August 6, 1993 between JWP and ENTEX Information Services, Inc.<F17>
are impaired and are entitled to vote on the Plan. The Plan
provides if that each of Classes 4C, 6, 7, 8, 9, 10 and 11
accepts the Plan, 195,667 New Series
Z Warrants will be issued, subject to reservation in the case of
the Businessland Debentures (as set forth below) to the holders
of interests in Class 9, each of which will entitle the holder to
purchase one share of New Common Stock at the exercise price of
$50.00. If any of Classes 4C, 6, 7, 8, 9, 10 and 11 does not
accept the Plan, Class 9 will not retain or receive any
property under the Plan. However, notwithstanding the failure of
any of Classes 9, 10 or 11 to accept the Plan, Reorganized JWP
may elect to make distributions of the New Series Z Warrants to
all such Classes.
Both Class 7 and 8 have priority in distribution to Classes 9, 10 and 11. After deducting the New Series Z Warrants allocable to Classes 7 and 8, there will be a remaining balance of 219,315 New Series Z Warrants available for distribution. These Warrants will be issued as follows:
the Bankruptcy Court that the
treatment of Class 9 interests related to the Businessland
Debentures affords the holders of Businessland Debentures the
same rights under the Plan as such holders have under the
recapitalization provisions of such
Debentures, i.e., the contractual right to receive the same
consideration
received by holders of Old Common Stock and, accordingly, that
Reorganized JWP will have fulfilled JWP's obligations under
the Share Issuance Agreement
by performance in accordance with the Plan. In the event that
it is
ultimately determined by the Bankruptcy Court that some or all
of such
claims are properly included as Class 4C claims, such claims
will be allowed
as creditors of that class, as if they were originally
included
in that
class, and will be entitled to receive the distributions
afforded members of
that Class under the Plan.
(a) Common Stockholders-Holders of Old Common Stock as of sixty days following the Effective Date of the Plan will receive all remaining Warrants after the distribution and reserve for other members of Classes 9, 10 and 11, as set forth below. Class 9 interest holders will be entitled to receive up to 78.267% of the 250,000 Warrants, or 195,667 New Series Z Warrants.
(b) Businessland Debentures-660 New Series Z Warrants will be reserved. The exercise price under the Share Issuance Agreement with respect to the Businessland acquisition is $314 for each share of Old Common Stock. It is, therefore, improbable and unrealistic to expect that any of the conversion rights will be exercised. Nonetheless, since the Subordinated Debentures could be converted to 138,000 shares of Old Common stock, the amount of Warrants equivalent to these shares is 660 New Series Z Warrants. Therefore, of the 195,667 New Series Z Warrants allocated to Class 9, 660 New Series Z Warrants will be reserved in the event that the conversion rights are later exercised.
(c) Employee Stock Options-Holders of options pursuant to Employee Stock Option Plans must exercise their options within 60 days following the Effective Date of the Plan. It is unlikely and unrealistic to expect that any of the Employee Stock Options will be exercised, since the exercise price exceeds the market value of the Old Common Stock. Nonetheless, in the event any such options are timely exercised, they can be converted to New Series Z Warrants. Any of the Employee Stock Options not exercised within 60 days of the Effective Date will be canceled.
The amount of Old Common Stock necessary to receive one whole warrant is 209 shares. Accordingly, in order to make the Cash Election, 2,090 or more shares of Old Common Stock would be necessary.
(3) Members of the Plaintiff Class Certified in In re JWP Inc. Securities Litigation-Class 10. Holders of any other claim with respect to a security classified in Class 8 or 9 which would be subordinated pursuant to Section 510(b) of the Bankruptcy Code, including, but not limited to, the claims asserted in In re JWP INC. Securities Litigation, 92 Civ. 5815 (CLB) (S.D.N.Y.) (the "Shareholder Litigation") and any indemnification, reimbursement or contribution claims by current or former officers or directors of JWP or other parties in connection with such subordinated claims. Holders of equity interests in Class 10 are impaired and are entitled to vote on the Plan. The Plan provides that if each of Classes 4C, 6, 7, 8, 9, 10 and 11 accepts the Plan, 22,059 New Series Z Warrants will be reserved for holders of interests in Class 10, each of which will entitle the holder to purchase one share of New Common Stock at the exercise price of $50.00. If any of Classes 4C, 6, 7, 8, 9, 10 and 11 does not accept the Plan, Class 10 will not retain or receive any property under the Plan. However, notwithstanding the failure of any of Classes 9, 10 or 11 to accept the Plan, Reorganized JWP may elect to make distribution of the New Series Z Warrants to all such classes.
The Debtor, the Creditors' Committee and the Junior Committee
believe that
even if JWP's bankruptcy case had not been commenced, the
Shareholder Litigation would settle for payment directly from the
insurers of JWP's
directors and officers and from other third parties, and that no
significant payment would have been made by JWP. Nonetheless, for
purposes of the Plan only, and without constituting any admission
of liability, it is assumed that the claims against JWP in
connection with the Shareholder Litigation are $15
million. This amount has been estimated as follows. Although,
based upon information provided to the Junior Committee, no
expert report of damages has been prepared in the Shareholder
Litigation, the representatives or the
plaintiffs have indicated that the damages are approximately
$300-350 million. However, the Junior Committee and its financial
advisor have calculated approximately $65 million of potential
damages, based upon a comparison of the market price of Old
Common Stock prior to October 2, 1992 and thereafter. Since
it is assumed that at least $50 million of that claim can be
recovered from the insurers of the directors and officers and
other third party sources, JWP's potential liability for purposes
of the Plan is assumed to be $15 million.
That amount represents 9.430% of the $159,074,597 total value
of the Old Common Stock and Warrants of Participation as of the
close of business on October 2, 1992 (the "Common Value").
Accordingly, 9.430% of the 219,315 New
Series Z Warrants allocated to Classes 9 through 11, or 20,680
Warrants, will be reserved for the Class Action Plaintiffs.
Any distribution under the Plan will not affect the rights of the plaintiffs in the Shareholder Litigation to pursue their claims against other defendants, and the Class Action Plaintiffs who continue to hold JWP Old Common Stock will also receive a distribution in their capacity as Class 9 holders of Old Common Stock.
In addition, although the Debtor, the Creditors' Committee and
the Junior Committee do not believe that there will be any
payment or expense incurred by JWP's officers or directors
individually, since all costs and
expenses will be paid by their insurers, the Debtor has reserved
New Series Z Warrants equivalent to a $1 million dollar interest.
This equates to 1,379 New Series Z Warrants. These warrants will
be issued in the proportion that any such
interest holder's payments or expenses bear to the aggregate $1
million. A
holder of an allowed Class 10 indemnification claim in the amount
of $725 would
be entitled to one whole New Series Z Warrant. Accordingly, a
holder of an
allowed Class 10 indemnification claim in the amount of $7,250 or
greater would
be entitled to make a Cash Election.
Notwithstanding the foregoing, each claim in Class 10, whether
filed on
behalf of an individual holder or on behalf of a class of such
holders, is
deemed disputed. Since all Class 10 claims are disputed, the
Debtor intends to seek estimation of each Class 10 claim in the
amount of $100, solely for the purpose of voting to accept or
reject the Plan and for no other purpose.
Recognition of the existence of such disputed claims in the Plan
shall not be deemed an admission by JWP or its Board of Directors
of any liability to such holders. No distribution will be made to
the holder of a claim in Class 10 unless and until the claim
becomes an allowed claim. Holders of timely filed
claims in Class 10 who do not opt out of the Shareholder
Litigation shall have their claims allowed or disallowed
exclusively by the Court with jurisdiction
over the Class Action. Holders of timely filed claims in Class 10
who opt out of the Class Action shall have their claims allowed
or disallowed exclusively by the Bankruptcy Court, provided that
no proceeding to allow or disallow such
a claim shall be commenced in the Bankruptcy Court until after
disposition of
the Class Action by Final Order. Neither the Plan nor the
Disclosure Statement
shall be admissible as evidence in the Class Action.
The Ratable Share of New Series Z Warrants of a holder of an
allowed Class 10
claim in respect of claims asserted in the Shareholder Litigation
cannot be
determined until the members of the class in the Class Action, as
well as those
who opt out, are identified.
(4) Warrants of Participation-Class 11. Holders of JWP's outstanding Warrants of Participation<F18> are impaired and are entitled to vote on the Plan. The Plan provides that if each of Classes 4C, 6, 7, 8, 9, 10 and
11 accepts the Plan, 1,589 New Series Z Warrants will be issued to holders of interests in Class 11, each of which will entitle the holder to purchase one share of New Common Stock at the exercise price of $50.00. If any of Classes 4C, 6, 7, 8, 9, 10 or 11 does not accept the Plan, Class 11 will not receive or retain any property under the Plan. However, notwithstanding the failure of any of Classes 9, 10 or 11 to accept the Plan, Reorganized JWP may elect to make distributions of the New Series Z Warrants to all such Classes.
The Debtor, the Creditors' Committee and the Junior Committee
believe that the Warrants of Participation do not have any
present value. The Warrants of
Participation provide that the Warrant holders are entitled to
receive shares of Old Common Stock only if a sale or other
disposition of all or part of Jamaica Water Supply Company occurs
prior to December 31, 1994, and then only
to the extent that "excess value" exists, as defined in the
warrant agreement. Although the Debtor has determined that it
will cause Jamaica Water Supply
Company to be sold, and although a condemnation proceeding by the
City of New York may continue (see "Legal Proceedings-New York
City Condemnation Proceeding"), it is highly unlikely that any
such sale or disposition will occur prior to December 31, 1994,
when the Warrants of Participation expire. Moreover, based upon
the valuation of Jamaica Water Supply Company by both
Lazard and Rothschild, it does not appear that the Jamaica Water
Supply Company can be sold in the near future for an amount that
will yield "excess value", and thereby provide any distribution
of stock to the warrant holders. In any event, even if "excess
value" should be realized, such value would be converted
to Old Common Stock which, under the Plan, will be canceled and
replaced by New Series Z Warrants.
The market value of the Warrants of Participation represented
0.725% of the Common Value. Accordingly, the holders of the
Warrants of Participation will be issued 0.725% of the 219,315
available Warrants for Class 9 through 11, or
1,589 New Series Z Warrants. If and when it is determined that
excess value exists upon a timely sale of JWS which would entitle
holders of Warrants of Participation to New Series Z Warrants, it
will be necessary to hold 725 Warrants of Participation to
receive one whole New Series Z Warrant.
Accordingly, it would be necessary to hold 7,250 Warrants of
Participation to make a Cash Election.
C. DISPUTED CLAIMS
Disputed claims include those filed claims to which JWP objects
(i) either as to nature or amount or (ii) by way of a request for
estimation pursuant to an estimation procedure to be established
by the Bankruptcy Court.
For purposes of calculating the initial distributions to be made under the Plan, JWP will make a good faith estimate of the amounts, if any, likely to be allowed in respect of contingent or unliquidated claims and will treat all liquidated disputed claims as if allowed in full.
D. EXECUTORY CONTRACTS
As of the Effective Date, all executory contracts and unexpired
leases to which JWP is a party will be assumed, except for any
executory contracts and unexpired leases which are specifically
rejected by JWP with the approval of
the Bankruptcy Court. All applications to the Bankruptcy Court
made by JWP to reject executory contracts and unexpired leases
must be either determined by or pending on the date of Plan
confirmation. Entry of the order confirming the
Plan by the Clerk of the Bankruptcy Court will constitute
approval of such assumptions pursuant to subsection 365(a) of the
Bankruptcy Code. Claims created by the rejection of executory
contracts must be filed with the Bankruptcy Court no later than
twenty (20) days after the entry of an order
authorizing such rejection. Any claims not filed within such time
will be forever barred from assertion against JWP, the estate of
JWP and Reorganized JWP. Unless otherwise ordered by the
Bankruptcy Court or arising from claims or
interests in Classes 9 or 11, all such claims arising from the
rejection of executory contracts shall be classified in Class 4C
of the Plan.
JWP estimates that Class 4C claims arising from rejection of material executory contracts and unexpired leases will result in allowed claims that will not exceed $4,500,000. However, there can be no assurance that such additional claims will not exceed JWP's estimates. See "Impaired Claims-Class 4C" and the table therein. For the effects of JWP's assumption of executory contracts and unexpired leases, see "Financial Information-Projections."
E. IMPLEMENTATION OF THE PLAN
1. Corporate Action. On or as soon as practicable after the Effective Date all corporate actions will occur which are necessary to effect the business, corporate and debt restructuring contemplated by the Plan.
An amended and restated certificate of incorporation will be filed for Reorganized JWP; a certificate of incorporation will be filed for MES; transfers of the stock of Nondebtor Subsidiaries will be made, as appropriate, to MES or SellCo; the new seven-member Board of Directors of Reorganized JWP will assume office and will, by voting the Reorganized JWP stockholdings in MES and SellCo, elect the Board of Directors of each such corporation.
In addition, the New Securities will be deemed to have been issued (but will only be delivered when the Percentages for the initial distribution, including reserves for disputed claims, have been calculated), and the pledge agreements and other security interests related to the New Securities will be executed and delivered.
In addition, the Plan authorizes the issuance of additional Series A Secured Notes, Series B Secured Notes, Series C Notes, SellCo Subordinated Contingent Payment Notes, New Common Stock and New Warrants solely for the purpose of paying the Additional Interest Amount to Belmont, upon the terms and conditions of the DIP loan facility provided to JWP during the Reorganization Case. Reorganized JWP may, instead of delivering all or a portion of the New Securities to Belmont, elect to make a cash payment equal to the amount of such New Securities that would be due.
2. 1994 Management Stock Option Plan. Within one year but not earlier than the expiration of three months and twenty days after the Effective Date, the Compensation Committee of the Board of Directors of Reorganized JWP shall determine the recipients of options to purchase 500,000 shares of New Common Stock of Reorganized JWP pursuant to the 1994 Management Stock Option Plan and shall issue such options to such recipients in the respective amounts as determined by the Compensation Committee of the Board of Directors of Reorganized JWP. The employment agreement between JWP and Frank T. MacInnis, its President and Chief Executive Officer requires that options to purchase 200,000 shares of New Common Stock be issued to Mr. MacInnis. The exercise price for such options shall be equal to the average market price of New Common Stock over the 20 day trading period immediately preceding the date of issuance of the option; provided, however, that in no event shall such options be issued or the exercise price be determined prior to expiration of three months plus twenty days after the Effective Date; provided further, that if the average market price of New Common Stock for the applicable period cannot be determined, the exercise price shall be determined by an investment advisor selected by the Board of Directors of Reorganized JWP.
Options may be exercised only after they have vested. Vesting
of options generally shall occur over a three-year period with
one-third vesting each year. All options granted under the 1994
Management Stock Option Plan shall expire no later than the tenth
anniversary of their date of grant. The
Compensation Committee of the Board of Directors of Reorganized
JWP is authorized to issue additional options pursuant to the
Management Stock Option Plan to then current employees of
Reorganized JWP or the Nondebtor Subsidiaries
to purchase up to 500,000 shares of New Common Stock available
under The Management Stock Option Plan. The 1994 Management Stock
Option Plan will be substantially in the form annexed to the Plan
as Exhibit L. See "Management and Management Stock
Options-Description of the 1994 Management Stock
Option Plan."
3. Listing of New Securities and Registration Rights. Reorganized JWP or Sellco, as the case may be, shall use its best efforts to (i) cause, as promptly as practicable after the Effective Date, the shares of Common Stock and the other securities issued hereunder to be listed on a national securities exchange or quoted in the national market system of the National Association of Securities Dealers', Automated Quotation System, (ii) file, as promptly as practicable after the Effective Date, and be declared effective as soon as possible thereafter, a registration statement or registration statements under the Securities Act of 1933, as amended (the "Securities Act"), for the offering on a continuous or delayed basis in the future of each of the shares of New Common Stock, the Series A Secured Notes, the Series B Secured Notes, the Series C Notes, the SellCo Subordinated Contingent Payment Notes, the New Series X Warrants and the New Series Y Warrants (the "Shelf Registration"), (iii) keep the Shelf Registration effective for a two-year period, commencing on the date on which the Shelf Registration is declared effective, and (iv) supplement or make amendments to the Shelf Registration, if required under the Securities Act or by the rules or regulations promulgated thereunder or if requested by any holder or underwriter of any of the securities covered by the Shelf Registration, and have such supplements and amendments declared effective as soon as practicable after filing. See "Securities Laws Considerations."
F. CONDITIONS PRECEDENT TO PLAN EFFECTIVENESS
1. Confirmation Order. The order of the Bankruptcy Court confirming the Plan shall be satisfactory in form to the holders of a majority in amount of the claims in each of Class 2 and Class 3 and shall have become a final order, no longer subject to review or appeal.
2. Class 4B and 4C Claims. Unless waived by the holders of at least two-thirds in amount of the claims of each of Class 2 and Class 3 which voted on the Plan, JWP shall have estimated that the aggregate allowed claims of Classes 4B and 4C will not exceed $100,000,000.
3. Working Capital Facility. Reorganized JWP or MES shall have entered into an agreement, subject only to confirmation of the Plan and the occurrence of the Effective Date, providing a working capital facility in an amount at least sufficient to repay and replace the DIP Loan provided to JWP during the Reorganization Case. JWP and its investment adviser have been diligently seeking such "exit financing" in order to fulfill this condition.
In order to facilitate JWP's ability to obtain exit financing and to meet the anticipated needs of a working capital lender, the Plan provides that such lender may have a "Working Capital Lien" on the stock of Jamaica Water Securities Corp. and the right to receive net proceeds from the sale thereof equal to the balance by which the working capital loan exceeds $25,000,000, up to $15,000,000; provided, however, that the application of any such proceeds to repay all or a portion of the balance of such working capital facility shall permanently reduce the availability under such facility by the amount applied. Accordingly, the pledges of stock or assets of the Nondebtor Subsidiaries which constitute SellCo, to secure the Series A Secured Notes, the Series B Secured Notes and the SellCo Subordinated Contingent Payment Notes, are subject to the Working Capital Lien and the Series C Notes are subordinated and junior to repayment in full of any working capital facility obtained by Reorganized JWP or MES, up to $100,000,000, following confirmation of the Plan.
4. Indenture Qualification. Each of the indentures governing the Series A Secured Notes, Series B Secured Notes, SellCo Subordinated Contingent Payment Notes and the Series C Notes shall have been duly qualified under the Trust Indenture Act of 1939.
5. Waiver. Any of the foregoing conditions, except that condition in Paragraph F.2 above which requires a two-thirds vote, may be waived by a writing signed by an authorized representative of JWP and the holders of a majority in amount of the claims of each of Class 2 and Class 3 which voted on the Plan.
6. Failure of Conditions. If each of the conditions to effectiveness and the occurrence of the Effective Date has not been satisfied or duly waived on or before the first Business Day that is more than 179 days after the date the Bankruptcy Court enters an order confirming the Plan, or by such later date as is proposed and approved, after notice and a hearing, by the Bankruptcy Court, upon motion by JWP or any party in interest made before the time that each of the conditions has been satisfied or duly waived, the order confirming the Plan may be vacated by the Bankruptcy Court; provided, however, that notwithstanding the filing of such a motion, the order confirming the Plan shall not be vacated if each of the conditions to consummation is either satisfied or duly waived before the Bankruptcy Court enters an order granting the relief requested in such motion. If the order confirming the Plan is so vacated, the Plan shall be null and void in all respects, and nothing contained in the Plan shall (a) constitute a waiver or release of any claims against or equity interests in JWP or (b) prejudice in any manner the rights of the holder of any claim or equity interest or JWP.
G. RELEASES, SETOFFS AND RECOUPMENTS, AND DISCHARGE
1. Releases. As of the Effective Date, JWP, Reorganized JWP,
and each creditor of JWP, Reorganized JWP and/or any Nondebtor
Subsidiary will waive, release and discharge the Seaboard Surety
Company, each of the holders of
claims in Classes 2, 3 and 6, the holders of claims in Classes 4B
and 4C to the extent ordered by the Bankruptcy Court, and all
officers, directors, employees or agents (including professionals
retained by such holder) of such holder,
from any and all claims arising prior to the Effective Date that
could be brought by, through, or on behalf of JWP or its estate
or any Nondebtor Subsidiary; provided, however, that claims which
are waived, released or discharged shall not include the claims
of any Nondebtor Subsidiary for
services rendered or goods sold to the holder of a Class 2, 3,
4B, 4C or 6 claim or the officers, directors, employees or agents
(including professionals retained by such holder) of such holder,
if any, or defenses of a Nondebtor
Subsidiary to any claim asserted by the Seaboard Surety Company
(or other bonding company) solely in respect of such Nondebtor
Subsidiary's liability on a bond; and provided, however, that the
provisions of the Plan described in this paragraph shall not in
any way affect the releases to Seaboard Surety Company provided
for in the agreement attached to the Plan as Exhibit K. Such
waiver, release and discharge shall also act as an injunction
against any person or entity commencing or continuing any action,
employment of process, or act to collect, offset, or recover any
such waived, released and discharged claim. In accordance with
Section 1123(b)(3) of the Bankruptcy Code, all other
claims, rights and causes of action held by JWP shall be retained
by Reorganized JWP.
2. Setoffs and Recoupments. Reorganized JWP shall retain its rights of setoff against or recoupment from any claim that is not impaired by the Plan and against and from the holder of any Class 4B or 4C claim that is not otherwise released as set forth above. Such setoff or recoupment may be taken in conjunction with any payments to be made or consideration to be distributed under the Plan or reserved to Reorganized JWP in connection with any reinstated Class 5 claim.
3. Discharge and Injunction. Other than with respect to the claims in Class 5, entry of the order confirming the Plan acts as a discharge of all debts of, claims against, liens on, and interests in each of JWP, its assets, or properties, which debts, claims, liens, and interests arose at any time before the entry of the order confirming the Plan. Other than with respect to the claims in Class 5, the discharge of JWP shall be effective as to each claim, regardless of whether a proof of claim therefor was filed, whether the claim is an allowed claim, or whether the holder thereof votes to accept the Plan. On the date the Court enters an order confirming the Plan, as to every discharged claim and equity interest, any holder of such claim or equity interest shall be precluded from asserting against JWP or against JWP's assets or properties, or any successors of JWP, any other or further claim or equity interest based on any document, instrument, act, omission, transaction, or other activity of any kind or nature that occurred before the date the Court enters the order confirming the Plan.
In accordance with Section 524 of the Bankruptcy Code, the discharge provided by the Plan and Section 1141 of the Bankruptcy Code, inter alia, acts as an injunction against the commencement or continuation of any action, employment of process, or act to collect, offset, or recover the claims discharged hereby.
H. RETENTION OF JURISDICTION BY THE BANKRUPTCY COURT
On and after confirmation of the Plan, the Bankruptcy Court shall retain jurisdiction of all matters arising out of and related to the Reorganization Case pursuant to, and for purposes of Sections 105(a) and 1142 of the Bankruptcy Code and including the following purposes:
1. To hear and determine pending applications for the assumption or rejection of executory contracts or unexpired leases, if any are pending, and the allowance of claims resulting therefrom;
2. To determine any and all pending adversary proceedings, applications, and contested matters;
3. To ensure that distributions, if any, to holders of allowed claims are accomplished as provided herein;
4. To resolve disputes as to the ownership of a claim;
5. To hear and determine any timely objections to claims for administrative expenses or to proofs of claims and equity interests filed, both before and after the date the Court enters an order confirming the Plan, including any objections to the classification of any claim or equity interest, and to allow or disallow any disputed claims for administrative expenses, disputed claim, or disputed equity interest, in whole or in part;
6. To enter and implement such orders as may be appropriate in the event the order confirming the Plan is for any reason stayed, revoked, modified, or vacated;
7. To issue such orders in aid of execution of the Plan, to the extent authorized by Section 1142 of the Bankruptcy Code;
8. To consider any modifications of the Plan, to cure any defect or omission, or reconcile any inconsistency in any order of the Court, including, without limitation, the order confirming the Plan;
9. To resolve disputes concerning nondebtor releases and injunctions contained herein;
10. To hear and determine all applications for compensation and reimbursement of expenses of professionals under Sections 330, 331 and 503(b) of the Bankruptcy Code;
11. To hear and determine disputes arising in connection with the interpretation, implementation, or enforcement of the Plan;
12. To recover all assets of JWP and property of the estate, wherever located, including any causes of action under Sections 544 through 550 of the Bankruptcy Code;
13. To hear and determine matters concerning state, local and federal taxes in accordance with Sections 346, 505 and 1146 of the Bankruptcy Code;
14. To hear any other matter not inconsistent with the Bankruptcy Code; and
15. To enter a final decree closing the Reorganization Case.
I. MISCELLANEOUS
1. Fractional Shares or Debt Instruments and Cash Option. No fractional shares of New Common Stock, New Series X Warrants, or New Series Y Warrants, or cash in lieu thereof, shall be distributed. No fractional shares of New Series Z Warrants shall be distributed; however, the New Series Z Warrants not distributed on account of such fractional shares shall be divided among Classes 7, 8, 9, 10 and 11 in proportion to the number of New Series Z Warrants to be distributed to each such class, and each holder of a claim or interest in each such class shall receive its Ratable Share of such New Series Z Warrants attributable to its class. At the option of the holder of an allowed claim or interest in Classes 7, 8, 9, 10 or 11, such holder shall be entitled to receive from Reorganized JWP $0.10 for each whole New Series Z Warrant such holder receives under the Plan, provided, however, that Reorganized JWP shall not be obligated to distribute cash to such holder on account of such whole New Series Z Warrants unless such holder is entitled to receive, in the aggregate, at least $1.00 on account of such whole New Series Z Warrants.
The remaining New Securities, which are in the form of New Debt Securities, shall be issued in multiples of $100. On the Effective Date, if a fraction of New Debt Securities would otherwise be distributed to the holder of a Class 2, 3 or 4B claim (i) the actual distribution of securities shall be rounded down to the next lower multiple of $100, and (ii) cash in an amount equal to the fraction of securities which would otherwise be so distributed shall be distributed to the holders of such claims. Interest on the New Debt Securities that is payable in kind shall be paid by issuance of additional New Debt Securities in multiples of $100, with any interest amount under $100 payable in cash.
2. Reservation of Warrants for the Businessland Debentures. Reorganized JWP shall reserve and keep available a number of New Series Z Warrants on account of the Old Common Stock reserved to satisfy the conversion rights under the Businessland Debentures and the ENTEX Share Issuance Agreement. Reorganized JWP shall distribute such New Series Z Warrants only after all of the requirements for conversion set forth in the Businessland Debentures and the ENTEX Share Issuance Agreement have been satisfied.
3. Business Days. Any payment or act required to be made or performed under the Plan on a day that is not a Business Day shall be made or performed on the next succeeding Business Day.
4. Revesting of Assets. On the Effective Date, the property of JWP's estate shall revest in Reorganized JWP, free and clear of all claims, security interests, liens and equity interests, except as provided in the Plan. Reorganized JWP may then operate its businesses and use, acquire and dispose of property free of the restrictions of the Bankruptcy Code and the Bankruptcy Rules.
J. TIMING OF DISTRIBUTIONS
The initial distributions of New Securities, other than New Series Z Warrants, under the Plan will be made on the Effective Date, or as soon as practicable thereafter. The Additional Interest Amount, Class 4B and 4C Series A Amount and the Class 2, Class 3 and Class 4B and 4C Residual Percentages will be calculated (including all liquidated Disputed claims in such classes, for purposes of such calculation, as if they were allowed in full and making a good-faith estimate of the amount of the Disputed claims filed in an unliquidated amount). Based on such calculations, and establishing a reserve for Disputed claims and interests in Classes 7, 8, 9, 10 and 11 as if such claims or interests were allowed in full, a distribution of New Securities, as applicable, will be made to holders of allowed claims and interests in Classes 2, 3, 4B, 4C, 6, 7, 8, 9, 10 and 11; provided, however, that New Series Z Warrants will not be distributed to holders of Class 9 interests earlier than 60 days after the Effective Date. New Securities not distributed in the initial distribution will be held in reserve pending resolution of Disputed claims or interests.
Every six months following the Effective Date, there will be a distribution in respect of Disputed claims or interests that have been allowed in whole or in part. New Securities held in reserve for Disputed claims or interests that have been disallowed, in whole or in part, shall be distributed to holders of allowed claims or interests based on a recalculation of the relevant Ratable Shares, taking into account the allowance or disallowance of Disputed claims or interests in the preceding six months, until all Disputed claims or interests have been determined.
The Debtor is unable, as of the date of this Disclosure Statement, to estimate the amount of New Securities that will be reserved on the Effective Date in respect of Disputed Claims in Classes 4B and 4C, which will affect the distribution of Series C Notes, SellCo Subordinated Contingent Payment Notes and New Common Stock to Classes 2, 3, 4B and 4C. The Debtor cannot, at this time, estimate if or what amount of New Series Z Warrants may have to be reserved on the Effective Date in respect of Disputed claims in Class 7 or Disputed interests in Classes 8, 9, 10 or 11.
V. CERTAIN RISK FACTORS
The securities to be issued pursuant to the Plan are subject to a number of material risks, including those enumerated below. The risk factors enumerated below assume confirmation and the consummation of the Plan and the transactions contemplated by the Plan and do not include matters that could prevent confirmation. See "Summary of the Plan-Conditions Precedent to Effectiveness of the Plan" and "Confirmation of the Plan" for discussions of such matters. Prior to voting on the Plan, each holder of claims against JWP entitled to vote on the Plan should carefully consider the risk factors enumerated or referred to below as well as all of the information contained in this Disclosure Statement, including the exhibits hereto.
A. PAYMENT OF SENIOR NOTES
JWP intends that payment of the Series A Secured Notes and Series B Secured Notes, including the $10,000,000 mandatory redemption on the second anniversary of the Effective Date, will be made from the proceeds of asset sales. If the projected sales prices for the collateral underlying the respective Notes are not realized or if any of the proceeds of such sales are required to be held as collateral under the Working Capital Liens, Reorganized JWP may not have the cash or the ability to borrow to make the mandatory redemption or to pay the relevant Note at its maturity in three years.
B. WORKING CAPITAL FINANCING
It is a condition precedent to effectiveness of the Plan that, upon emergence from the Reorganization Case, Reorganized JWP shall have obtained, subject only to the occurrence of the Effective Date, a working capital facility in an amount at least sufficient to repay and replace the DIP Loan ("exit financing"). The outstanding principal amount of the DIP Loan is, at the date hereof, $25 million. There is no assurance that, despite JWP's efforts, adequate exit financing will be obtained. In addition, the terms of any such exit financing may be costly and may include the Working Capital Lien referred to in Section IV-F hereof.
C. LACK OF ESTABLISHED MARKET FOR THE NEW SECURITIES
There is no existing market for the New Securities and there will be relatively few holders of the New Securities. Under the Plan, Reorganized JWP has undertaken to use reasonable efforts to secure the listing of the New Securities for trading on a national securities exchange or the NASDAQ National Market System. However, the historical financial statements of JWP (see Exhibit 4 hereto) are unaudited and JWP has not filed all periodic reports required to be filed by it under the Securities Exchange Act of 1934, as amended (the "1934 Act"). Accordingly, JWP believes it will be unable to secure a listing of the New Securities unless JWP obtains audited financial statements and becomes current in its filings of periodic reports under the 1934 Act. There can be no assurance as to whether or when such audited financial statements will become available and JWP will become current in its periodic filings. In addition, the New Securities will be issued pursuant to the Plan to prepetition creditors, some of whom may prefer to liquidate their investment rather than to hold it on a long-term basis. Accordingly, it is anticipated that, if a market for New Securities develops, such market will be uncertain, at least for an initial period of trading. In addition, there can be no assurance that an active market therefor will develop or as to the degree of price volatility in any such particular market. Accordingly, no assurance can be given that a holder of the New Securities will be able to sell such securities in the future or as to the price at which any such sale may occur.
Moreover, while the Plan was developed based upon an assumed reorganization value of $8.70 per share of New Common Stock (See "Pro Forma Financial Information" and "Valuation"), such valuation was not an estimate of the prices at which New Common Stock may trade in the market, and JWP has not attempted to make any such estimate in connection with the development of the Plan. If markets with respect to the New Debt Securities were to exist, such securities could trade at prices higher or lower than the face amount thereof, depending upon many factors, including prevailing interest rates, markets for similar securities, industry conditions, and the performance of, and investor expectations, for Reorganized JWP. No assurance can be given as to the market prices, if any, that will prevail following the Effective Date.
For information regarding the current Securities and Exchange Commission investigation see "Legal Proceedings."
C. PROJECTIONS
The financial projections included in this Disclosure Statement are dependent upon the successful implementation of JWP's business plan and the reliability of the other assumptions contained therein. See "Projected Financial Information." These projections reflect numerous assumptions, including confirmation and consummation of the Plan in accordance with its terms, the anticipated future performance of Reorganized JWP, industry performance, general business and economic conditions and other matters, most of which are beyond the control of Reorganized JWP and some of which may not materialize. In addition, unanticipated events and circumstances occurring subsequent to the preparation of the projections may affect the actual financial results of Reorganized JWP. Therefore, the actual results achieved throughout the periods covered by the projections may vary significantly from the projected results. These variations may be material. See "Projected Financial Information."
D. BUSINESS FACTORS AND COMPETITIVE CONDITIONS
The MES business in which Reorganized JWP will engage is extremely competitive. This business competes with national, regional and local companies. Reorganized JWP will have to regain customer confidence in its financial stability. In addition, Reorganized JWP's business will be directly affected by general economic conditions, particularly the cyclical nature of new construction.
E. DIVIDENDS
Under the terms of the New Debt Securities, Reorganized JWP is prohibited from paying dividends on the New Common Stock. There is no assurance that Reorganized JWP will be able to declare and pay dividends on the New Common Stock if or when the New Debt Securities have been paid in full.
F. BONDING CAPACITY
As of May 31, 1994, JWP's business had a backlog of contracts in the amount of approximately $1 billion, of which approximately $600 million is bonded. In order to obtain a substantial portion of their new business, Reorganized JWP and the MES businesses will require bonding. There is no assurance that Reorganized JWP and the MES business will be able to obtain the performance or bid bonds necessary to achieve the projections contained in this Disclosure Statement. See "Events During the Reorganization Case-Surety Bonds."
G. PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
An indirect subsidiary of the Debtor, University Cogeneration, Inc., owns a cogeneration facility which during calendar year 1993 narrowly failed to satisfy one of the necessary criteria under applicable federal law for being a "qualifying facility." The Securities and Exchange Commission ("SEC") has informed the Debtor's counsel that it will issue a "no action" letter so that such failure will not cause such subsidiary's direct and indirect parents (including the Debtor) to be considered "utility holding companies" required to be registered under the Public Utility Holding Company Act of 1935 ("PUHCA") during 1993. In addition, the Debtor plans to apply for a waiver from the Federal Energy Regulatory Commission waiving compliance in 1993 with the one criterion which such facility failed to meet.
The Debtor believes that it will be able to ensure that the aforementioned cogeneration facility meets all criteria for being a qualifying facility during calendar year 1994. However, because satisfaction of the key criteria are determined on a calendar-year basis, there can be no definitive assurance that such criteria will be met until the end of 1994.
VI. THE COMPANY
A. BUSINESS
1. Mechanical/Electrical Services. JWP's Mechanical/Electrical Services Group (the "MES Group") specializes in the design, distribution, integration, installation and maintenance of complex mechanical and electrical systems. Services are provided to a broad range of commercial, industrial and institutional customers through approximately 40 offices located in major markets throughout the United States and more than 25 offices located in Canada, the United Kingdom and the Middle East. The business units that are to comprise the MES Group after completion of the restructuring generated approximately $1.8 billion of revenues in 1992 and $1.9 billion in 1993.
The MES Group provides its mechanical and electrical services, both directly, by designing, selling, integrating, installing and maintaining systems to and for end-users (including corporations, municipalities and other governmental entities, owner/developers, and tenants of buildings), and indirectly, by acting as subcontractor for construction managers, general contractors and other subcontractors.
The MES Group is primarily involved in the design, integration,
installation and maintenance of (i) distribution systems for
electrical power (including power cables, conduits, distribution
panels, transformers and generators), (ii) lighting systems, and
(iii) heating, ventilating, air conditioning, plumbing,
process and high purity piping, and clean air systems. With
approximately 13,000 employees in the subsidiaries to be
retained, JWP believes its mechanical and electrical services
business is the largest of its kind in the United States and
Canada and one of the largest in the United Kingdom.
Historically, mechanical and electrical services have been
principally of three types: (1) large installation projects, with
contracts generally in the multi-million dollar range, in
connection with construction of industrial
facilities, institutional and public works projects, commercial
buildings, and large blocks of space within commercial buildings,
(2) smaller system installations involving renovation and
retrofit work, and (3) maintenance and service.
JWP's largest installation projects have included those for (i) industrial and institutional use (such as manufacturing, pharmaceutical and chemical plants, refineries, research facilities, water and wastewater treatment facilities, hospitals, correctional facilities, schools, trading floors and computer facilities, and mass transit systems), (ii) for commercial use (such as office buildings, convention centers, shopping malls, hotels and destination resorts), and (iii) for electric utilities. These can be multi-year projects ranging in size up to and, occasionally, in excess of, $50 million. The MES Group also installs and maintains street, highway, bridge and tunnel lighting, traffic signals, computerized traffic signal control systems, and signal control and communication systems for mass transit in several metropolitan areas.
Major projects are performed pursuant to contracts with owners, such as corporations and municipalities and other governmental entities, general contractors, construction managers, as agents for owners of construction projects, owner-developers, and tenants of commercial properties. Institutional and public works projects are frequently long-term, complicated projects requiring significant technical skills and financial strength to obtain the performance bonds that are often a condition to the award of contracts for such projects.
Smaller projects, which are generally completed in less than one year, involve the provision of conventional mechanical and electrical contracting services in industrial plants, office buildings and commercial and retail space in which The MES Group installs electrical fixtures, provides electrical and air conditioning systems for computer facilities, and installs smaller heating, air conditioning, and plumbing systems for office and renovation projects. In this area, The MES Group is not necessarily dependent upon new construction; demands for its services are frequently prompted by the expiration of leases, changes in technology and changes in the customer's plant or office layout in the normal course of business.
The MES Group's mechanical and electrical businesses also perform maintenance and service work, under multi-year contracts or on a short-term, on-call basis, for outside and interior lighting systems and for air conditioning and heating systems in plants and other large facilities, office buildings and commercial enterprises. The MES Group's service units also install refrigeration systems for restaurants, office cafeterias and supermarkets. Contracts for maintenance of mechanical and electrical systems range from one to several years and are billed on a time and materials basis or a fixed fee plus the cost of materials. In many of the buildings in which The MES Group maintains lighting systems, its service units also install fixtures, move outlets, rewire and perform other routine electrical work. Service operations often require a number of employees to be permanently located at the building or facility served.
The MES Group also operates fully equipped sheet metal
fabrication facilities
in the United States, providing and installing sheet metal for
both its own mechanical services businesses and unrelated
mechanical contractors; it also maintains welding and piping
fabrication shops for its own mechanical operations. Certain of
these facilities will be sold.
The businesses in which JWP's MES Group engage are extremely competitive. These businesses compete with national, regional and local companies. However, JWP believes that, at present, it is the largest mechanical and electrical services company in the United States and Canada and one of the largest in the United Kingdom. JWP, through the MES Group, competes in these businesses on the basis of the quality of service, price, performance and reliability. JWP's competitive position has been adversely affected by its weakened financial condition, which has caused a decrease in backlog and a weak negotiating position with respect to new work and contract disputes, and has adversely affected margins. JWP has been able to obtain new work, frequently only at reduced margins.
2. Supply of Water. Jamaica Water Supply Company ("JWS") (substantially all the common stock of which is owned by JWP) and Sea Cliff Water Company ("Sea Cliff") (all the capital stock of which is owned by JWP) (sometimes referred to herein collectively as the "Water Companies") are regulated public utilities that own and operate water supply systems on portions of Long Island, New York. JWS, the largest investor-owned water utility in New York state, supplies water to a densely populated residential area of approximately 40 square miles in the Borough of Queens in New York City and in adjacent southwestern Nassau County, Long Island, an area with an aggregate population of approximately 650,000. Sea Cliff supplies water to a four square mile area on the north shore of western Nassau County with a population of approximately 20,000. The business of the Water Companies consists of the purification, distribution and sale of water for residential, commercial and industrial purposes, providing backup water for commercial customers' fire sprinkler systems, and renting, as lessor, fire hydrants for municipal fire protection.
As of December 31, 1993, the Water Companies provided potable water to approximately 120,000 water service accounts, substantially all of whom are metered and billed for the amount of water actually used, and approximately 1,000 private fire protection accounts for sprinkler connections billed on a flat rate basis. On December 22, 1993, JWS entered into a settlement agreement (the "Settlement Agreement") with New York State, local government entities and a public interest group resolving complex disputes as to JWS rates and operations. On February 2, 1994, the Public Service Commission of the State of New York ("Public Service Commission") approved the Settlement Agreement. See "Legal Proceedings-Jamaica Water Supply Rate Related Proceeding and Related Litigation." The Settlement Agreement contemplates, among other things, that Jamaica Water Securities Corp. ("JWSC"), a subsidiary of JWP which holds JWP's interest in JWS, be separated from JWP. In the interim, within the corporate structure of Reorganized JWP, JWSC and Sea Cliff will become subsidiaries of SellCo. See "Reorganized JWP."
The Water Companies' primary sources of water are ground water from wells located in the New York counties of Queens and Nassau and surface water obtained from the City of New York (the "City"). JWS has 93 wells on 60 well sites, of which 71 wells are currently operable, and Sea Cliff has two wells on two sites. Where appropriate, JWS has installed treatment facilities at well sites to remove volatile organic compounds prior to the water entering the distribution system.
In an effort to reduce the cost of water to City residents, the
City provides
JWS with an exemption from real property taxes from the City and
makes direct
revenue support payments to JWS for water service. JWS also has
an agreement with the City to purchase up to 50 million gallons
of water daily from the City (to the extent available) at a cost
of $1 per million gallons. JWS expects to
purchase approximately 30 million gallons daily. The $1 per
million gallons rate is substantially less than both JWS' cost to
pump and treat water from its wells and the New York City rate
for commercial customers. The agreement
expires June 30, 1998, although it is cancelable by either party
on two years notice. The 30 million gallons of water JWS expects
to purchase daily from the City constitutes approximately 60
percent of the average daily mount of water
presently distributed by JWS to its customers in Queens County.
JWS customers in Nassau County are served entirely from wells
owned and operated by JWS.
The Water Companies are subject to regulation by the Public Service Commission. Since the population of the areas served by the Water Companies has been relatively stable, the amount of water consumed by their customers has not and is not expected to increase in any significant respect. Consequently, cost increases due to inflation or otherwise must be recovered through operating efficiencies or increases in rates which are subject to approval of the Public Service Commission. Until recently, the Water Companies have traditionally filed for rate increases on an annual basis and have received approvals of rate increases from the Public Service Commission enabling them to maintain satisfactory operating results.
See "Legal Proceedings-Jamaica Water Supply Rate Related Proceedings and Related Litigation."
The Water Companies are also subject to regulation by various federal, state and local agencies, including the Department of Environmental Conservation of the State of New York, the New York State and New York City Departments of Health, the New York City Department of Environmental Protection, the Nassau County Department of Health, and the United States Environmental Protection Agency. JWP believes that the Water Companies are in compliance with all applicable federal, state and local laws and regulations.
3. Information Services. JWP's Information Services Group, which was discontinued in 1993 and which reported revenues of $1.7 billion for 1992, principally engaged in providing computer and systems integration services. It sold integrated multi-vendor personal computer related products and services for medium and large sized companies and other organizations. On August 9, 1993, JWP sold all of the operating assets of JWP Information Services, Inc. ("JWPIS"), its subsidiary which conducted this business in the United States; on April 19, 1993, JWP sold the Canadian operations of this group; on August 17, 1993, JWP sold the United Kingdom operations of its information services group; on September 14, 1993, JWP sold its information services business in Japan; and on January 26, 1994, JWP sold the German information services business. JWP also carried on similar information services businesses in Belgium and France. In 1992, the Belgian operation filed a petition seeking relief from its creditors and is in the process of being liquidated. On June 25, 1993 the IS unit in France filed a petition in the Paris Commercial Court seeking relief from its creditors and is also in the process of being liquidated.
On October 25, 1993, JWPIS filed a voluntary petition under
Chapter 7 of the Bankruptcy Code in the United States Bankruptcy
Court for the Southern District of New York (the "Chapter 7
Case"). A Chapter 7 trustee has been appointed to
liquidate the remaining assets of JWPIS and to administer the
proceeds thereof for the creditors of JWPIS. The Chapter 7 Case
will provide JWPIS's creditors a single, orderly procedure for
recovery. The remaining principal assets of JWPIS
are a receivable in the amount of $24.9 million ("IS Intercompany
Account") owed to JWPIS by JWP (and included in the Class 4B
claims) and warrants, for which JWP has not booked or estimated
any value, for the purchase of ten (10%)
percent of the stock of Entex Holding, Inc., the parent
corporation of the purchaser of JWPIS' assets. See "Summary of
the Plan-Treatment of Classes-Class 4." The Chapter 7 Trustee of
JWPIS has filed a proof of claim in
the Reorganization Case in the amount of $50 million to which JWP
intends to object and seek to have the Bankruptcy Court reduce
and allow in the amount of $24.9 million. The Creditors'
Committee has propounded the view that even further
reductions in the amount of this claim are warranted, as well as
the view that this claim should be subordinated. The IS
Intercompany Account will be a Class 4B claim in the
Reorganization Case, unless grounds for subordinating such claim
are determined by the Bankruptcy Court, in which case the IS
Intercompany Account will become a Class 7 subordinated claim.
4. Other Business. In addition to the sale of certain mechanical and electrical service business units contemplated by the Business Plan, beginning in 1992, JWP began the sale of its non-core businesses and, through February, 1994, has disposed of a number of non-core businesses. See "Background Information-Asset Disposition Program." The non-core business units that continue to be held for sale include JWP's telephone systems business and its remaining energy and environmental related businesses.
JWP's telephone systems service business is engaged in the design, sale, installation and servicing of telecommunication systems, including LEXAR PBX telephone systems, which JWP manufactures. JWP's telephone switching systems are used to interconnect business and institutional users with telephone lines of the regulated telephone companies.
JWP's principal remaining energy and environmental related business constructs, operates and maintains co-generation facilities for use in steam enhanced oil recovery processes, industrial plants, hotels, universities, hospitals and shopping centers. JWP, through its subsidiaries, has built sixteen co-generation facilities, operates six of them, and owns, in whole or in part, three of them. Where a JWP subsidiary owns a co-generation facility, it supplies utility services to its customer under a long-term contract. The other two environmental related business units include one which manufactures fluidized bed combustion and gasification systems for the waste-to-energy market to process solid wastes of various types and one which collects methane gas at a landfill for conversion into electrical energy which is sold to a utility.
VII. REORGANIZED JWP
A. BUSINESS
After completing the asset sales which are an integral part of
the restructuring of JWP's business (see "Background
Information"), Reorganized JWP will be a smaller company,
remaining international in scope, engaged principally in the MES
business. Reorganized JWP's corporate headquarters will
be located in Rye Brook, New York. The Rye Brook corporate
headquarters will focus on corporate direction and strategy,
handling the legal and financial
requirements for Reorganized JWP, providing for financial
reporting, risk management, treasury, tax, human resources policy
and compliance functions and financial and operating controls.
The Rye Brook office will also oversee the
management and sale of the non-MES units until they are sold.
B. CORPORATE STRUCTURE
The corporate structure of Reorganized JWP will reflect the
purposes of the restructuring. Reorganized JWP will continue to
be a holding company, the direct subsidiaries of which will be
(i) MES, a holding company for all MES operating subsidiaries,
(ii) SellCo, a holding company for substantially all
businesses to be offered for sale, (iii) the five Nondebtor
Subsidiaries listed on Schedule 4 to the Plan which constitute
the substitute Software House collateral and (iv) the
"Dynalectric Companies,"* consisting of DYN Specialty
Contracting, Inc. and its subsidiaries B&B Contracting and Supply
Company, Dynalectric Company, Dynalectric Company of Nevada,
Inc., Contra Costa Electric, Inc. and JWP Systems/Kirkwood
Electric Company, Inc. The North
American MES business will continue to operate on a decentralized
basis, with day-to-day operations managed by the business units.
Reorganized JWP's European operations are managed by Drake &
Scull, which has its corporate office in London.
MES CORPORATION
PRINCIPAL RETAINED MES UNITS
Principal
Company Market Business
- ---------------------------------------------------- --------------- ---------------------
JWP/JC Higgins Corp. ............................... Boston Mechanical
JWP Forest Electric Corp. .......................... New York Electrical
JWP Penguin Air Conditioning Corp. ................. New York Mechanical
JWP Welsbach Electric Corp. ........................ New York Electrical
Gibson Electric Company, Inc. ...................... Chicago/MidWest Electrical
JWP/Hyre Electric Co. of Indiana, Inc. ............. Mid-West Electrical
Los Angeles/
San Diego/
Phoenix/
JWP West (d/b/a University Mechanical Contractors).. National Mechanical
JWP Trautman & Shreve, Inc. ........................ Denver Mechanical
Hansen Mechanical Contractors, Inc. ................ Las Vegas Mechanical
JWP Zack Inc. ...................................... Power Systems Boiler/Mechanical
*JWP Gowan, Inc. ................................... Southwest Mechanical
United Kingdom/
The Drake & Scull Companies......................... Middle East Mechanical/Electrical
Comstock Canada..................................... Canada Mechanical/Electrical
*Heritage Air Systems, Inc. ........................ New York Mechanical
- ------
* Reflected in the Disclosure Statement, dated February 14, 1994, as a SellCo
subsidiary. It has since been determined that these companies will be
retained.
|
2. SellCo. The following table lists the principal business units which will be direct or indirect subsidiaries of SellCo.
SELLCO CORPORATION
NON-MES BUSINESSES
*University Cogeneration, Inc.
General Energy Development Inc.
Water Companies
MES BUSINESSES
VIII. MANAGEMENT AND MANAGEMENT STOCK OPTIONS
A. CHANGES IN MANAGEMENT
There have been a number of changes in the management of JWP
during 1992, 1993 and 1994. David L. Sokol was President from
January 1992 until he resigned such position in October 1992.
Andrew Dwyer, who, from 1987 to 1993, was Chairman of the Board
of Directors, and Chief Executive Officer of JWP and,
from 1985 until January 1992, President, resumed the office of
President upon Mr. Sokol's resignation. Mr. Dwyer subsequently
resigned as President and Chief Executive Officer in April 1993
and was succeeded in such positions by Edward
F. Kosnik. Mr. Kosnik became Chairman on July 1, 1993. Prior to
becoming President and Chief Executive Officer, Mr. Kosnik served
from December 1992 as Executive Vice-President and Chief
Financial Officer. In January 1994, Mr.
Kosnik announced his intention to resign from the positions he
held, and the JWP Board of Directors commenced a search for a new
Chief Executive Officer. In April 1994, the search was concluded
and Mr. Frank T. MacInnis was elected as Chairman of the Board of
Directors, Chief Executive Officer and President of
JWP. Mr. MacInnis was previously Chairman of the Board of
Directors and Chief Executive Officer and President of Comstock
Group, Inc., a nationwide electrical contracting company.
Susan B. Garelli, formerly Senior Vice President-Human
Resources of JWP, resigned as of June 1, 1993. Stephen H.
Kornfeld, formerly Senior Vice
President of JWP and Chairman of the Board and Chief Executive
Officer of JWP
International Inc., a subsidiary of JWP, resigned all such
positions effective as of August 31, 1993.
Since August 1992, there has been significant turnover among
JWP's senior management with financial and accounting
responsibilities. In August 1992,
Ernest W. Grendi resigned as Chief Financial Officer. Mr. Grendi
had also served as JWP's principal accounting officer. Following
Mr. Grendi's resignation, Mr. Richard F. Zannino, a Vice
President of JWP, became Acting
Chief Financial Officer, and Mr. Philip M. McGinn, who had been
Controller of
JWP, was also elected a Vice President of JWP and designated
principal accounting officer of JWP.
In the Fall of 1992, Mr. Zannino resigned from JWP's employ
and, as indicated above, Mr. Edward F. Kosnik, in December 1992,
became Executive Vice President and Chief Financial Officer of
JWP. Following Mr. Kosnik's election as
President and Chief Executive Officer of JWP in April 1993, Mr.
Stephen H. Meyers and Mr. Joseph A. Gallo took on much of Mr.
Kosnik's responsibilities in
the financial area. Mr. Meyers joined JWP in January 1993 as
Senior Vice President-Finance and continues in that position. Mr.
Gallo, who had been a Vice President and Treasurer of JWP, was
promoted to the position of Senior Vice President in April 1993.
He also continues as Treasurer of JWP. In May
1994, Mr. Leicle Chesser became an Executive Vice-President and
the Chief Financial Officer of JWP.
In January 1994, Mr. Jeffrey M. Levy was elected Senior Vice
President of JWP
and in February 1993 Mr. Levy was named Chief Operating Officer
of JWP. Formerly, Mr. Levy had been President and Chief
Executive Officer of JWP Electrical Mechanical Services (East)
Inc.
B. BOARD OF DIRECTORS OF REORGANIZED JWP
Reorganized JWP will remain a Delaware corporation and will have a Board of Directors that will initially consist of seven members, who will serve until the next annual meeting of shareholders. Four Directors will be designated by the Old Note Holders; two Directors will be designated by the Old Credit Agreement Holders; and one Director will be JWP's current Chairman. The names and description of the principal occupations and employments of the foregoing designees will be available at or prior to the hearing on confirmation of the Plan.
C. MANAGEMENT OF REORGANIZED JWP
The current officers of JWP, will continue in their positions as officers of Reorganized JWP, subject to review by the Board of Directors of Reorganized JWP:
Frank T. MacInnis, age 47, Chairman of the Board of Directors, President and Chief Executive Officer.
Sheldon I. Cammaker, age 54, Executive Vice President and General Counsel.
Leicle Chesser, age 47, Executive Vice President and Chief Financial Officer.
Joseph A. Gallo, age 42, Senior Vice President and Treasurer.
Jeffrey Levy, age 41, Senior Vice-President and Chief Operating Officer.
Stephen H. Meyers, age 52, Senior Vice President-Finance.
Joseph G. Barnett, age 56, Vice President-Real Estate and Corporate Secretary.
Sidney Bernstein, age 58, Vice President-Taxation.
D. DESCRIPTION OF THE 1994 MANAGEMENT STOCK OPTION PLAN
During the restructuring process and the Plan negotiations, all parties concluded that it would be in the best interests of the Reorganized JWP, its creditors and equity holders that there be both continuity of key management and a performance incentive for maintaining such continuity. Accordingly, Reorganized JWP will adopt a Management Stock Option Plan (the "1994 Plan"). The 1994 Plan will be conditioned on approval by the stockholders of Reorganized JWP following its adoption.
A copy of the 1994 Plan is annexed hereto as Exhibit L. The following summary of its principal provisions is subject to the full text of the 1994 Plan.
The 1994 Plan will be administered by the Compensation
Committee of the Board of Directors (the "Compensation
Committee"), comprised of two or more directors
of Reorganized JWP, each of whom are disinterested within the
meaning of Rule 16b-3(c)(2) under the Securities Exchange Act of
1934 (the "Exchange Act") and considered outside directors within
the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code") and the
regulations promulgated thereunder. Such key employees as may be
determined by the Compensation Committee from time to time will
be eligible to participate in the 1994 Plan.
The aggregate number of shares of New Common Stock that may be issued pursuant to options under the 1994 Plan may not exceed 1,000,000. The maximum number of shares which may be the subject of options granted to any individual in any calendar year shall not exceed 500,000 shares.
Within one year after the Effective Date, the Compensation
Committee shall determine the recipients of options to purchase
500,000 shares of New Common Stock of Reorganized JWP pursuant to
the 1994 Plan and shall issue such options to such recipients in
the respective amounts as determined by the Compensation
Committee; provided, however, that in no event shall such options
be issued prior to the expiration of three months plus 20 days
after the Effective Date. The employment agreement between JWP
and Frank T. MacInnis requires that Mr.
MacInnis shall receive options to purchase 200,000 shares of New
Common Stock three months and twenty days following the Effective
Date.
Options may be granted by the Compensation Committee to
eligible employees as "incentive stock options" (as defined under
Section 422 of the Code) or as non-qualified stock options.
The exercise price of an incentive stock option and a
non-qualified stock option must be at least equal to the fair
market value of the New Common Stock
on the date of grant; provided, however, that the purchase price
for the initial grant of options with respect to 500,000 shares
shall be equal to the average market price of New Common Stock
over the 20 day trading period immediately preceding the date of
issuance of the option; and provided, further, that if the
average market price of New Common Stock for the
applicable period cannot be determined, the exercise price shall
be determined by an investment advisor selected by the
Compensation Committee of the Board of
Directors of Reorganized JWP. Notwithstanding the preceding, the
exercise price of any such option which is an incentive stock
option shall not be less than
the fair market value of the New Common Stock on the date of
grant of the option.
Options may not be exercised more than ten years after the date
of grant. Options shall be exercisable at such rate and times as
may be fixed by the Committee on the date of grant; however, the
rate at which the option first becomes exercisable may not be
more rapid than 331/3% on and after each of the
first, second and third anniversaries of the date of grant. The
aggregate fair market value (determined at the time the option is
granted) of the New Common Stock with respect to which incentive
stock options are exercisable for the
first time by a participant during any calendar year (under all
stock option plans of Reorganized JWP and its subsidiaries) shall
not exceed $100,000; to the extent that this limitation is
exceeded, such excess options shall be
treated as non-qualified stock options for purposes of the 1994
Plan and the Code.
At the time an option is granted, the Compensation Committee
may, in its sole discretion, designate whether the option is to
be considered an incentive stock
option or non-qualified stock option. Options with no such
designation shall be deemed an incentive stock option to the
extent that the $100,000 limit described above is met.
Payment of the purchase price for shares acquired upon the exercise of options may be made by any one or more of the following methods: in cash, by check, by delivery to Reorganized JWP of shares of New Common Stock already owned by the option holder, by a "cashless" exercise method with a designated broker, or by such other method as the Compensation Committee may permit from time to time. However, a holder may not use previously owned shares of New Common Stock that were acquired pursuant to the 1994 Plan, or any other stock plan that may be maintained by Reorganized JWP or its subsidiaries, to pay the purchase price under an option, unless the holder has beneficially owned such shares for at least six months.
Options become immediately exercisable in full upon the retirement of the holder after reaching the age of 65, upon the disability or death of the holder while in the employ of Reorganized JWP, or upon the occurrence of such special circumstances as in the opinion of the Compensation Committee merit special consideration. However, no options or rights may be exercised earlier than six months following the later of the date of grant or of the stockholder approval of the 1994 Plan (except that the estate of a deceased holder of an option may exercise it prior to the expiration of such six-month period).
Options terminate at the end of the three-month period following the holder's termination of employment. This period is extended to six months in the case of the death of the holder, in which case the option is exercisable by the holder's estate.
Each option contains anti-dilution provisions which will automatically adjust the number of shares subject to options in the event of a stock dividend, split-up, conversion, exchange, reclassification or substitution. In addition, upon the dissolution or liquidation of Reorganized JWP, or the occurrence of a merger or consolidation in which Reorganized JWP is not the surviving corporation, or in which Reorganized JWP becomes a subsidiary of another corporation or in which the voting securities of Reorganized JWP which are outstanding immediately prior thereto do not continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting securities of Reorganized JWP or such surviving entity immediately after such merger or consolidation, or upon the sale of all or substantially all of the assets of Reorganized JWP, the 1994 Plan and the options granted thereunder shall terminate unless provision is made by Reorganized JWP in connection with such transaction for the assumption of options theretofore granted, or the substitution for such options of new options of the successor corporation or a parent or subsidiary thereof, with appropriate adjustments as to the number and kinds of shares and the per share exercise prices. If options terminate as a result of any such transaction, the holder will be entitled to the excess of (i) the fair market value (determined on the basis of the amount received by stockholders in connection with such transaction) of the shares subject to the portion of the option not theretofore exercised (whether or not the option is then exercisable pursuant to its terms or otherwise), over (ii) the aggregate purchase price that would be payable for such shares upon the exercise of the option. In the event of any other change in the corporate structure or outstanding shares of New Common Stock, the Compensation Committee may make such equitable adjustments to the number of shares and the class of shares available under the 1994 Plan or to any outstanding options as it shall deem appropriate to prevent dilution or enlargement of rights.
Reorganized JWP shall obtain such consideration for granting options under the 1994 Plan as the Compensation Committee in its discretion may request.
Each option may be subject to provisions to assure that any exercise or disposition of New Common Stock will not violate the securities laws.
No options may be granted under the 1994 Plan after ten years following the date of its adoption.
The Board of Directors or the Compensation Committee may at any time withdraw or amend the 1994 Plan and may, with the consent of the affected holder of an outstanding option at any time withdraw or amend the terms and conditions of outstanding options. Any amendment which would increase the number of shares issuable pursuant to options or to any individual employee, or change the class of employees to whom options may be granted shall be subject to the approval of the stockholders of Reorganized JWP within one year of such amendment.
The Federal income tax consequences to an employee who receives incentive stock options generally will, under current law, be as follows:
An employee will not realize any income upon the grant or
exercise of an incentive stock option. If the employee disposes
of the shares of New Common Stock acquired upon the exercise of
an incentive stock option at least two
years after the date the option is granted and at least one year
after the New Common Stock is transferred to him or her, the
employee will realize long-term capital gain in an amount equal
to the excess, if any, of his or her selling price for the shares
over the option exercise price. In such case, Reorganized
JWP will not be entitled to any tax deduction resulting from the
issuance or sale of the shares. If the employee disposes of the
shares of New Common Stock acquired upon the exercise of an
incentive stock option prior to the expiration
of two years from the date the option is granted, or one year
from the date the New Common Stock is transferred to him or her,
any gain realized will be taxable at such time as follows (a) as
ordinary income to the extent of the difference between the
option exercise price and the lesser of the fair market
value of the shares on the date the option was exercised or the
amount realized from such disposition, and (b) as capital gain to
the extent of any excess, which gain shall be treated as
short-term or long-term capital gain depending
upon the holding period of the New Common Stock. In such case,
Reorganized JWP may claim an income tax deduction (as
compensation) for the amount taxable to the employee as ordinary
income.
In general, the difference between the fair market value of the New Common Stock at the time the incentive stock option is exercised and the option exercise price will constitute an item of adjustment, for purposes of determining alternative minimum taxable income, and under certain circumstances may be subject, in the year in which the option is exercised, to the alternative minimum tax.
If an employee uses shares of New Common Stock which he or she
owns to pay, in whole or in part, the exercise price for shares
acquired pursuant to an incentive stock option, (a) the holding
period for the newly issued shares of New Common Stock equal in
value to the old shares which were surrendered upon the exercise
shall include the period during which the old shares were
held, (b) the employee's basis in such newly issued shares will
be the same as his or her basis in the old shares surrendered and
(c) no gain or loss will be recognized by the employee on the old
shares surrendered. However, if any employee uses
shares previously acquired pursuant to the exercise of an
incentive stock option to pay all or part of the exercise price
under an incentive stock option, such tender will constitute a
disposition of such previously acquired shares for purposes of
the one-year (or two-year) holding period
requirement applicable to such incentive stock option and such
tender may be treated as a taxable exchange.
The Federal income tax consequences to an employee who receives non-qualified stock options generally will, under current law, be as follows:
An employee will not realize any income at the time the option
is granted. Generally, an employee will realize ordinary income,
at the time the option is exercised in a total amount equal to
the excess of the then fair market value
of the New Common Stock acquired over the exercise price.
However, Section 83 of the Code provides that, if a director,
officer or principal stockholder (i.e., an owner of more than 10
percent of the outstanding shares of New Common
Stock) receives shares pursuant to the exercise of a
non-qualified stock option, he or she is not required to
recognize any income until the date on
which such shares can be sold at a profit without liability under
Section 16(b) of the Exchange Act. At such time, the director,
officer or principal stockholder will realize income equal to the
amount by which the then fair
market value of the shares acquired pursuant to the exercise of
such option exceeds the price paid for such shares.
Alternatively, a director, officer or
principal stockholder who would not otherwise be taxed at the
time the shares are transferred may file a written election
within 30 days with the Internal Revenue Service, to be taxed as
of the date of transfer, on the difference between the then fair
market value of the shares and the price paid for such
shares.
All income realized upon the exercise of a non-qualified stock option will be taxed as ordinary income. Reorganized JWP will be entitled to a tax deduction (as compensation) for the amount taxable to an employee (including a director, officer and principal stockholder) upon the exercise of a non-qualified stock option, as described above, in the same year as those amounts are taxable to the employee.
Shares of New Common Stock issued pursuant to the exercise of a
non-qualified stock option generally will constitute a capital
asset in the hands of an employee (including a director, officer
or principal stockholder) and will be eligible for capital gain
or loss treatment upon any subsequent disposition.
The holding period of an employee (including a director, officer
or principal stockholder) will commence upon the date he or she
recognizes income with respect to the issuance of such shares, as
described above. The employee's basis in the shares will be equal
to the greater of their fair market value as of that date or the
amount paid for such shares. If, however, an employee uses
shares of New Common Stock which he or she owns to pay, in whole
or in part, the exercise price for shares acquired pursuant to
the exercise of a non-qualified stock option, (a) the holding
period for the newly issued shares of New Common Stock equal in
value to the old shares which were surrendered
upon the exercise shall include the period during which the old
shares were held, (b) the employee's basis in such newly issued
shares will be the same as his or her basis in the surrendered
shares, (c) no gain or loss will be realized by the employee on
the old shares surrendered, and (d) the employee
will realize ordinary income in an amount equal to the fair
market value of the additional number of shares received over and
above the number of old shares surrendered (the "Additional
Shares") and the employee's basis in the Additional Shares will
be equal to such fair market value.
In addition to the Federal income tax consequences discussed above, Section 280G of the Code provides that if an officer, stockholder or highly compensated individual receives a payment which is in the nature of compensation and which is contingent upon a change in control of the employer, and such payment equals or exceeds three times his or her "base salary" (as hereinafter defined), then any amount received in excess of base salary shall be considered an "excess parachute payment." An individual's "base salary" is equal to his or her average annual compensation over the five-year period (or period of employment, if shorter) ending with the close of the individual's taxable year immediately preceding the taxable year in which the change in control occurs. If the taxpayer establishes, by clear and convincing evidence, that an amount received is reasonable compensation for past or future services, all or a portion of such amount may be deemed not to be an excess parachute payment. If any payments made under the 1994 Plan in connection with a change in control of Reorganized JWP constitute excess parachute payments with respect to any employee, then in addition to any income tax which would otherwise be owed on such payment, the individual will be subject to an excise tax equal to 20% of such excess parachute payment and Reorganized JWP will not be entitled to any tax deduction to which it otherwise would have been entitled with respect to such excess parachute payment.
Section 280G provides that payments made pursuant to a contract entered into within one year of the change in control are presumed to be parachute payments unless the individual establishes, by clear and convincing evidence, that such contract was not entered into in contemplation of a change in control. In addition, the General Explanation of the Tax Reform Act of 1984 prepared by the Staff of the Joint Committee on Taxation indicates that the grant of an option within one year of the change in control or the acceleration of an option because of a change in control may be considered a parachute payment, in an amount equal to the value of the option or the value of the accelerated portion of the option as the case may be. Pursuant to proposed regulations issued by the Treasury Department under Section 280G, the acceleration of a non-qualified stock option because of a change in control is considered a parachute payment in an amount equal to the value of the accelerated portion of the option. Even if the grant of an option within one year of the change in control or the acceleration of an option is not a parachute payment for purposes of Section 280G, the exercise of an option within one year of the change in control or the exercise of the accelerated portion of an option may result in a parachute payment, in an amount equal to the excess of the fair market value of the shares received upon exercise of the option over the exercise price. Payments received for the cancellation of an option because of a change in control may also result in parachute payments.
The foregoing summary with respect to Federal income taxation does not purport to be complete and reference is made to the applicable provisions of the Code.
IX. LEGAL PROCEEDINGS
A. SHAREHOLDER LITIGATION
Since August 1992, nineteen class action lawsuits have been filed against JWP arising out of the restatements of earnings, write-offs and losses announced by JWP on August 4, 1992 and October 2, 1992. The lawsuits named as defendants, among others, JWP and certain of its current and former officers and directors and alleged federal securities law and state law violations. On November 2, 1992, all of those actions were consolidated for pre-trial purposes before Judge Charles L. Brieant in the White Plains division of the United States District Court for the Southern District of New York.
Pursuant to Stipulation and Court Order, on January 15, 1993, a single consolidated amended class action complaint (the "Complaint") was filed against JWP and Andrew T. Dwyer, a director of JWP and former Chairman of the Board, President and Chief Executive Officer of JWP, Ernest W. Grendi, JWP's former Chief Financial Officer, Joseph E. Grendi, former Chief Financial Officer of JWP's Mechanical/Electrical Services Group, and three other current directors of JWP-Innis O'Rourke, Jr., Craig C. Perry, and Edmund S. Twining, Jr.-and George M. Duff, Jr., a former director, each of whom were members of JWP's Audit Committee for all or part of 1991, and Ernst & Young, which served as JWP's auditor for 1992 and 1991 and several prior years.
The Complaint alleges violations of Section 10(b) of the Securities and Exchange Act of 1934, Rule 10b-5 promulgated thereunder and common law fraud and deceit on the part of JWP and the other named defendants. Among other things, JWP is alleged to have intentionally and materially overstated its inventory, accounts receivable and earnings in various public disseminations during the purported class period, May 1, 1991 through October 1, 1992. The Complaint seeks an unspecified amount of damages. On March 30, 1993, JWP filed an answer which denies the material allegations in the Complaint. In June 1994, the Bankruptcy Court modified the automatic stay provided by the Bankruptcy Code with respect to the Shareholder Litigation in order to allow discovery of the non-debtor defendants and limited discovery of JWP. The parties are now engaged in discovery proceedings.
For a description of the treatment of the Shareholder Litigation under the Plan, see "Summary of the Plan-Class 10."
B. SECURITIES AND EXCHANGE COMMISSION INVESTIGATION
JWP has been informed by the Securities and Exchange Commission (the "SEC") that it is conducting a private investigation to determine whether there have been violations of certain provisions of the federal securities laws and/or the rules and regulations of the SEC in connection with JWP's financial records, reports, and public disclosures. JWP has been cooperating with the SEC's staff and has voluntarily produced documents and information as requested by the staff. On April 12, 1994, the SEC staff informed JWP of its intention to recommend that the SEC file a civil injunction action against the JWP. JWP is currently engaged in discussions with the SEC staff concerning a possible consensual resolution of the matter.
C. NEW YORK COUNTY DISTRICT ATTORNEY INVESTIGATION
In connection with an investigation of the plumbing industry
being conducted by the New York County District Attorney's
Office, two related subsidiaries of JWP engaged in the plumbing
business in New York City have received subpoenas for certain of
their books and records. The subsidiaries have complied with
those subpoenas. Additionally, certain employees of the two
subsidiaries have been subpoenaed to testify as witnesses before
a grand jury, and the employees
have complied with the subpoenas.
D. JAMAICA WATER SUPPLY COMPANY
1. Rate Related Proceedings and Related Litigation. Effective March 1991, JWS was authorized by the Public Service Commission of the State of New York (the "Public Service Commission") to increase its rates charged to customers by amounts designed to increase annual revenues by $3,992,000. At that time the Public Service Commission made $2,000,000 of that increase temporary and subject to refund pending a further review by the Public Service Commission. Upon completion of its review, in July 1992, the Public Service Commission ordered JWS to refund to its customers all of the amounts collected under the temporary portion of the rate increase during the period from March 1991 through June 1992. In addition, the Public Service Commission ordered JWS to reduce the rates charged customers, as initially authorized effective March 1991, by amounts designed to reduce annual revenues by $1,400,000 effective July 1, 1992. During the third quarter of 1992, JWS, which had not recorded as revenue any of the amounts collected under the temporary portion of the rate increase, made the required refund, aggregating $2,900,000 including interest, by way of credits to customers' bills.
In January 1992, the Public Service Commission ordered its Staff to perform an audit covering all aspects of JWS's operations. The report on that audit alleged that mismanagement and imprudence on the part of JWS may have resulted in excess charges to the customers of up to $10,600,000. As a result of the audit report, in June 1992, the Public Service Commission instituted a proceeding requiring JWS to demonstrate that its rates charged customers are not excessive and providing for an investigation of JWS's management practices. As part of this proceeding, and citing the audit report's assertions without receiving the audit report in evidence, the Public Service Commission ordered that $10,600,000 of JWS's annual revenues be made temporary and subject to refund, effective August 6, 1992, pending the completion of the investigation.
Between December 1992 and May 1993, each of JWS, the Public Service Commission Staff, the New York State Consumer Protection Board, Waterbill Watchdogs, Inc., the County of Nassau, the Town of Hempstead, the New York City Department of Environmental Protection and the New York City Water Board appeared and submitted testimony in the Public Service Commission proceedings. On June 3, 1993, the Public Service Commission issued an order suspending hearings and appointing two administrative law judges for the purpose of effecting a settlement. Negotiations among the parties and through the settlement judges were ongoing from that time.
In addition, in February 1993, the County of Nassau commenced
an
action
alleging violation of the Racketeer Influenced and Corrupt
Organizations Act
("RICO") and common law fraud based on allegations that JWS
intentionally filed
false rate applications and, as a result, had earnings that
exceeded
projections by $8,653,000. The complaint demanded treble damages
and punitive
damages.
As a result of the negotiations ordered by the Public Service
Commission, all
of the foregoing parties entered into a settlement agreement
dated
December 22,
1993 ("Settlement Agreement"), which, following approval by the
Public Service
Commission on February 2, 1994, settled all issues outstanding
before the
Public Service Commission, various state courts, and in the RICO
action. The
Settlement Agreement provides, among other things, (i) that JWS
will use its
best efforts to bring about the separation of Jamaica Water
Securities Corp.
("JWSC"), a subsidiary of JWP, which holds substantially all of
the
common
stock of JWS, from JWP and that JWSC will submit a plan to the
Public Service
Commission on or before December 31, 1994 for its separation from
JWP and the
formation of a separate waterworks corporation to be incorporated
under the New
York Transportation Corporations Law to provide water utility
service to the
Nassau County customers served by JWS, (ii) a commitment by JWS
that, subject
to limited specified exceptions, it will not seek to have a
general
rate
increase become effective prior to January 1, 1997, thus
providing
rate
stability for three years, (iii) for refunds and other payments
to
customers
estimated to aggregate approximately $11.7 million over the
1994-1997 period,
and (iv) a cap on earnings above which JWS will share with its
customers its
return on equity. The JWS Settlement Agreement also recognizes
the
positive
steps taken by JWS to comply with the Public Service Commission's
audit
recommendations.
2. New York City Condemnation Proceeding. From time to time representatives of New York City (the "City") and JWP met to discuss a possible purchase by the City of that portion of JWS's water distribution system, which is located in the City. That system constitutes approximately 75% of JWS's water plant.
In September 1986, the State of New York enacted a law that
requires the City to acquire by condemnation all of the property
of JWS "constituting or relating to [its] water distribution
system located in the City of New York" only in the
event of a decision by the Supreme Court of the State of New York
that the amount of compensation to be paid JWS for the water
distribution system "shall be determined solely by the income
capitalization method of valuation, based on the actual net
income as allowed (to JWS) by the [New York State]
public service commission." In addition, the law provides that if
any court determines "that a method of compensation other than
the income capitalization method be
utilized, or if the proposed award is more than the [JWS] rate
base of the
[condemned] assets . . . as utilized by the public service
commission in
setting rates," the City may withdraw the condemnation proceeding
without prejudice or costs. As of December 31, 1987, the rate
base of those assets
located in the City was approximately $53,084,000 exclusive of
water meters currently under lease which may be required to be
purchased in the event of condemnation.
In April 1988, the City instituted a proceeding in the Supreme
Court of the
State of New York pursuant to the 1986 statute. The City sought,
in
the first
instance, an order providing that the income capitalization
method
of valuation
would be the sole method used to determine compensation for JWS's
property,
and, on that basis, asked the Court to determine the value of the
JWS property
to be condemned. Pursuant to the 1986 law, if the Court were to
determine
compensation that exceeds the rate base or were to determine
compensation by a
method other than the income capitalization method, the City
could
withdraw the
condemnation proceeding. JWS argued, at trial and in its
post-trial
memorandum,
that the judicially recognized method of valuing public utility
property is by
the Reproduction Cost New Less Depreciation ("RCNLD")<F19> of
tangible and intangible assets in order to
determine just
compensation for the JWS property in the City. JWS also sought
consequential
and severance damages that would result from separating the JWS
Nassau County
water supply system from that in the City. The aggregate
compensation sought by
JWS as of December 31, 1987 was $923,966,341, consisting of
$846,625,285 RCNLD, $49,670,056 consequential and severance
damages and $27,671,000 as the fair
market value of the land owned by JWS. The City submitted its
income capitalization valuation, as of December 31, 1987, at
$62,500,000.
The evidentiary hearings in the proceedings were concluded and
JWS reserved its right to contest the constitutionality of the
statute.
Subsequent to the trial, the Court requested that the parties
address the constitutionality of the statute. After a joint
post-hearing submission from
JWS and the City contending that the statute was constitutional,
the Supreme
Court sua sponte, by decision dated June 21, 1993, dismissed the
City's petition and held, inter alia, that "insofar as the
legislature has directed
this Court to make . . . a decision [on valuation only prior to
any taking] through General City Law 20(2), that statute is
unconstitutional" because such
a decision would be advisory.<F20> Aware that a constitutional
challenge to a nearly identical condemnation statute<F21>
involving Saratoga
County, was pending
in the appellate courts, neither JWS nor the City served a notice
of entry of
the dismissal order that would commence the period within which
an
appeal could
be taken.
On February 24, 1994, the New York Court of Appeals held the
nearly-identical
statute to be constitutional.<F22> On April 6, 1994, a conference
was held with
the Supreme Court pursuant to the City's request to reconsider
its
JWS decision
in light of the Court of Appeals February 24, 1994 decision.
At the April 6, 1994 conference, the Court stated it would, as
requested by
the City, reconsider its June 21, 1993 decision. The Court
further
stated that
in the event it decided to withdraw its June 21, 1993 decision
that
it would
then take the proceedings under further consideration.
JWP cannot predict when or if the Supreme Court will conduct
further
proceedings under the statute nor is it possible to predict what
the decision
of the Supreme Court might be if it decides to value the JWS
property or the
effect of the pending litigation on the ability to sell or the
timing of the
sale of JWS.
X. FEASIBILITY OF THE PLAN
Assuming JWP has met the conditions precedent to confirmation
of
the Plan
(See "Summary of the Plan-Conditions Precedent") with respect to
a
working
capital credit facility:
A. PAYMENTS ON THE EFFECTIVE DATE
<F20> 600 N.Y.S.2d 914 (Sup. 1993).
<F21> New York Public Authorities Law (S) 1199.eee(5).
<F22> Saratoga Water Services, Inc. v. Saratoga County Water
Authority, 83 N.Y.2d 205, 608 N.Y.S.2d 952 (1994).
Other than payment of administrative expense, priority and
Class 4A claims, the only cash payments that JWP expects will be
payable under the Plan on or shortly after the Effective Date are
(i) a mandatory prepayment of the Series B Secured Notes if there
are proceeds constituting Series B Cash Collateral from
assets sales consummated prior to the Effective Date and (ii), if
Reorganized JWP so elects, a cash payment to Belmont in an amount
equal to the face amount of Series B Secured Notes Belmont would
otherwise receive as Additional Interest.
B. FUTURE PAYMENTS UNDER THE PLAN
Confirmation of the Plan will result in discharge of
indebtedness in the amount of approximately $630 million<F23>
Reorganized JWP will have indebtedness
under the Plan in the amount of approximately $136 million<F24>
consisting of the
1. approximately $59.4 million<F23> principal amount (plus the Additional Interest amount if not paid in cash) of the 3-year 7% Series A Senior Secured Notes, with interest payable only in kind;
2. $11.357 million principal amount (plus the Additional Interest amount if not paid in cash) of the 3-year 7% Series B Senior Secured Notes, with interest payable only in kind; and
3. $60 million principal amount (plus the Additional Interest amount if not paid in cash) of the 7-year 11% Series C Notes with interest payable only in kind for the first eighteen months and payable in cash quarterly thereafter.
4. Reorganized JWP Supplemental SellCo Note issued to SellCo in the estimated principal amount of $5,000,000; interest to accrue at 8% per annum, payable at maturity, which is the earlier of ten years from the Effective Date and one day prior to the date on which the SellCo Subordinated Contingent Payment Note is deemed canceled by reason of the sale of substantially all of SellCo's assets other than this note, but not earlier than five years from the Effective Date.
Additionally, SellCo will have indebtedness under the Plan consisting of $46,000,000 principal amount, plus the Additional Interest amount if not paid in cash, of the 10-year 12% SellCo Subordinated Contingent Payment Notes, with interest compounded semi-annually and payable at the earlier of maturity or payment in full of principal; provided that if all the assets of SellCo have been sold and the proceeds distributed or if the SellCo assets (other than the JWP Supplemental SellCo Note) are valued at less than $250,000, the SellCo Subordinated Contingent Payment Notes shall be canceled. The SellCo Subordinated Contingent Payment Notes are recourse to Reorganized JWP to the extent of the JWP Supplemental SellCo Note.
Other than the $10 million mandatory redemption under of Series A Secured Notes (less optional prepayments and asset sales proceeds) on the second anniversary of the Effective Date and mandatory redemptions based on net proceeds of assets sales or debt or equity offerings or "Available Cash," Reorganized JWP will not be required to make any cash debt service payments for the first eighteen months following the Effective Date. After that time, cash interest payments, of approximately $8 million per year<F25>, will be payable and only in respect of the Series C Notes.
<F24> Not including the Additional Interest Amount, which could amount to additional indebtedness of up to $4.9 million.
<F25> Not including interest on the Additional Interest Amount.
XI. CONFIRMATION OF THE PLAN
A. HEARING
To confirm the Plan, the Bankruptcy Court will be required to
hold, after notice, a confirmation hearing. The Plan will only be
confirmed if the Bankruptcy Court determines at such hearing that
the Plan satisfies all of the requirements set forth in Section
1129 of the Bankruptcy Code. Section 1129 requires, among other
things, that the Plan (1) has been accepted by each
impaired class of claims or interests or, if rejected by any
impaired classes, that it satisfies the requirements for
"cramdown" set forth in Section 1129(b)
with respect to such rejecting classes, (2) is feasible and (3)
is in the "best interests" of nonaccepting creditors and equity
holders that are impaired under the Plan.
B. ACCEPTANCE
Classes 2, 3, 4B, 4C, 6, 7, 8, 9, 10 and 11 are impaired under
the Plan. Classes 2,3 and 4B constitute "Senior Indebtedness"
with respect to the claims of Class 6. If Classes 2, 3 and 4B,
voting as a single class, do not accept the Plan, the Plan cannot
be confirmed. Each of the remaining Classes must accept
the Plan;<F26> however, the Plan can be confirmed notwithstanding
the rejection of the Plan by any of Classes 4C, 6, 7, 8, 9, 10 or
11 if the Bankruptcy Court finds that the treatment accorded to
each non-accepting class of claims or
interests satisfies the "cramdown" provisions of Section 1129(b).
See "Confirmation of the Plan-Confirmation Without Acceptance by
all Impaired Classes."
C. FEASIBILITY
The Bankruptcy Code requires the Bankruptcy Court to find that confirmation of the Plan is not likely to be followed by the liquidation, or the need for further financial reorganization, of the Debtor. For purposes of determining whether the Plan meets this requirement, JWP has analyzed its ability to meet its obligations under the Plan. As part of this analysis, management has prepared projections of Reorganized JWP's financial performance for the period from 1994 through 1997. See "Projected Financial Information." Although these projections do not reflect all possible effects of the Plan or of significant unanticipated adverse changes in economic conditions generally, JWP is confident that the Plan provides a feasible means of reorganization and operation, through which it can be reasonably expected that, subject to the risks disclosed herein, Reorganized JWP will be able to satisfy its obligations on and after the Effective Date. For a description of the assumptions underlying the projections, as well as the related qualifications, see "Financial Projections" and "Certain Risk Factors."
D. BEST INTERESTS TEST
The Bankruptcy Code requires that each creditor or equity
holder in an impaired class either (a) has accepted the Plan or
(b) will receive or retain under the Plan property of a value, as
of the Effective Date, that is not less than the value such
creditor or equity holder would receive or retain if the
Debtor were liquidated under Chapter 7 of the Bankruptcy Code on
such date.
balance of those proceeds were made available to pay the pre-petition unsecured claims and interests. See the consolidated Liquidation Analysis attached as Exhibit 5 hereto.
To determine if the Plan is in the best interests of each holder of a claim or interest in each impaired class, the present value of the distributions from the proceeds of the hypothetical liquidation of the assets and properties of JWP (after subtracting the amounts attributable to costs and expenses of the bankruptcy cases) must be compared with the present value of the consideration offered to such classes under the Plan.
After considering the effect that a Chapter 7 liquidation would
have on the ultimate proceeds available for distribution to
creditors and equity holders of JWP, including (1) increased cost
and expenses of liquidation under Chapter 7 arising from fees
payable to a bankruptcy trustee and attorneys and other
professional advisors to such trustee, (2) additional expenses
and claims, some of which would be entitled to priority, that
would be generated during the liquidation from, for example the
rejection of unexpired leases and executory contracts in
connection with the cessation of the operations of
JWP and from the creation of liquidated claims, such as guarantee
and other claims, which would be unimpaired in the Reorganization
Case, or, if impaired, would remain contingent and unliquidated
so long as JWP and its Nondebtor Subsidiaries are going concerns,
(3) the erosion of the value of JWP's assets in the context of
an expedited liquidation required under Chapter 7 and the "fire
sale" atmosphere that would prevail, (4) the adverse effects on
the saleability of portions of the business that could result
from the possible departure of key employees and the loss of
major customers, (5) the cost attributable to the time value of
money resulting from what is likely to be a more protracted
proceeding, and (6) the application of the rule of absolute
priority to distributions in a Chapter 7 liquidation, JWP has
determined that confirmation of the Plan will provide each holder
of a claim or interest in an impaired class with a greater
recovery than such holder would receive pursuant to a
Chapter 7 liquidation of JWP and its Nondebtor Subsidiaries.
The consolidated Liquidation Analysis for JWP is attached as
Exhibit 5 hereto. The analysis set forth in the Liquidation
Analysis of the estimated recoveries in a liquidation of JWP's
operating businesses was prepared by JWP with the assistance of
its financial advisors, Lazard Freres & Co. A description of
procedures followed and the assumptions and qualifications made
by JWP in connection with such analysis is set forth in the
consolidated Liquidation Analysis contained in Exhibit 5 hereto.
The Liquidation Analysis was completed using December 1993 data
and, as of the date hereof, JWP is not
aware of any events subsequent to such date that would materially
impact the Liquidation Analysis.
E. CONFIRMATION WITHOUT ACCEPTANCE BY ALL IMPAIRED CLASSES
In the event that one or more of Classes 4C, 6, 7, 8, 9, 10 and 11 does not accept the Plan, the Debtor will seek to confirm the Plan notwithstanding the non-acceptance by such classes under the "cramdown" provisions set forth in Section 1129(b) of the Bankruptcy Code. To obtain confirmation under the "cramdown" provisions, it must be demonstrated to the Bankruptcy Court that the Plan does not "discriminate unfairly" and is "fair and equitable" with respect to any dissenting class.
1. Unfair Discrimination. The "unfair discrimination" test requires, among other things, that the Plan recognize the relative priorities among unsecured creditors and equity holders and that classes of equal rank receive equal treatment. JWP believes that it can demonstrate to the Bankruptcy Court that the Plan does not discriminate at all among Classes 2, 3, 4B and 4C and that this test is met for each of Classes 2, 3, 4B and 4C, based on the Intercreditor Agreement, which, in effect, provides for a partial subordination of claims in Class 3 to the claims in Class 2. The Intercreditor Agreement has no discriminatory effect on the claims in Classes 4B and 4C. Such discrimination as may exist in favor of Class 5 is fair and justified because it is essential to enable JWP's businesses to reorganize and to continue as going concerns. The claims of Class 6 are contractually subordinated to the claims of Classes 2, 3 and 4B and are separately classified and treated in order to recognize the terms of such subordination. If Classes 2, 3 and 4B, voting as a single class, accept the Plan, and the Plan is confirmed, the New Series X Warrants and New Series Y Warrants will be issued to Class 6 by reason of the negotiated settlement among such classes. The claims of Class 7 are certain claims that are subordinated to the claims of Classes 2, 3, 4, 5 or 6, and are separately classified and treated in accordance with such subordination.
The interests in classes 8, 9, 10 and 11 are appropriately treated in accordance with their relative priorities. The interests in Class 8, which are based upon ownership of Old Preferred Stock, are senior to the interests in Classes 9, 10 and 11. The interests in Classes 9, 10 and 11, which are based upon the ownership of, or claims of right to, the Old Common Stock, or interests that are pari passu with such interests, are separately classified and treated under the Plan in order to effect a fair and rational allocation of New Series Z Warrants among such interests. The Plan provides that, notwithstanding the failure of any of Classes 9, 10 or 11 to accept the Plan, Reorganized JWP may, in its discretion, issue New Series Z Warrants to all such classes.
2. Fair and Equitable Standard. The Bankruptcy Code establishes different "fair and equitable" tests for secured creditors, unsecured creditors and equity holders. The respective tests, in part, are as follows:
a. Unsecured Creditors. Either (i) each impaired unsecured creditor of the rejecting class receives or retains under the Plan property of a value equal to the amount of its allowed claim or (ii) the holders of claims and interests that are junior to the claims of the dissenting class do not receive or retain any property under the Plan. To the extent that any of Classes 4B, 6 and 7, which are classes of unsecured creditors, do not accept the Plan, the Plan provides that no class junior to such classes shall receive or retain any property under the Plan.
b. Equity Holders. Either (i) each equity holder of the rejecting class receives or retains under the Plan property of a value equal to the value of such holder's equity interest or (ii) the holders of interests that are junior to the interests of such rejecting class do not receive or retain any property under the Plan. To the extent that Class 8, which is a class of equity interests, does not accept the Plan, the Plan provides that no class junior to such classes shall receive or retain any property under the Plan. To the extent that any of Classes 9, 10 and 11, which are classes of equity interests, do not accept the Plan, the Plan provides that no class junior to such classes shall receive any property under the Plan.
If all of the applicable requirements for confirmation of the
Plan set forth
in Section 1129(a) of the Bankruptcy Code, except that any
impaired classes reject the Plan, have been satisfied, JWP will
request the Bankruptcy Court to confirm the Plan pursuant to the
"cramdown" provisions of Section 1129(b) of
the Bankruptcy Code, on the basis that the Plan is fair and
equitable and does not discriminate unfairly with respect to such
rejecting classes.
XII. ALTERNATIVES TO THE PLAN
A. ALTERNATIVE PLAN OF REORGANIZATION
If the Plan is not confirmed, JWP or any other party in
interest could
attempt to formulate a different plan. Such a plan might involve
either a reorganization and continuation of all or a part of
JWP's businesses or it
might propose an orderly liquidation of all of JWP's assets. JWP
has explored
various alternative plans in consultation with its advisors and
in the lengthy
negotiations underlying the formulation and development of the
Plan. JWP believes that the Plan in its present form enables the
greatest recovery for
creditors. The Plan contemplates the orderly disposition of
certain of JWP's
assets and preserves that part of JWP's business deemed to be
profitable and
capable of generating sufficient cash flow to service operations
and debt service. While a liquidation by JWP of all of JWP's
assets under Chapter 11
would likely result in greater proceeds than a liquidation under
Chapter 7 by a
trustee, it is JWP's belief that the aggregate net proceeds of
such a Chapter
11 liquidation would not equal the present value of the estimated
recovery for
creditors, over time, from JWP's continuing business, as proposed
in the Plan.
In addition, creditors' recoveries from a Chapter 11 liquidation
would likely
be further and substantially reduced by the creation and
assertion of claims of
a currently undetermined amount in connection with liabilities of
JWP that are unimpaired under the Plan and that would not be
assumed by any purchaser of purchasers of
assets. These are claims, such as guarantee or indemnity
obligations of JWP, that, subject to
certain conditions, remain unimpaired under the Plan because the
likelihood that such claims would become fixed instead of
contingent is remote so long as
JWP's operating subsidiaries continue to meet their obligations,
as anticipated.
B. LIQUIDATION UNDER CHAPTER 7.
If no plan can be confirmed, the Reorganization Case may be
converted to a
case under Chapter 7, in which a trustee would be appointed to
liquidate the
assets of JWP for distribution to creditors in accordance with
priorities established by the Bankruptcy Code. A discussion of
the effect that a Chapter 7
liquidation would have on the recovery of the holders of claims
and interests is set forth under "Confirmation of the Plan-Best
Interests Test."
JWP believes that liquidation under Chapter 7 would result in
smaller distributions to claimants than those provided for in the
Plan because of (a) increased costs
and expenses arising from fees payable to a bankruptcy trustee
and attorney and other professional advisors to such trustee, (b)
additional expenses and claims, some of which would be entitled
to priority, which would
be generated during the liquidation from, for example, the
rejection of unexpired leases and
executory contracts in connection with the cessation of the
operations of JWP and from the creation of liquidated claims,
such as guarantee and
other claims that will likely be unimpaired in the Reorganization
Case, or, if impaired, will remain contingent and unliquidated so
long as JWP and its Nondebtor
Subsidiaries are going concerns, (c) the erosion of the value of
JWP's assets in the context of an expedited liquidation required
by Chapter 7 and the "fire
sale" atmosphere that would prevail, (d) the adverse effect on
the salability of portions of the business that could result from
the possible departure of
key employees and the loss of major customers, and (e) the cost
attributable to
be a more protracted proceeding. For more details, see the
consolidated Liquidation Analysis attached as Exhibit 5 hereto.
XIII. SECURITIES LAWS CONSIDERATIONS
A. ISSUANCE OF REORGANIZATION SECURITIES
Section 1145 of the Bankruptcy Code exempts the original
issuance of securities under a plan of reorganization from
registration under the
Securities Act of 1993 (the "Securities Act") and state law.
Under Section 1145, the issuance of the New Securities is exempt
from registration if three
principal requirements are satisfied: (1) the securities must be
issued by a
debtor, its successor, or an affiliate participating in a joint
plan with the
debtor, under a plan of reorganization; (2) the recipients of the
securities must hold a claim against the debtor or such
affiliate, an interest
in the debtor or such affiliate, or a claim for an administrative
expense against the
debtor or such affiliate; and (3) the securities must be issued
entirely in exchange for the recipient's claim against or
interest in the debtor or such
affiliate, or "principally" in such exchange and "partly" for
cash or property.
JWP believes that the issuance to holders of Claims in Classes 2,
3, 4B and 4C
of the New Securities under the Plan will satisfy all three
conditions because:
(a) the issuances are expressly contemplated under the Plan, the
joint proponents of which are JWP and SellCo, an affiliate of the
Debtor;
(b) the recipients are holders of "claims" against JWP, the
Debtor; and (c) the
recipients would obtain the New Securities in exchange for their
prepetition Claims.
B. SUBSEQUENT TRANSFERS OF REORGANIZATION SECURITIES
The New Securities to be issued pursuant to the Plan may
generally be resold
by the holders thereof without registration under the Securities
Act or other federal securities laws pursuant to the exemption
provided by Section 4(1) of
the Securities Act, unless the holder is an "underwriter" (as
defined in Section 1145(b) of the Bankruptcy Code) with respect
to such securities. In addition, such securities may generally be
resold without registration or qualification under state
securities laws pursuant to various
exemptions provided by such laws.
Section 1145(b) of the Bankruptcy Code defines four types of "underwriters:"
(1) persons who purchase a claim against, an interest in, or a claim for an administrative expense against the debtor with a view to distributing any security received in exchange for such a claim or interest;
(2) persons who offer to sell securities offered under a plan for the holders of such securities;
(3) persons who offer to buy such securities from the holders of such securities, if the offer to buy is: (A) with a view to distributing such securities; or (B) made under a distribution agreement; and (4) a person who is an "issuer" with respect to the securities as the term "issuer" is defined in Section 2(11) of the Securities Act.
Under Section 2(11) of the Securities Act an "issuer" includes
any person directly or indirectly controlling or controlled by
the issuer, or any person under direct or indirect common control
with the issuer. Under Rule 405 of
Regulation C under the Securities Act, the term "control" means
the possession, direct or indirect, of the power to direct or
cause the direction of the
policies of a person, whether through the ownership of voting
securities, by contract or otherwise. Accordingly, an officer or
director of a reorganized debtor (or its affiliate or successor)
under a plan of reorganization may be
deemed to "control" such debtor (and therefore be an underwriter
for purposes of Section 1145), particularly if such management
position is coupled with the
ownership of a significant percentage of a debtor's (or
affiliate's or successor's) voting securities.
To the extent that a person is deemed to be an "underwriter,"
except as described below, such person may make public offers and
sales of New Securities only in accordance with the registration
requirements of the Securities Act or
exemptions therefrom, such as (i) the exemption for sales by
persons in control
relationships with the issuer provided by Rule 144 under the
Securities Act, as
described hereinafter, and (ii) the exemption for "ordinary
trading transactions" (within the meaning of Bankruptcy Code
section 1145(b)(1)), as described hereinafter.
As to the exemption for sales by persons in control
relationships with the issuer, the staff of the SEC has taken
the position in no-action letters that a person deemed to be an
"underwriter" solely because he is an affiliate or a
person in a control relationship with the issuer may, pursuant to
Rule 144 under the Securities Act, resell securities issued under
a plan of reorganization without registration, subject to the
availability to the public of current information regarding the
issuer and to certain volume limitations and certain other
conditions (but not the holding period requirement of Rule
144(d)). "Underwriters" may also be able to sell their securities
without registration pursuant to Rule 144A under the Securities
Act, which provides an exemption from the registration
requirements for resales to "qualified institutional buyers."
Rule 144A under the Securities Act generally defines
"qualified institutional buyers" as institutional buyers who own
and invest, on a discretionary basis, at least $100,000,000 in
the aggregate, in the securities of unaffiliated issuers. A
minimum net worth requirement is also imposed for banks and
savings and loan institutions.
As to the exemption for "ordinary trading transactions," the
Bankruptcy Code
does not define "ordinary trading transactions," and the SEC has
not given definitive guidance with respect to the proper
construction of that term.
However, in a no-action letter, the staff of the SEC has
concurred in the view that a transaction will be an "ordinary
trading transaction" if it is carried
out on an exchange or in the over-the-counter market at a time
when the issuer
of the traded securities is a reporting company under the
Securities Exchange
Act of 1934, as amended (the "Exchange Act") and does not involve
any of the following factors:
(i) (x) concerted action by two or more recipients of
securities issued under
a plan of reorganization in connection with the sales of those
securities, or
(y) concerted action by distributors on behalf of one or more
such recipients in connection with sales;
(ii) the preparation or use of informational documents concerning the offering of the securities to assist in the resale of the securities, other than the disclosure statement approved in connection with the plan (and any supplement thereto) and documents filed with the SEC by the debtors or the reorganized company pursuant to the Exchange Act; or
(iii) special compensation to brokers or dealers in connection with the sale of the securities designed as a special incentive to resell the securities, other than compensation that would be paid pursuant to arm's-length negotiations between a seller and a broker or dealer, each acting unilaterally, that is not greater than the compensation that would be paid for routine similar-sized sale of similar securities of a similar issuer.
Although JWP's Old Common Stock is registered under the
Exchange Act and JWP is, therefore, currently subject to the
periodic reporting requirements of the
Exchange Act, JWP has not filed all of the periodic reports
required to be filed by it under the Exchange Act during the
preceding 12 months and its
financial statements for its three most recent fiscal years are
unaudited.
Accordingly, Rule 144 and Rule 144A may not be currently
available and may not
be available for resales of the New Securities unless and until
JWP obtains
audited financial statements and becomes current in its filings
of periodic
reports thereunder or JWP otherwise makes publicly available
certain financial
and other information specified in Rule 144.
Under the Plan, Reorganized JWP will be obligated to use its
best efforts to,
among other things, file the Shelf Registration under the
Securities Act covering all of the New Securities and cause it to
be declared effective and
remain effective for a two-year period. See "Summary of the
Plan-Implementation
of the Plan-Listing of New Securities and Registration Rights".
However, JWP
believes that Reorganized JWP will be unable to file the Shelf
Registration
unless and until it obtains audited financial statements for its
three most
recent fiscal years. Accordingly, there can be no assurance as to
whether or
when holders of New Securities who are deemed to be
"underwriters"
of JWP may
be able to sell their securities pursuant to the Shelf
Registration. To the
extent that Rule 144 and Rule 144A and the Shelf Registration are
unavailable,
holders who are deemed to be "underwriters" of JWP may, under
certain circumstances, be able to sell their securities in
private transactions
pursuant to the so-called Section 4(11/2) exemption from the
registration requirements of the Securities Act.
Whether or not any particular person would be deemed to be an
"underwriter" with respect to any New Security to be issued
pursuant to the Plan would depend upon various facts and
circumstances applicable to that person.
Accordingly, JWP expresses no view as to whether any particular
person receiving distributions under the Plan would be an
"underwriter" with respect to any New Security or other security
to be issued pursuant to the Plan.
Given the complex and subjective nature of the question whether a particular holder may be an underwriter, JWP makes no representation concerning the right of any person to trade in the New Securities. JWP recommends that potential recipients of a large amount of New Securities consult their own counsel concerning whether they may freely trade such New Securities without compliance with the Securities Act.
XIV. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of (1) certain material
federal income
tax consequences of the exchanges contemplated under the Plan to
holders of Old
Credit Agreement Debt, Old Notes, Class 4B and 4C Claims, and
Class 6 Claims (collectively, the "Old Debt"), and holders of
claims in Class 7, Class 8,
Class 9, Class 10 and Class 11, (2) certain material federal
income tax consequences of the ownership and disposition of the
Series A 7% Senior Secured
Notes (the "Series A Notes"), the Series B 7% Senior Secured
Notes (the "Series
B Notes"), the 11% Series C Notes (the "Series C Notes"), the 12%
SellCo Subordinated Contingent Payment Notes (the "SellCo
Notes")(collectively, the
"New Debt Securities"), New Series X Warrants, New Series Y
Warrants, New Series Z Warrants and the New Common Stock, and (3)
certain material federal income tax consequences of the Plan to
Reorganized JWP.
This discussion is based on the provisions of the Internal
Revenue Code of
1986, as amended (the "Code"), final, temporary and proposed
Treasury regulations thereunder ("Treasury Regulations"), and
administrative and judicial interpretations thereof, all as in
effect as of the date
hereof and all of which are subject to change (possibly on a
retroactive basis). No ruling
from the Internal Revenue Service (the "Service") has been or
will be sought on
any of the issues discussed below, and there can be no assurance
that the Service will not take a contrary view as to the federal
income tax consequences
discussed below. There is substantial uncertainty as to many of
the federal
income tax consequences discussed below. Uncertainty is created,
in part, by recent changes to the Code, certain provisions of
which call for the
promulgation of Treasury Regulations that have not yet been
promulgated or have not yet become final.
This discussion provides general information only and does not
address all of the federal income tax consequences that may be
applicable to any
particular holder subject to special treatment under United
States Federal income tax law
or to any particular holder in light of such holder's particular
facts and circumstances. Certain holders, including
broker-dealers, tax-exempt entities,
banks, insurance companies, foreign persons, and persons to whom
property was or is transferred in connection with the performance
of services, may be
subject to special and/or different rules not discussed below.
This summary does not discuss any aspect of state, local or
foreign taxation.
This discussion also assumes that the holders compute income
under the accrual
method of accounting and that they hold the Old Debt, and will
hold the New Debt Securities and the New Common Stock, as capital
assets within the meaning of Code Section 1221.
This discussion also assumes that the Old Debt and the New Debt
Securities constitute debt rather than equity. Whether an
interest in a corporation is to
be treated as stock or debt is primarily a question of fact. Some
of the primary factors considered in answering this question
include:
(1) whether there is a written unconditional promise to pay, on
demand or on a specified
date, a fixed amount in money in return for an adequate
consideration and to
pay a fixed rate of interest, (2) whether there is subordination
to, or preference over, other debt and (3) the ratio of debt to
equity. This issue is
of concern in the case of the SellCo Notes because interest and
principal on
the SellCo Notes will not be paid in the event that insufficient
funds are
available after the sale of substantially all of the assets of
SellCo and its direct and indirect subsidiaries.
THE FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN AND OF THE
OWNERSHIP AND DISPOSITION OF THE NEW DEBT SECURITIES AND THE NEW
COMMON STOCK ARE COMPLEX.
ALL HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF THE MATTERS DISCUSSED
HEREIN, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE,
LOCAL AND FOREIGN TAX LAWS.
Federal Income Tax Consequences of the Plan to Holders of Old
Debt
Certain Assumptions
The federal income tax consequences of the exchange of Old
Notes, Old Credit Agreement Debt and Class 4B and 4C Claims for
New Debt Securities and New
Common Stock depend in part on whether each such exchange would
constitute a "recapitalization" under the Code. The determination
of whether each exchange would constitute a recapitalization
depends, in part, upon whether
the Old Notes, Bank Debt, Class 4B and 4C Claims, and New Debt
Securities are
"securities" for federal income tax purposes.
The term "security" is not defined in the Code or the
regulations issued
thereunder, and has not been clearly defined by court decisions.
In general, a
debt instrument constitutes a "security" if it represents a
participating,
continuing interest in the issuer, rather than merely the right
to a cash payment. Thus, the term of the debt instrument is
usually regarded as a
significant factor in determining whether it is a security. The
Service has ruled that a debt instrument with a maturity of ten
years or more is treated as
a security. However, under the case law, debt instruments with
maturities ranging between five and ten years are often held to
be securities. For
purposes of this discussion, it is assumed that the Old Notes and
Series C Notes constitute "securities" within the meaning of the
provisions of the Code
governing reorganizations, but that the Old Credit Agreement
Debt, Class 4B and
4C Claims, Series A Notes and Series B Notes do not constitute
"securities."
(a) Exchange of Old Notes. The exchange of the Old Notes for New Debt Securities and New Common Stock should be treated as a recapitalization within the meaning of Code Section 368(a)(1)(E). If the exchange is treated in that manner, the federal income tax consequences to the holders of the Old Notes would be as follows:
(1) Subject to the discussion below as to accrued but unpaid interest, a holder would not recognize loss on the exchange, but would recognize gain to the extent of the lesser of the amount of gain realized from the exchange or the sum of the aggregate issue price, determined as discussed below, of the Series A Notes, Series B Notes and SellCo Notes received (the "Boot Notes"). The amount of gain realized, if any, would be equal to the excess of (1) the sum of the aggregate issue price of the New Debt Securities received and the fair market value of the New Common Stock received, over (2) such holder's adjusted tax basis in the Old Notes.
(2) Subject to the discussion below as to accrued market discount, any such gain recognized on the exchange would be capital gain, and such capital gain would be long-term capital gain if such holder held the Old Notes for more than one year as of the Effective Date. Each holder should discuss with its tax advisor the possible application of the installment sale rules of the Code to such gain.
(3) Except for the New Common Stock treated as received in exchange for accrued but unpaid interest as discussed below, a holder should have an aggregate tax basis in the New Debt Securities and New Common Stock equal to such holder's adjusted tax basis in the Old Notes, reduced by the aggregate amount of the issue price of the Boot Notes received and increased by any gain recognized on the exchange. The Boot Notes should have a tax basis equal to their issue price.
(4) Except for the New Common Stock treated as received in exchange for accrued but unpaid interest as discussed below, the holding period of the New Debt Securities and New Common Stock should include the holding period of the Old Notes. The holding period for the Boot Notes should commence on the day immediately following the Effective Date.
(b) Exchange of Old Credit Agreement Debt and Class 4 Claims. The exchange by the holders of the Old Credit Agreement Debt and the Class 4B and 4C Claims for their respective shares of the New Debt Securities and New Common Stock should be treated as a taxable exchange under Code Section 1001. If the exchange were treated in that manner, then the federal income tax consequences to the holders of such claims would be as follows:
(1) Subject to the discussion below as to accrued but unpaid interest, a holder would recognize gain or loss on the exchange in an amount equal to the difference between (i) the sum of the fair market value of the New Common Stock received as of the Effective Date and the aggregate issue price of the New Debt Securities received, and (ii) such holder's adjusted tax basis in its Old Credit Agreement Debt or Class 4B and 4C Claims, as the case may be.
(2) Subject to the discussion below as to accrued market discount, any such gain or loss should be capital gain or loss, and such capital gain or loss should be long-term capital gain or loss if such holder held the Old Credit Agreement Debt or the Class 4B and 4C Claims for more than one year as of the Effective Date. Each holder should discuss with its tax advisor the possible application of the installment sale rules of the Code to any such gain.
(3) A holder's tax basis in the New Common Stock would be equal to the fair market value of the New Common Stock as of the Effective Date. The holder's tax basis in the New Debt Securities should be equal to the issue price of such New Debt Securities.
(4) The holding period of the New Common Stock and New Debt Securities would begin on the day immediately following the Effective Date.
(c) Exchange of Class 6 Claims. The exchange by the holders of the Claims in Classes 6, 7, 8, 9, 10 and 11 for New Warrants and/or cash should be treated as a taxable exchange under Code Section 1001. If the exchange were treated in that manner, then the federal income tax consequences to the holders of such claims would be as follows:
(1) Subject to the discussion below as to accrued but unpaid interest, a holder would recognize gain or loss on the exchange in an amount equal to the difference between (i) the amount of cash and fair market value of the New Warrants received as of the Effective Date, and (ii) such holder's adjusted tax basis, if any, in its claim, Old Preferred Stock, Old Common Stock or New Warrants of Participation, as the case may be.
(2) Subject to the discussion below as to accrued market discount, any such gain or loss should be capital gain or loss, and such capital gain or loss should be long-term capital gain or loss if such holder held its claim, Old Preferred Stock, Old Common Stock or New Warrants of Participation, as the case may be, for more than one year as of the Effective Date. The character of any gain (capital versus ordinary and long-term versus short-term) recognized by the holder of a Class Action claim should be determined by reference to the transaction which gave rise to such claim. Accordingly, holders of such claims are urged to consult with their own tax advisors.
(3) A holder's tax basis in the New Warrants would be equal to the fair market value of the New Warrants as of the Effective Date.
(4) The holding period of the New Warrants would begin on the day immediately following the Effective Date.
(5) A holder of New Warrants should not recognize gain or loss upon the exercise of the New Warrants. If a holder exercises a New Warrant, the basis in the New Common Stock acquired would equal the sum of the amount paid for the New Common Stock and the tax basis of the New Warrants exercised. The holding period for such New Common Stock would commence on the date the New Warrants are exercised. If a holder does not exercise a New Warrant, but allows it to lapse, the holder would recognize a loss (which should be capital loss) in an amount equal to the holder's tax basis in the New Warrant. Such loss would be long term capital loss if the New Warrants have been held for more than one year, and otherwise would be short term capital loss.
(d) Accrued But Unpaid Interest. The Plan provides, and JWP intends to take the position for federal income tax purposes, that the New Debt Securities are being issued solely in exchange for an identical principal amount of Old Debt. The New Common Stock will be treated as having been issued in exchange for the remaining principal amount of the Old Debt and any accrued but unpaid interest on the Old Debt, and allocated among such remaining principal and interest based upon the relative amounts of each. The Service, however, could challenge such allocations and contend that some other allocation is required. All holders of the Old Debt should consult their own tax advisors regarding the allocation of consideration to accrued interest and make their own independent determination whether any portion of the consideration received should be treated as received in exchange for accrued but unpaid interest.
A holder that has previously included in income accrued but
unpaid interest
during the period that the holder held the Old Debt should
recognize an
ordinary loss as a result of the exchange if and to the extent
the amount of
such accrued but unpaid interest previously included in income
exceeds the fair
market value of the New Common Stock and New Warrants deemed
received in
payment of the accrued but unpaid interest. A holder should
recognize interest
income as a result of the exchange if and to the extent the fair
market value
of the New Common Stock and New Warrants deemed received in
payment of the
accrued but unpaid interest exceeds the amount the holder had
included in
income as accrued but unpaid interest during the period that the
holder held such Old Debt.
A holder's tax basis in the New Common Stock and New Warrants treated as received in exchange for accrued but unpaid interest, if any, will be equal to the fair market value of such New Common Stock and New Warrants as of the Effective Date. The holding period for such New Common Stock and New Warrants will begin on the day immediately following the Effective Date.
(e) Accrued Market Discount. A holder that acquired the Old Debt subsequent to its original issuance with more than a "de minimis" amount of market discount (as defined below) would be subject to the market discount rules of Code Sections 1276 through 1278. Under those rules, assuming that no election to include market discount in income on a current basis has been made by the holder with respect to any market discount instrument, any gain recognized on the exchange of the Old Debt would be characterized as ordinary income to the extent of the accrued market discount as of the Effective Date. In the case of the exchange of the Old Notes, any market discount remaining thereon which has not been recognized as ordinary income as described in the previous sentence would be carried over and be treated as accrued market discount on the Series C Notes and New Common Stock received in exchange therefor. Because Treasury Regulations with respect to the market discount rules have not yet been issued, all holders of Old Debt should consult their own tax advisors concerning developments in this area.
Federal Income Tax Consequences of Ownership and Disposition of New Debt Securities and New Common Stock
Treatment of New Debt Securities
The following discussion of certain of the anticipated federal
income tax
consequences of the ownership and disposition of the New Debt
Securities is
based in part on Treasury Regulations relating to the original
issue discount
provisions of the Code (the "Regulations"). The Regulations were
released in
final form on January 27, 1994, and will become effective on
April 4, 1994. The
Regulations are ambiguous and uncertain in many respects, and
there is little
authority interpreting the Regulations. Also, as discussed below,
the treatment of the SellCo Notes is subject to more uncertainty
because of the issuance and
withdrawal of certain proposed Treasury Regulations. Accordingly,
the ultimate federal income tax treatment of the New Debt
Securities may
differ from that
described below and holders are urged to consult their own tax
advisors concerning these rules.
(a) Original Issue Discount. The New Debt Securities will be
issued with
original issue discount ("OID") within the meaning of Code
Section 1273(a). As
a result, a holder of the New Debt Securities generally must
include OID in
gross income for federal income tax purposes as it accrues, under
a method that
takes into account the compounding of interest on a constant
yield
to maturity
basis. Any amount included in income as OID will increase a
holder's tax basis
in the New Debt Security. Generally, each payment under a New
Debt Security is
treated first as a payment of OID to the extent of the OID that
has accrued as
of the date of payment and has not been allocated to prior
payments, and second
as a payment of principal. However, a pro rata prepayment (such
as any
mandatory prepayment on the New Debt Securities) is treated as a
payment in
retirement of a portion of a debt instrument, which may result in
gain or loss
to the holder. Generally, the gain or loss is calculated by
assuming that the
original debt instrument consists of two instruments, one that is
retired and
one that remains outstanding. The adjusted issue price, adjusted
basis, and
accrued but unpaid OID of the original debt instrument,
determined immediately
before the pro rata prepayment, are allocated between these two
instruments based on the portion of the instrument that is
treated as retired by the pro rata prepayment.
The amount of OID on a New Debt Security will be equal to the
excess of its
"stated redemption price" at maturity over its "issue price." In
general, the "stated redemption price at maturity" of a New Debt
Security will be equal to
all amounts payable under the New Debt Security, other than the
amounts payable
as qualified stated interest. "Qualified stated interest" is
stated interest
that is unconditionally payable in cash or in property (other
than debt
instruments of the issuer, e.g., pay-in-kind interest) at least
annually and,
except for certain variable rate debt instruments, at a single
fixed rate. It
is not anticipated that the New Debt Securities will pay any
qualified stated
interest, and therefore each New Debt Security will be issued
with OID.
The determination of the "issue price" of a New Debt Security
depends, in
part, on whether the New Debt Securities or the Old Debt are
publicly traded.
In general, either the New Debt Securities or the Old Debt would
be treated as publicly traded if, at any time during the 60-day
period ending 30 days after
the issue date of the New Debt Securities (the "60-Day Period"),
the New Debt
Securities or the Old Debt are traded on an established market.
Subject to
certain exceptions, the New Debt Securities or Old Debt would be
treated as
traded on an established market if (1) either is listed on
certain securities
exchanges, interdealer quotation systems, or designated foreign
exchanges or
boards of trade, (2) either is traded either on certain boards of
trade that
are designated as a contract market or on an interbank market,
(3) either appears on a system of general circulation that
provides a reasonable basis to
determine fair market value by disseminating either recent price
quotations of
identified brokers, dealers or traders, or actual prices of
recent sales
transactions; or (4) price quotations are readily available from
brokers, dealers or traders.
The issue price of a debt instrument that is traded on an
established market
or that is issued for another debt instrument so traded would be
the fair
market value of such debt instrument or such other debt
instrument,
as the case
may be, on the issue date as determined by such trading. The
issue price of a
debt instrument that is neither so traded nor issued for another
debt instrument so traded would be its stated principal amount,
if the stated
interest rate on the debt instrument exceeds the "applicable
federal rate"
published monthly by the Service. The applicable federal rate is
reported for
three categories of debt instruments: short term (3 years or
less), mid-term
(over 3 years but less than 9 years), and long-term (over 9
years). The
applicable federal rate for each category is determined by the
Service based
upon the average market yield (during any one month period ending
in the calendar month in which the determination is made) on
outstanding marketable
obligations of the United States in such categories. In the case
of a debt instrument issued in connection with a sale or
exchange, the applicable federal
rate is the lowest such rate in effect for any month in the three
calendar month period ending with the calendar month in which
there is a binding
contract in writing for the sale or exchange (presumably, the
Confirmation Date
of the Plan). The stated interest rate of each New Debt Security
would exceed
the applicable federal rate in effect for June 1993.
It is anticipated that neither the Old Debt nor the New Debt
Securities will
be listed or traded on a securities exchange, interdealer
quotation system,
board of trade, or interbank market within the relevant 60-Day
Period. To the
best of its knowledge, JWP does not believe that within the
relevant 60-Day
Period (i) the Old Debt or the New Debt Securities will appear on
a system of
general circulation that disseminates recent price quotations or
actual prices
of recent sales, or (ii) price quotations from traders, dealers
and brokers will be readily available for the Old Debt or New
Debt Securities. Accordingly,
JWP intends to take the position that the Old Debt was not, and
the New Debt Securities will not, be traded on an established
market for purposes of the
Regulations. Thus if the interest rates on the New Debt
Securities continue to
exceed the applicable federal rates as of their issue date, then
the issue price of such notes would be their respective stated
principal amounts.
However, holders should note that the fair market value of the
Old Debt or the
New Debt Securities as of the Effective Date may be less than the
stated principal amount of the New Debt Securities. Thus, if
either the Old Debt or
the New Debt Securities are ultimately determined to be traded on
an established market, (i) the New Debt Securities would have a
larger amount of
OID, and (ii) the New Debt Securities (other than the Series A
Notes and Series
B Notes) could become subject to the applicable high yield
discount obligation
provisions of Code Section 163(e)(5) resulting in adverse tax
consequences to
JWP with respect to, among other things, the timing and amount of
interest
deductions. If the New Debt Securities already are subject to
those provisions, the adverse tax consequences of those
provisions would be worsened.
To the extent that the issue price of a New Debt Security is
equal to its
stated principal amount, the OID on the New Debt Security would
be reduced, but
not eliminated. Because no "qualified stated interest" will be
payable on the
New Debt Securities, in each case the stated redemption price of
a New Debt
Security will exceed its issue price, and therefore such New Debt
Security will
be issued with OID. Thus, a holder of a New Debt Security will be
required to
include amounts in gross income for federal income tax purposes
in advance of the receipt of cash payments in respect of such
income. The amount
of OID to be included in income in any tax period would be
determined using a constant yield to maturity
method, under which a holder would have to include in income
increasingly greater amounts of OID in successive accrual
periods.
The amount of OID allocable to any accrual period is an amount
equal to the excess, if any, of (a) the product of the New Debt
Security's "adjusted issue
price" at the beginning of such accrual period and its yield to
maturity (determined on the basis of compounding at the close of
each accrual period and
properly adjusted for the length of the accrual period) over (b)
the sum of any
qualified stated interest payments on the New Debt Security
allocable to the
accrual period. The "adjusted issue price" of the Note at the
start of any
accrual period is equal to its issue price increased by the
accrued OID for
each prior accrual period and reduced by any prior payments with
respect to
such New Debt Security that were not qualified stated interest
payments.
Under the Regulations, the issuance of additional New Debt
Securities (the
"PIK Notes") in lieu of cash interest payments does not
constitute
the payment
of interest for purposes of calculating OID. Instead, all cash
payments with
respect to each New Debt Security and any cash payments with
respect to any
related PIK Note should be treated as payments in respect of a
single debt
instrument for purposes of applying the OID rules. The stated
redemption price
at maturity of a New Debt Security should be equal to the sum of
all cash
payments due pursuant to the terms of such Note and any related
PIK Note. When
a PIK Note is issued in lieu of payment of cash interest on a New
Debt Security, the adjusted issue price of the New Debt Security
should be allocated
between the New Debt Security and the PIK Note in proportion to
their
respective stated principal amounts, and these allocated amounts
thereafter
would be used in accruing OID on the New Debt Security and the
PIK Note.
Similarly, the tax basis of a New Debt Security should be
allocated between the
New Debt Security and the PIK Note in proportion to their
respective stated principal amounts.
If a holder's tax basis in a New Debt Security immediately
after the holder's
acquisition of the New Debt Security exceeds the sum of all
amounts payable
thereafter on the New Debt Security other than payments of
qualified stated
interest, then such holder would generally be treated as having
acquired such
New Debt Security at a "premium" under Code Section 1272(c)(1).
In such event,
such holder would not be required to include original issue
discount in income
with respect to such New Debt Security.
If a holder does not acquire a New Debt Security at a premium
as described above, but the holder's tax basis in the New Debt
Security immediately after the holder's acquisition of the New
Debt Security exceeds the adjusted issue
price of the New Debt Security as of the date of the holder's
acquisition, then such holder would be treated as having acquired
such New Debt Security at an
"acquisition premium" equal to such excess under Code Section
1272(a)(7). For this purpose, the adjusted issue price of a New
Debt Security is its issue
price, increased by the amount of original issue discount on the
New Debt Security previously includible in the gross income of
any holder without regard
to whether the acquisition premium exception applied to any such
holder, and reduced by the aggregate amount of all payments
previously made on
the New Debt Security other than qualified stated interest
payments, as discussed above. In
such event, such holder would generally be permitted to reduce
the amount of original issue discount includible in income by a
portion of the acquisition
premium. That portion is equal to a constant percentage (equal to
the amount of such acquisition premium divided by the excess of
the sum of all amounts
payable on the debt instrument after the acquisition date, other
than payments of qualified stated interest, over the New Debt
Security's adjusted issue
price) of the original issue discount otherwise allocable to each
day that the holder holds such New Debt Security. Rather than
apply this acquisition premium
fraction, a holder of a New Debt Security purchased at an
acquisition premium
may elect to compute OID accruals by treating the acquisition as
a purchase at original issuance and applying the mechanics of the
constant yield method.
Although Code Section 1272(a)(7) is applicable on its face only
to a holder who
purchases a debt instrument after its original issue, the
Regulations indicate
that these rules also apply to an original purchaser of a debt
instrument.
Accordingly, an initial holder of a New Debt Security should be
entitled to treat the excess, if any, of its tax basis in the New
Debt Security (determined as discussed above) over the issue
price of the New Debt Security as
acquisition premium that will reduce the amount of OID otherwise
includible in income.
Notwithstanding the foregoing two paragraphs, if a holder's tax
basis in a
New Debt Security is determined in whole or in part by reference
to the adjusted tax basis in such New Debt Security in the hands
of the person from
which the holder acquired the New Debt Security, then such holder
can be treated as having acquired the New Debt Security at a
premium or at an
acquisition premium only if such person acquired the New Debt
Security at a premium or at an acquisition premium, as the case
may be.
It should be noted that, for purposes of applying the OID rules
described
above, the SellCo Notes should be treated as originally-issued
with OID to JWP,
and not to the holders of Old Debt. Each such holder should be
treated as
having acquired SellCo Notes from JWP in exchange for Old Debt
(and interest
thereon) in an amount equal to the issue price of such SellCo
Notes.
(b) Market Discount. Under the market discount provisions of Code Sections 1276 through 1278, a holder (other than a holder that makes an election to include market discount in income on a current basis, as described below) that acquires a debt instrument with market discount that is not "de minimis" would be required to treat any gain realized on a sale or certain other dispositions of, or partial principal payments on, such debt instrument as ordinary income to the extent of the market discount that accrues during the period the holder holds such debt instrument. Further, a disposition of such a debt instrument by gift (and in certain other circumstances) could result in the recognition of market discount income, computed as if such debt instrument had been sold for its fair market value. A holder of a debt instrument with market discount also would be required to defer the deduction of a portion of the interest on any indebtedness incurred or continued to purchase or carry such debt instrument until such debt instrument is sold or otherwise disposed of, or until all such market discount has been otherwise included as ordinary income. In the case of an exchange of an old debt instrument for a new debt instrument, any accrued market discount will carry over to the new debt instrument. In the case of an exchange of an old debt instrument for stock in a transaction in which the gain realized is not recognized for federal income tax purposes, ordinary income would be recognized on the disposition of such stock to the extent of the accrued market discount on the old debt instrument.
Generally, the term "market discount" means the excess, if any,
of the stated redemption price at maturity of a debt instrument
over the holder's tax basis
in the debt instrument immediately after its acquisition. In the
case of a debt
instrument originally issued with more than a "de minimis" amount
of OID, "market discount" is generally the amount by which the
holder's tax basis in
such debt instrument (immediately after its acquisition) is less
than the
adjusted issue price of such debt instrument. Under a "de
minimis" exception,
if the market discount is less than one-fourth of 1% of the
stated redemption
price at maturity multiplied by the number of complete years from
the holder's
acquisition date to the maturity date of the debt instrument,
market discount is deemed to be zero.
A holder of a New Debt Security with market discount may elect
to include market discount in income as the market discount
accrues. Once made, the
current inclusion election will apply to all market discount
obligations acquired in the year of the election and in all
subsequent years, and would be
revocable only with the consent of the Service. If a holder of a
New Debt Security elects to include market discount in income as
it accrues, the
foregoing rules with respect to the recognition of ordinary
income on a sale or
certain other dispositions of, or partial principal payments on,
the New Debt
Security and the deferral of interest deductions on indebtedness
related to the
New Debt Security would not apply.
The New Debt Securities may be redeemed, in whole or in part,
before maturity. In general, if the principal of a debt
instrument is paid
in more than one installment, the holder is required to include
accrued market discount
(as determined by Treasury Regulations to be provided) in income
with respect
to each principal payment up to the amount of the payment (which
could be in
advance of the time otherwise required). This provision could
apply to a holder of a New Debt Security with market discount
that will be redeemed in part.
No Treasury Regulations with respect to the market discount
rules have been issued or proposed, and, therefore, all holders
should consult their own tax
advisors concerning developments in this area.
(c) Amortizable Bond Premium. If a holder's tax basis in a New
Debt Security
exceeds the amount payable at maturity of such New Debt Security,
then such excess may be deductible by the holder as "amortizable
bond premium" under Code
Section 171 on a constant yield to maturity basis over the period
from the holder's acquisition date to the maturity date of the
New Debt Security. Under
the Regulations, it appears the "amount payable at maturity"
equals the sum of
all amounts payable on the New Debt Security after the purchase
date other than payments of qualified stated interest.
The deduction would be treated as a reduction of interest
income. Such deduction would be available only if the holder
makes (or has made) a timely
election under Code Section 171. The election, if made, would
apply to all debt
instruments held or subsequently acquired by the electing holder
and could not
be revoked without permission from the Service.
(d) Disposition. On a sale, redemption or other taxable
disposition of a New
Debt Security, a holder generally would recognize gain or loss in
an amount
equal to the difference between (i) the amount realized on the
disposition and
(ii) the holder's adjusted tax basis in such New Debt Security.
Any amount
received that is attributable to accrued but unpaid interest that
has not
previously been included in the holder's income would be treated
as interest income and would not be treated as an amount realized
upon the sale, redemption
or other taxable disposition of the New Debt Security. The
holder's adjusted
tax basis in a New Debt Security generally would equal the
holder's original
tax basis in the New Debt Security, increased by any OID and
market discount
previously included in the holder's gross income with respect to
such New Debt
Security pursuant to the rules described above, and reduced by
any amortizable
bond premium deducted as a reduction of interest income as
described above, and
further reduced (but not below zero) by all payments on such New
Debt Security
(other than payments of qualified stated interest) received by
the holder.
Subject to the market discount rules described above, any such
gain or loss
would generally be capital gain or loss, and would be long-term
capital gain or
loss if the holder's holding period for such New Debt Security is
more than one year at the time of the disposition.
(e) Backup Withholding. All payments made under the Plan are subject to applicable withholding (including employment tax withholding). Under the Code, interest, dividends and other "reportable payments" may, under certain circumstances, be subject to "backup withholding" at a 31% rate. Backup withholding generally applies if the holder (a) fails to furnish his social security number or other taxpayer identification number ("TIN"), (b) furnishes an incorrect TIN, (c) fails properly to report interest or dividends or (d) under certain circumstances, fails to provide a certified statement, signed under penalty or perjury, that the TIN provided is his correct number and that he is not subject to backup withholding. Backup withholding is not an additional tax but merely an advance payment, which may be refunded to the extent it results in an overpayment of tax. Certain persons are exempt from backup withholding, including corporations and financial institutions.
(f) Information Reporting. Pursuant to the provisions of Code
Section 6049,
information reporting will be made to the Service, and to holders
of record
that are not exempted from the reporting requirements, annually
or as otherwise
required with respect to interest paid and original issue
discount accrued on the New Debt Securities.
Treatment of New Common Stock
Dividends, if any, paid on the New Common Stock will be taxed
as ordinary
income to the extent paid from current or accumulated earnings
and profits. A
dividends received deduction (generally at a 70% rate) may be
available with respect to such dividends to holders that are
corporations, subject
to limitations such as those relating to holding periods or
indebtedness used to
acquire or carry such stock. To the extent that a distribution
exceeds current
and accumulated earnings and profits, it is treated as a
nontaxable recovery of
the holder's adjusted tax basis to the extent thereof, and any
remaining amount
is treated as gain from a taxable disposition. Subject to the
discussion above
as to accrued market discount, a holder will generally recognize
capital gain
or loss upon a sale or other taxable disposition of the New
Common Stock. The
rules discussed above regarding backup withholding and
information
reporting on the
New Debt Securities will also apply to the New Common Stock.
Treatment of the SellCo Notes
There is some degree of uncertainty as to whether the SellCo
Notes would be
treated as debt or as equity of SellCo for federal income tax
purposes.
Moreover, assuming the SellCo Notes are treated as debt, there is
some doubt as
to whether the debt would be treated as a "contingent debt
instrument" for OID
purposes. Because of the paucity of authority on whether a debt
instrument is
treated as "contingent" for OID purposes, and the uncertainty of
whether the
SellCo Notes are properly characterized as debt or as equity for
federal income
tax purposes, each holder should consult with its own tax
advisors regarding
the appropriate tax characterization of the SellCo Notes. JWP, on
behalf of SellCo (its wholly-owned subsidiary), intends to take
the position (and the
discussion below assumes) that the SellCo Notes will be respected
as debt for federal income tax purposes, however, no assurance
can be made that
the Service will concur with such treatment.
(a) Exchange of Old Debt. Irrespective of whether the SellCo Notes are treated as debt or as equity for federal income tax purposes and subject to the discussion above as to accrued but unpaid interest, any SellCo Notes received by a holder would be treated as Boot Notes. If the SellCo Notes are debt, the amount realized with respect to them would be their issue price for OID purposes, otherwise it would be their fair market value.
(b) Original Issue Discount. The following discussion concerning contingent debt instruments is based on proposed Treasury Regulations originally issued in 1986 (the "1986 Regulations"). Other proposed regulations relating to contingent debt instruments were issued in 1993, but were subsequently withdrawn. Holders are urged to consult their own tax advisors as to the possibility of whether the proposed, but withdrawn regulations might be reissued with retroactive effect.
Assuming the SellCo Notes are treated as debt for federal
income tax
purposes, the SellCo Notes would be issued with OID. However, it
is not clear
whether the SellCo Notes would be treated as "contingent debt
instruments" within the meaning of the 1986 Regulations. If the
SellCo Notes are
not treated as "contingent," then the discussion above under the
caption, "Federal Income
Tax Consequences Of Ownership and Disposition Of New Debt
Securities and New
Common Stock; Treatment of New Debt Securities" would apply to
the SellCo
Notes. However, since principal and interest on the SellCo Notes
are payable
only out of the net proceeds of the sale of certain assets of
SellCo, under the
1986 Regulations, the SellCo Notes may be treated as "contingent
debt instruments" of SellCo.
Assuming the SellCo Notes are so treated and assuming that
neither they nor
the Old Debt are traded on an established market, as discussed
above, the 1986
Regulations would require that each payment on the SellCo Notes
be treated as
consisting of (i) a payment of principal in an amount equal to
the present
value of the payment determined by discounting the payment by the
"applicable
federal rate" from the date that the amount of the payment
becomes fixed to the
issue date, and (ii) a payment of interest in an amount equal to
the excess of
the total amount of the payment over the amount treated as
principal.
Notwithstanding the preceding sentence, the total amount treated
as principal
may not exceed the stated maximum principal amount on the SellCo
Note. Once the
portion of the contingent payments treated as principal exceeds
the stated
maximum principal amount of the SellCo Notes, any additional
payments would be treated entirely as interest.
If either the SellCo Notes or Old Debt is deemed to be traded
on an established market, as discussed above, the 1986
Regulations provide that the
amount of interest deemed to accrue on the SellCo Notes during an
accrual period would be equal to the product of (x) the adjusted
issue price of the
note at the beginning of the accrual period, and (y) the
"applicable federal
rate" based upon the due date of the final payment under the debt
instrument.
Payments on the SellCo Note would be treated as consisting of (i)
a payment of
interest to the extent of interest deemed accrued for the current
and all prior
accrual periods and not allocated to prior payments, and (ii) a
payment of principal to the extent of
the excess of
such payment over the portion treated as interest. If at the time
of maturity
of the SellCo Notes, the outstanding principal balance (issue
price less the
sum of all prior payments treated as principal) exceeds the total
amount of the
final payment, the entire amount of the final payment would be
treated as
principal and the SellCo Notes would be treated as retired for
such amount. If,
conversely, at that time, the total amount of the final payment
exceeds the
outstanding principal balance, the SellCo Notes would be treated
as retired for an amount equal to such outstanding principal
balance, and the final payment
would be treated as interest to the extent of such excess.
In the event that the SellCo Notes are treated as equity for
federal income tax purposes, the federal income tax treatment to
holders with respect to
payments on the SellCo Notes should follow the contingent debt
rules described
above (with the exception that corporate holders may be entitled
to a dividends
received deduction (generally at a 70% rate) with respect to any
payments under
the SellCo Notes characterized as dividends). However, because
there is no
authority confirming that this would be the proper treatment,
each holder
should consult with its own tax advisors as to the federal income
tax consequences of payments on the SellCo Notes in the event
that they are
properly characterized as equity for federal income tax purposes.
Certain Federal Income Tax Consequences of the Plan to JWP
Cancellation of Indebtedness ("COD") Income. Upon
implementation of the Plan,
the amount of the JWP's aggregate outstanding indebtedness will
be substantially reduced. In general, the Code provides that a
debtor in a case
under the Bankruptcy Code must reduce its tax attributes by any
COD, i.e., the
amount by which the debt discharged exceeds any consideration
paid in exchange
therefor. Although a debtor's net operating loss carryforwards
("NOLS") are generally reduced before any other tax attributes, a
debtor may elect to first
reduce the tax basis in its depreciable property (determined as
of the first
day of the taxable year succeeding the taxable year of
discharge).
However, JWP will not incur COD and will not be required to
reduce its tax
attributes to the extent the so-called "stock-for-debt exception"
applies.
Under the stock-for-debt exception, COD generally will not be
realized with
respect to a given claim if, in exchange for such claim pursuant
to a plan confirmed by the Bankruptcy Court, the holder receives
a sufficient equity
interest in the debtor which satisfies certain rules.
Whether an exchange by a particular holder qualifies for the
stock-for-debt
exception depends, in part, upon whether (i) the New Common Stock
issued in
exchange for the holder's Old Debt (including accrued but unpaid
interest
thereon, but reduced by the aggregate issue price of New Debt
Securities issued
in partial exchange therefor) is not nominal or token within the
meaning of
Code Section 108(e)(8)(A) (the "nominal or token test"), (ii) the
ratio of the
value of the New Common Stock received by such holder to the
amount of such
holder's Old Debt exchanged for the New Common Stock is not less
than 50% of a
similar ratio computed for all holders of the Old Debt (the
"Proportionality
Test") and (iii) the New Common Stock is stock eligible for the
stock-for-debt exception.
JWP intends to take the position that the stock-for-debt
exception will apply
to the exchange of New Stock for the Old Debt (excluding the
Class 6 Claims) and the interest on such Old Debt outstanding
after the issuance of the New
Debt Securities with respect thereto. However, there can be no
assurance that the Service will agree. If a Service challenge
were successful, Reorganized JWP
could be required to significantly reduce its tax attributes,
including its
NOLs. In addition, JWP will recognize COD and corresponding
attribute reduction
in an amount equal to the sum of (i) the excess of the face
amount of the Class
6 Claims (including accrued interest) over the fair market value
of the New Warrants issued in exchange therefor.
The stock-for-debt exception discussed above was repealed,
albeit on a
delayed basis, by the Reconciliation Act of 1993 (the "1993 Act")
with respect
to stock transfers occurring after December 31, 1994. However,
under a grandfathering provision contained in the 1993 Act, since
a bankruptcy case was
filed on behalf of JWP before December 31, 1993, the
stock-for-debt exception
will continue to apply even with respect to transfers of stock
occurring after
December 31, 1994, provided that the case is not dismissed and
such transfers are made pursuant to the Plan. If, on the
other hand, the
present case is dismissed and JWP files its own bankruptcy case,
the exchange
of Old Debt for New Debt Securities and New Common Stock pursuant
to the Plan
must occur on or before December 31, 1994 in order for the
stock-for-debt exception to apply.
Limitation on Net Operating Losses. JWP estimates that, as of
December 31, 1993, it will have consolidated NOLs for federal
income tax
purposes totalling
approximately $553 million, of which approximately $23 million
will be subject
to limitation and therefore usable only by certain subsidiaries
of JWP, all of
which amounts are subject to reduction on audit. JWP believes
that the
implementation of the Plan will cause an "ownership change" as of
the Effective
Date for federal income tax purposes. As a result, to the extent
not reduced or
eliminated because of the realization of COD, as discussed above,
the use of
any remaining NOLs will be governed by Code Section 382, as
discussed below.
Generally, under Code Section 382, a corporation's annual
taxable income for
periods after an "ownership change" may be offset by NOLs
attributable to
periods prior to such an "ownership change" only to the extent of
the product
of (A) the fair market value of the corporation's stock
immediately before such
"ownership change" and (B) the long-term tax-exempt rate
prescribed by the IRS
(for June 1994, 6.01%). For this purpose, the fair market value
of stock is
generally determined without regard to capital contributions made
during the
two-year period ending on the date of the "ownership change."
If a corporation that undergoes an "ownership change" has a
"net unrealized built-in gain," its general Section 382
limitation, as described in the preceding paragraph, is
increased, subject to certain limitations,
by any "built-in gain" recognized during the five-year period
beginning with the date
of the "ownership change." If a corporation that undergoes an
"ownership change" has a "net unrealized built-in loss," subject
to certain limitations,
any "built-in loss" recognized during the five-year period
beginning with the
date of the "ownership change" is treated as a pre-change loss
and is subject
to the general Section 382 limitation described above.
Reorganized
JWP would be
treated as having a "net unrealized built-in loss" if at the time
of the ownership change it has "built-in losses" in excess of
"built-in gains." When
such "built-in gains" are recognized, they might be subject to
federal income
taxation because the availability of pre-ownership change NOLs
and recognized
"built-in losses" to offset such gains would be subject to the
limitations of Code Section 382.
However, when an "ownership change" occurs pursuant to the
implementation of
a bankruptcy plan of reorganization, the general Section 382
limitation does
not apply. Instead, one of two other "Section 382 regimes" is
available to a debtor.
(A) Section 382(1)(6) Regime. If JWP elects to utilize its NOLs
under Code Section 382(1)(6) (and recently finalized Regulations
thereunder), the
applicable limitation under Section 382 of the Code on annual use
of the NOLs would generally be the same as the general Section
382 limitation (discussed
above), except that such applicable limitation would reflect the
increase (if any) in the value of Reorganized JWP resulting from
any surrender or
cancellation of Claims in exchange for New Common Stock.
Assuming a projected aggregate value of the New Common Stock
immediately
after the exchanges on the Effective Date of approximately
$106,000,000 (i.e.,
net book value), and using the June 1994 long-term tax-exempt
rate prescribed
by the IRS of 6.01%, under Section 382(1)(6) of the Tax Code,
Reorganized JWP
could annually utilize $6,370,600 of its net operating loss
carryforwards. It
should be noted that Lazard estimates that the enterprise value
of Reorganized
JWP and its subsidiaries as of January 1, 1994 would be in a
range between $225 million and $250 million.
(B) Section 382(1)(5) Regime. Section 382(1)(5) of the Code
provides that the
general Section 382 limitation does not apply to an "ownership
change"
resulting from transactions that are pursuant to a plan of
reorganization of a
corporation in a chapter 11 case if the shareholders and
creditors of such
corporation immediately before an "ownership change" own
immediately after such
change (as a result of being shareholders or creditors
immediately before such change) at
least 50 percent
of the stock of the corporation by vote and value after the
"ownership change."
For purposes of this rule, stock transferred to a creditor shall
be taken into
account only to the extent that such stock is transferred in
satisfaction of
indebtedness and only if such indebtedness either (1) was held by
the creditor
at least 18 months before the filing of the chapter 11 case, or
(2) arose in
the ordinary course of the trade or business of the old loss
corporation and is
held by the person who at all times held the beneficial interest
in such
indebtedness. JWP believes that a claim for unpaid interest
accrued after the
filing of a chapter 11 case or interest accrued within 18 months
before the
filing of a chapter 11 case with respect to indebtedness which
was held for the
requisite period would be considered qualifying indebtedness for
these purposes, but there is no specific authority with respect
to this issue.
Pursuant to Regulations under Code Section 382(1)(5), options or
warrants to
acquire stock that are outstanding at the time of an "ownership
change"
(including options or warrants created pursuant to a plan of
reorganization in
a chapter 11 case) are generally deemed exercised upon such
"ownership change"
if such deemed exercise would cause the shareholders and
creditors
immediately
before such "ownership change" to fail to meet the 50 percent
threshold requirement of Code Section 382(1)(5).
Under recently finalized Regulations, for purposes of applying
the 50 percent
threshold requirement of Section 382(1)(5) of the Code as
described
above, a
debtor is entitled to treat a portion of its debt as always
having been owned
by the person who beneficially owned it immediately before the
ownership change
if that person is not, immediately after the ownership change,
either (1) a
5-percent shareholder or (2) an entity through which a
five-percent
shareholder
owns an indirect interest in the debtor. However, this safeharbor
is not available in certain cases that may be relevant here,
including cases where (a)
the debt is beneficially owned by a person whose participation in
formulating
the bankruptcy plan makes evident to the debtor corporation that
the person has
not owned the debt for the requisite period or (b) the debtor has
actual knowledge of a coordinated acquisition of debt by a group,
through a formal or
informal understanding among themselves, in which case the debt
(and any stock
received for it) is treated as owned by one entity.
Based upon the provisions of the Plan and JWP's understanding
of the current
status and ownership of claims, JWP currently anticipates that
the 50 percent
threshold requirement of Section 382(1)(5) of the Code as
described above could
be met. However, there can be no certainty that this threshold
requirement will
be met as of the Effective Date. In particular, JWP's ability to
meet the 50
percent threshold requirement could be adversely affected if
there are
subsequent significant shifts in the ownership of claims. In
addition, JWP's
ability to meet the 50 percent threshold requirement could be
affected by the
adverse resolution of certain technical uncertainties under
Section
382(1)(5)
of the Code as described above and possible difficulties in
proving the beneficial ownership of claims on the relevant dates.
Under Section 382(1)(5) of the Code, JWP could avoid entirely
the application
of the general Section 382 limitation to the NOLs and built-in
losses, if any,
but would, however, be required to reduce its NOLs and possibly
other tax
attributes by: (1) any deduction for interest claimed by JWP with
respect to
any indebtedness converted in New Common Stock for (a) the
three-year period
preceding the taxable year of the "ownership change" and (b) the
portion of the
year of the "ownership change" prior to the Effective Date of the
Plan, and (2)
50 percent of the excess of discharged debt over the value of New
Common Stock
issued in exchange therefor in a transaction that qualifies for
the stock-for-debt exception, discussed above. The amounts
described in (1) and (2)
above are contingent upon the value of the New Common Stock
distributed to
creditors on the Effective Date as well as other factors, which
cannot be
predicted currently with certainty. Accordingly, the precise
amount of NOL and
other tax attribute reduction that would be required under
Section 382(1)(5) of
the Code cannot currently be determined. Nevertheless, JWP
estimates that the
amount of NOLs available immediately after the Effective Date
under Code
Section 382(l)(5) would be approximately $300 million, and that,
in any event,
the amount of NOLs available under Code Section 382(l)(5) would
be materially
greater than the amount of NOLs available under Code Section
382(l)(6).
Under Section 382(1)(5)(D) of the Tax Code, if a second
"ownership change"
with respect to Reorganized JWP occurs within the two-year period
following the
Effective Date, the Section 382(1)(5) exception would not apply
with respect to the second ownership
change and any
NOLs remaining after the second ownership change would be
eliminated. Thus, if
Reorganized JWP is governed by Code Section 382(1)(5), a risk
exists that most
(if not all) of the utility of the NOLs could be lost as a result
of a second
ownership change within the two-year period following the
Effective Date. If,
on the other hand, Reorganized JWP were to elect to be governed
by Code Section
382(l)(6), a second ownership change within two years of the
Effective Date
would not necessarily result in an elimination of Reorganized
JWP's NOLs.
Instead, the general Section 382 limitations (discussed above)
would apply to
such a second ownership change.
(C) Code Section 269. Under Code Section 269, the IRS is authorized to disallow any deduction, credit or other allowance (e.g., the utilization of NOLs) if control of a corporation (i.e., 50% of the vote or value) was acquired by one or more persons principally for the purpose of evading or avoiding federal income taxes by securing the benefit of such deduction, credit or allowance to which the corporation would not otherwise be entitled. While the existence of a principal tax avoidance purpose is primarily a question of fact, JWP does not believe that Code Section 269 should apply to the change in control occurring pursuant to the Plan because such change in control was not motivated by tax considerations. Nevertheless, there can be no assurance that the IRS will not challenge the utilization of JWP's tax attributes subsequent to such change in control on the basis of Code Section 269, or that such a challenge, if asserted, would not be sustained.
Under Treasury Regulation Section 1.269-3(d), absent strong
evidence to the
contrary, an ownership change to which Code Section 382(l)(5)
(and not
382(l)(6)) applies is considered to be made for the principal
purpose of
evasion or avoidance of federal income tax, and therefore subject
to the
provisions of Code Section 269 discussed above, unless the
corporation carries
on more than an insignificant amount of an active trade or
business
during and
subsequent to the bankruptcy proceeding. The determination of
whether the
corporation carries on more than an insignificant amount of an
active trade or
business is based on all the facts and circumstances, including
the amount of
business assets that continue to be used and the number of
employees in the
work force who continue to be employed. It is anticipated that
JWP and its
subsidiaries will, throughout the bankruptcy proceedings and
after the
Effective Date, have substantial assets and a substantial number
of employees.
Accordingly, JWP believes that it will have more than an
insignificant amount
of trade or business activity, and Treasury Regulation Section
1.269-3(d) should be inapplicable.
(D) Effect of the Plan. The Plan affords JWP the flexibility to
be governed
by either Code Section 382(1)(5) or 382(1)(6). Under existing
Regulations, JWP
need not file the election to be governed by Code Section
382(1)(6)
(and not
Section 382(1)(5)) until the due date (including applicable
extensions) of its
federal income tax return for the year in which the Effective
Date occurs. JWP
will make such election if the facts and circumstances known to
it at that time
indicate that the election is in its best interests, taking into
account, among
other things, any risk that the 50 percent threshold requirement
under Code
Section 382(1)(5), discussed above, will not be met, and the
likelihood of a
second "ownership change" within two years of the Effective Date.
Applicable High Yield Discount Obligation Rules. The Series C
Notes and
SellCo Notes (the "Long Term Notes") may constitute "applicable
high yield
discount obligations". In general, an applicable high yield
discount obligation
is any debt instrument with "significant original issue
discount,"
a maturity
date more than five years from the issue date and a yield to
maturity at least
five percentage points higher than the applicable federal rate. A
Long Term
Note would have significant original issue discount if the
aggregate amount of
interest and original issue discount includible in gross income
with respect to
such note for periods before the close of an accrual period
ending
more than
five years after the issue date of the note exceeds the sum of
(a) the
aggregate amount of interest required to be paid on such note
before the close
of such accrual period and (b) the product of the issue price of
the note and
its yield to maturity. If the Series C Notes and SellCo Notes
constitute
applicable high yield discount obligations, Reorganized JWP and
SellCo will be
denied an interest deduction for a certain portion of the
original issue
discount on their respective notes and may claim an interest
deduction as to
the remainder of the original issue discount only when the cash
with respect to
such original issue discount is paid. To the extent Reorganized
JWP
and SellCo
are denied an interest deduction for a portion of the original
issue discount,
the denied
portion may be treated as a dividend and certain corporate
holders may be
entitled to a dividends received deduction. The treatment of the
Long Term
Notes as applicable high yield discount obligations will depend
upon, among
other things, applicable federal rates as of the Effective Date.
Accordingly,
holders of Long Term Notes are urged to consult their tax
advisors regarding
the treatment of the Long Term Notes as applicable high yield
discount obligations, and the tax consequences of such treatment
to the holder.
XV. CONCLUSION
JWP believes that the Plan, which was initially negotiated with
its senior
creditors holding the most substantial portion of its
pre-petition
indebtedness
and amended after further negotiations among JWP and the Official
Committees,
is fair and equitable and in the best interests of Reorganized
JWP and its
creditors and interest holders. JWP and the Official Committees
urge acceptance
of the Plan by all impaired creditors and interest holders
entitled to vote.
August 9, 1994
JWP Inc.
Debtor and Debtor-in-Possession
/s/ Frank T. MacInnis
By:
Chairman of the Board of Directors,
President and Chief Executive Officer
|
EXHIBIT 1
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ---------------------------- X
In re
:
CHAPTER 11
JWP INC., :
No. 93-B-46404 (JHG)
Debtor.
|
:
- ---------------------------- X
THIRD AMENDED
JOINT PLAN OF REORGANIZATION OF
THE DEBTOR AND SELLCO CORPORATION
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
JWP INC., as debtor in possession, and SellCo Corporation, its
wholly owned
nondebtor subsidiary, propose the following chapter 11 plan
pursuant to
subsection 1121(a) of title 11 of the United States Code:
I.
Introduction
A. Plan Defined Terms. Unless the context otherwise requires,
the terms
specified below have the following meanings (such meanings to be
equally applicable to both the singular and plural):
1. Additional Interest Amount, when used in connection with the Series A Secured Notes, the Series B Secured Notes, the Series C Notes, the SellCo Subordinated Contingent Payment Notes, the New Common Stock, the New Series X Warrants, the New Series Y Warrants, or the New Series Z Warrants, means the principal amount of such notes, the number of shares of such stock or the number of shares represented by such warrants, as the context requires, to which Belmont Capital Partners II, L.P. shall be entitled, pursuant to that certain Credit Agreement, dated as of February 14, 1994, between JWP, certain guarantors, and Belmont Capital Partners II, L.P.
2. Allowed claim, allowed equity interest, or allowed administrative expense refer to a claim, equity interest, or administrative expense, as the case may be, that is allowed or deemed allowed pursuant to sections 502 or 503 of the Bankruptcy Code.
3. Asset Sale means the sale, lease, conveyance, or other disposition of any assets (including capital stock) other than (i) the sale or disposition of inventory, motor vehicles, or equipment sold in the ordinary course of business, and (ii) the sale or disposition of equipment or motor vehicles which have become obsolete or are replaced in the ordinary course of business.
4. Bankruptcy Code means title 11 of the United States Code, as amended from time to time, as applicable to the Reorganization Case.
5. Bankruptcy Rules means the Federal Rules of Bankruptcy Procedure, as amended from time to time, as applicable to the Reorganization Case, including the Local Rules of the Court.
6. Business Day means any day except a Saturday, Sunday, or "legal holiday" as such term is defined in Bankruptcy Rule 9006(a).
7. Bylaws means the amended and restated bylaws of Reorganized JWP in the form set forth in Exhibit E to the Plan.
8. Certificate of Incorporation means the Amended and Restated Certificate of Incorporation of Reorganized JWP in the form set forth in Exhibit F to the Plan.
9. Class Action means that certain consolidated class action captioned In re JWP INC. Securities Litigation, 92 Civ. 5815 (CLB) (S.D.N.Y.).
10. Class 2 Residual Percentage means (a) the aggregate amount of allowed claims in class 2 less the aggregate principal amount of Series A Secured Notes and Series B Secured Notes to be distributed to the holders of claims in class 2, divided by (b) the aggregate amount of allowed claims in classes 2, 3, 4B, and 4C less the aggregate principal amount of Series A Secured Notes and Series B Secured Notes to be distributed under the Plan to holders of allowed claims in classes 2, 3, 4B, and 4C.
11. Class 2 Series B Percentage means (a) the aggregate amount of allowed claims in class 2 less $51,000,000, divided by (b) the aggregate amount of allowed claims in classes 2 and 3, less $51,000,000.
12. Class 3 Residual Percentage means (a) the aggregate amount of allowed claims in class 3 less the aggregate principal amount of Series B Secured Notes to be distributed to the holders of claims in class 3, divided by (b) the aggregate amount of allowed claims in classes 2, 3, 4B, and 4C less the aggregate principal amount of Series A Secured Notes and Series B Secured Notes to be distributed under the Plan to the holders of allowed claims in classes 2, 3, 4B, and 4C.
13. Class 3 Series B Percentage means (a) the aggregate amount of allowed claims in class 3, divided by (b) the aggregate amount of allowed claims in classes 2 and 3, less $51,000,000.
14. Class 4B and 4C Residual Percentage means (a) the aggregate amount of allowed claims in Classes 4B and 4C less the Class 4B and 4C Series A Amount, divided by (b) the aggregate amount of allowed claims in classes 2, 3, and 4B, less the aggregate principal amount of Series A Secured Notes and Series B Secured Notes to be distributed under the Plan to the holders of allowed claims in classes 2, 3, 4B, and 4C.
15. Class 4B and 4C Series A Amount means the amount which bears the same ratio to the aggregate amount of allowed claims in Classes 4B and 4C as (a) $51,000,000 bears to (b)(i) the aggregate amount of allowed claims in class 2 and class 3, less (ii) the aggregate principal amount of Series B Secured Notes to be distributed under the Plan to the holders of allowed claims in class 2 and class 3.
16. Collateral Intercreditor Agreement means that certain Intercreditor Agreement dated as of the Effective Date among Reorganized JWP, MES, SellCo, and each of the trustees for the indentures governing the Series A Secured Notes, the Series B Secured Notes, and the SellCo Subordinated Contingent Payment Notes, substantially in the form of Exhibit C to Exhibits A, B, and D to the Plan.
17. Court means the United States District Court having jurisdiction over the Reorganization Case and, to the extent of any reference made pursuant to section 157 of title 28 of the United States Code, the unit of such District Court pursuant to section 151 of title 28 of the United States Code.
18. Disbursing Agent means the person or entity identified as the disbursing agent in the Disbursement Agreement.
19. Disbursement Agreement means that certain Disbursement Agreement, dated as of the Effective Date, substantially in the form of Exhibit N to the Plan.
20. Disputed means, with respect to a claim or interest which has been or hereafter is listed on the schedules of liabilities filed by JWP as unliquidated, disputed, or contingent and proof of which was filed, or a proof of claim or interest filed in an amount greater than the liquidated amount for which it was scheduled, and (i) in either case, (ii) in respect of any proof of claim, or (iii) in the case of a claim for administrative expenses, any such claim or interest as to which JWP or any other party in interest has interposed a timely objection or request for estimation in accordance with the Bankruptcy Code and the Bankruptcy Rules, which objection or request for estimation has not been withdrawn or finally determined.
21. Effective Date means (a) if no stay of the order confirming the Plan is in effect, 11:00 a.m., New York time (when a specific time is contemplated), on a Business Day selected by JWP, which date is not more than 10 calendar days after the date each of the conditions set forth in Article V hereof has been satisfied or waived as set forth herein or (b) if a stay of the order confirming the Plan is in effect, on a Business Day selected by JWP that is not more than 10 calendar days after the later of (i) the date such stay is vacated or any appeal, rehearing, remand, or petition for certiorari is resolved in a manner that does not reverse or materially modify the order confirming the Plan or (ii) the date each condition set forth in Article V hereof has been satisfied or waived as set forth in such Article.
22. Generally Accepted Accounting Principles means generally accepted accounting principles in the United States of America as in effect from time to time set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board, or in such other statements by such other entity as may be in general use by significant segments of the accounting profession, which are applicable to the circumstances as of the date of determination.
23. JWP means JWP INC., a Delaware corporation, the debtor or debtor in possession, as the context requires, in the Reorganization Case.
24. JWP Supplemental SellCo Note means JWP's promissory note, as described in Article IV, Q of the Plan. The JWP Supplemental SellCo Note shall be substantially in the Form of Exhibit Q to the Plan.
25. Management Stock Option Plan means the 1994 Management Stock Plan of JWP Inc., dated as of the date hereof, substantially in the form attached as Exhibit L hereto.
26. MES means MES Corporation, a Delaware corporation and wholly owned subsidiary of Reorganized JWP.
27. Net Cash Proceeds means, when used with reference to any
Asset Sale or
series of related Asset Sales, the aggregate amount of the cash
portion of the
purchase price, and all other cash consideration (including,
without limitation, any cash payments received by way of deferred
payment of principal
pursuant to a note and any interest thereon, receivable,
contingent payment
arrangement, or otherwise, but only as and when received) in
respect of an
Asset Sale, in a net amount equal to or in excess of $250,000 in
respect of such Asset Sale or series of related Asset Sales,
after deducting,
without duplication (i) sales, transfer, and similar taxes and
reasonable out-of-pocket
expenses and fees (including reasonable legal, accounting, and
brokerage fees
and expenses) incurred (which taxes, expenses, and fees are
classified as such
in accordance with Generally Accepted Accounting Principles) in
connection with
such Asset Sale, (ii) employee severance costs incurred in
connection with the
sale of any business constituting an Asset Sale, (iii) fixed,
determined
liabilities in accordance with Generally Accepted Accounting
Principles
retained in connection with such Asset Sale including amounts
payable in
respect of any insurance matters or employee benefit matters,
(iv) reserves
established in respect of contingent liabilities in accordance
with Generally
Accepted Accounting Principles retained in connection with such
Asset Sale, and
(v) customary costs incurred in connection with the closing of a
business
constituting or arising in connection with such Asset Sale.
28. New Common Stock means all the shares of common stock of Reorganized JWP authorized pursuant to Article IV.A. of the Plan.
29. New Series X Warrants, New Series Y Warrants, and New Series Z Warrants mean the warrants to purchase New Common Stock, as described in Article II of the Plan.
30. Nondebtor Subsidiary means any of the wholly owned, direct or indirect subsidiaries of JWP, set forth on Exhibit M to the Plan.
31. Old Common Stock means the authorized common stock, par value $0.10 per share, issued by JWP.
32. Old Credit Agreement means the Amended and Restated Credit Agreement, dated as of September 11, 1992, among JWP; the banking institutions named as Lenders therein; Fleet Bank, as Agent and Issuing Bank; and Chemical Bank, Credit Suisse, and Bank of America National Trust and Savings Association, as Co-lead Managers; as the same may have been amended from time to time.
33. Old Note Agreements means the agreements listed on Schedule 2 hereto.
34. Old Notes means the notes issued by JWP in accordance with the Old Note Agreements.
35. Petition Date means December 21, 1993.
36. Plan means this chapter 11 plan of reorganization, either in its present form or as it may be altered, amended, or modified from time to time.
37. Ratable Share means a number (expressed as a percentage) equal to the proportion that an allowed claim or interest in a particular class (or group of classes, as the context requires) bears to the aggregate amount of allowed claims or interests in such class (or group) as of the date of determination.
38. Reorganization Case means the above-captioned chapter 11 case.
39. Reorganized JWP means JWP, or any successor thereto by merger, consolidation, or otherwise, on and after the Effective Date.
40. Schedules means the schedules of assets and liabilities and the statement of financial affairs filed by JWP as required by section 521 of the Bankruptcy Code and the Official Bankruptcy Forms of the Bankruptcy Rules, as amended from time to time.
41. Sea Cliff means Sea Cliff Water Company, a New York corporation and wholly owned subsidiary of Reorganized JWP.
42. SellCo means SellCo Corporation, a Delaware corporation and wholly owned subsidiary of Reorganized JWP.
43. SellCo Subordinated Contingent Payment Notes means SellCo's 12% Subordinated Contingent Payment Notes, due 2004, described in Article II of the Plan. Each SellCo Subordinated Contingent Payment Note shall be substantially in the form of Exhibit A to the indenture governing the SellCo Subordinated Contingent Payment Notes.
44. Series A Secured Notes means Reorganized JWP's 7% Senior Secured Notes, Series A, due 1997, described in Article II of the Plan. Each Series A Secured Note shall be substantially in the form of Exhibit A to the indenture governing the Series A Secured Notes.
45. Series A Substitute Collateral means any property of any kind (other than cash) received by JWP or any Nondebtor Subsidiary on or after December 1, 1993 and prior to the Effective Date and which has not been liquidated prior to the Effective Date, in connection with an Asset Sale or Asset Sales on or after December 1, 1993 and prior to the Effective Date of any of the assets of JWP or any of the assets of the Nondebtor Subsidiaries (other than the Nondebtor Subsidiaries listed on Schedule 4 hereto) or the sale of the capital stock of any of the Nondebtor Subsidiaries (other than the Nondebtor Subsidiaries listed on Schedule 4 hereto).
46. Series B Cash Collateral means all Net Cash Proceeds received by JWP or any Nondebtor Subsidiary prior to the Effective Date in connection with an Asset Sale or Asset Sales of the Nondebtor Subsidiaries listed on Schedule 4 hereto or their assets; provided, however, that the Series B Cash Collateral shall not exceed $11,357,000.
47. Series B Secured Notes means Reorganized JWP's 7% Senior Secured Notes, Series B, due 1997, described in Article II of the Plan. Each Series B Secured Note shall be substantially in the form of Exhibit A to the indenture governing the Series B Secured Notes.
48. Series B Substitute Collateral means any property of any kind (other than cash) received by JWP or any Nondebtor Subsidiary prior to the Effective Date in connection with (a) an Asset Sale or Asset Sales of any of the Nondebtor Subsidiaries listed on Schedule 4 hereto or any of their assets and (b) the sale of the capital stock of any of the Nondebtor Subsidiaries listed on Schedule 4 hereto.
49. Series C Notes means Reorganized JWP's 11% Series C Notes, due 2001, described in Article II of the Plan. Each Series C Note shall be substantially in the form of Exhibit A to the indenture governing the Series C Notes.
50. Working Capital Lien means a lien on the stock of Jamaica
Water
Securities Corp., which entitles the lenders providing a working
capital
facility to Reorganized JWP or MES to receive proceeds from the
sale of such
stock equal to the amount by which the balance under such working
capital
facility exceeds $25,000,000; provided, however, that (i) the
maximum amount of
such proceeds to be received by such lenders shall not exceed
$15,000,000 and
(ii) the application of any such proceeds to repay all or a
portion
of the
balance of such working capital facility shall permanently reduce
the
availability under such facility by the amount applied.
B. Bankruptcy Code Terms. "Allowed," "case," "claims," "confirm,"
"confirmation," "debtor," "debtor in possession," "governmental unit," "impaired," and other uncapitalized terms defined (either explicitly or implicitly) in the Bankruptcy Code are used herein with such defined meanings.
C. Other Terms. The words "herein," "hereof," "hereto,"
"hereunder," and
others of similar import refer to the Plan as a whole and not to
any particular
section, subsection, or clause contained in the Plan.
D. Exhibits. All Exhibits to the Plan are incorporated into and
are a part of
the Plan as if set forth in full herein.
II.
Property Distributions
Reorganized JWP shall distribute (or cause the distribution of)
the following
property to the holders of allowed claims (as set forth herein):
A. Series A Secured Notes. The Series A Secured Notes shall (a)
be in an
initial aggregate principal amount of $51,000,000 plus (i) the
Class 4B and 4C
Series A Amount and (ii) the Additional Interest Amount, (b)
accrue
interest
commencing on the Effective Date at a rate of 7% per annum,
compounded
semiannually, which shall be payable in additional Series A
Secured
Notes, (c)
be senior indebtedness of Reorganized JWP, (d) be guaranteed by
SellCo, which
guarantee shall be secured by a pledge of the capital stock of
each of the
Nondebtor Subsidiaries listed on Schedule 5 hereto, subject only
to the Working
Capital Lien, (e) be guaranteed by MES, (f) be secured by a first
priority
pledge of the capital stock of MES and a first priority pledge of
the capital
stock of SellCo, and a first priority security interest in the
Series A
Substitute Collateral, (g) be secured by a second priority pledge
of the
capital stock of the Nondebtor Subsidiaries identified on
Schedule 4 hereto,
and a second priority security interest in the Series B
Substitute Collateral,
(h) have a mandatory scheduled redemption on the second
anniversary of the
Effective Date of $10,000,000 or such lesser amounts as provided
in the
indenture governing the Series A Secured Notes, (i) be subject to
mandatory
prepayment in certain events, and (j) mature on the third
anniversary of the
Effective Date. The Series A Secured Notes will be governed by an
indenture,
dated as of the Effective Date, between Reorganized JWP and an
independent
trustee. Such indenture shall be substantially in the form
attached
as Exhibit
A to the Plan. As specified in Article III of the Plan, the
Series
A Secured
Notes are to be distributed to the holders of allowed claims in
classes 2, 4B,
4C, and Belmont Capital Partners II, L.P.
B. Series B Secured Notes. The Series B Secured Notes shall (a)
be in an
initial aggregate principal amount of (i) $11,357,000 plus (ii)
the
Additional
Interest Amount in the event JWP determines to distribute Series
B Secured
Notes to Belmont Capital Partners II, L.P. rather than cash on
account of the
Series B Secured Note Additional Interest Amount, (b) accrue
interest
commencing on the
Effective Date at a rate of 7% per annum, compounded
semiannually,
which shall
be payable in additional Series B Secured Notes, (c) be senior
indebtedness of
Reorganized JWP, (d) subject to the repayment in full of the
Series
A Secured
Notes, be guaranteed by SellCo, which guarantee shall be secured
by a pledge of
the capital stock of each of the Nondebtor Subsidiaries listed on
Schedule 5
hereto, subject only to the Working Capital Lien and the lien in
favor of the
Series A Secured Notes, (e) subject to the repayment in full of
the Series A
Secured Notes, be guaranteed by MES, (f) be secured by a first
priority pledge
of the capital stock of the Nondebtor Subsidiaries identified on
Schedule 4
hereto, and a first priority security interest in the Series B
Substitute
Collateral, (g) be secured by a second priority security interest
in the Series
A Substitute Collateral, and a second priority pledge of the
capital stock of
MES and a second priority pledge of the capital stock of SellCo,
(h) be subject
to mandatory prepayment in certain events, and (i) mature on the
third
anniversary of the Effective Date. The Series B Secured Notes
will be governed
by an indenture, dated as of the Effective Date, between
Reorganized JWP and an
independent trustee. Such indenture shall be substantially in the
form attached
as Exhibit B to the Plan. As specified in Article III of the
Plan, the Series B
Secured Notes are to be distributed to the holders of allowed
claims in classes 2 and 3.
C. Series C Notes. The Series C Notes shall (a) be in an
initial aggregate
principal amount of $60,000,000 plus the Additional Interest
Amount, (b) accrue
interest commencing on the Effective Date at a rate of 11% per
annum, which
shall be payable semiannually in additional Series C Notes for
the first 18
months after the Effective Date, and thereafter interest shall be
paid
quarterly in cash, (c) be senior indebtedness of Reorganized JWP,
provided that
the Series C Notes shall be (i) junior and subordinate to the
payment in full
of Series A Secured Notes and the Series B Secured Notes and (ii)
junior and
subordinate to the payment in full of any working capital or
revolving credit
financing obtained by JWP or MES after the confirmation of the
Plan up to
$100,000,000; (d) be guaranteed by MES subject to the repayment
in full of any
such working capital or revolving credit financing obtained by
JWP or MES, the
Series A Secured Notes and the Series B Secured Notes, and (e)
mature on the
seventh anniversary of the Effective Date. The Series C Notes
will be governed
by an indenture, dated as of the Effective Date, between
Reorganized JWP and an
independent trustee. Such indenture shall be substantially in the
form attached
as Exhibit C to the Plan. As specified in Article III of the
Plan,
the Series C
Notes are to be distributed to the holders of allowed claims in
classes 2, 3,
4B, 4C, and Belmont Capital Partners II, L.P.
D. SellCo Subordinated Contingent Payment Notes. The SellCo
Subordinated
Contingent Payment Notes shall (a) be in an initial aggregate
contingent
principal amount of $46,000,000 plus the Additional Interest
Amount, (b) accrue
interest commencing on the Effective Date at a rate of 12% per
annum,
compounded semiannually, which shall be payable in additional
SellCo
Subordinated Contingent Payment Notes until the earlier to occur
of
maturity or
payment in full of the original principal amount of the SellCo
Subordinated
Contingent Payment Notes, (c) be junior and subordinated
indebtedness of SellCo
so long as all or any portion of the indebtedness on account of
the Series A
Secured Notes or Series B Secured Notes or the guarantees of
SellCo in respect
thereof remain outstanding, (d) be secured by a pledge of all the
capital stock
of each of the Nondebtor Subsidiaries listed on Schedule 5
hereto,
subject only
to the Working Capital Lien and the lien in favor of the Series A
Secured Notes
and the Series B Secured Notes, (e) be secured by a first
priority
pledge of
the JWP Supplemental SellCo Note, (f) be subject to the
establishment of a cash
reserve for the payment of capital gains taxes arising from the
sale of
Nondebtor Subsidiaries and (g) mature on the tenth anniversary of
the Effective
Date. If, at any time after the fifth anniversary of the
Effective
Date and
prior to the maturity date, the value, as determined by an
independent
appraiser selected by Reorganized JWP, of the consolidated assets
of SellCo
(excluding the JWP Supplemental SellCo Note) and the Nondebtor
Subsidiaries
listed on Schedule 5 hereto is less than $250,000, then the
SellCo Subordinated
Contingent Payment Notes which are outstanding, if any, at such
time shall be
deemed cancelled and no longer an obligation of SellCo. The
SellCo Subordinated
Contingent Payment Notes will be governed by an indenture, dated
as of the
Effective Date, between SellCo and an independent trustee. Such
indenture shall
be substantially in the form attached as Exhibit D to the Plan.
As
specified in
Article III of the Plan, the SellCo Subordinated Contingent
Payment
Notes are
to be distributed to the holders of allowed claims in classes 2,
3, 4B, 4C, and
to Belmont Capital Partners II, L.P.
E. New Common Stock. The New Common Stock shall consist of
13,700,000 shares
of new common stock of Reorganized JWP par value $0.10 per share.
As specified
in (i) Article III of the Plan, 9,000,000 shares are to be
distributed to the
holders of allowed claims in classes 2, 3, 4B, and 4C (ii) the
Management Stock
Option Plan, 1,000,000 shares are to be held to satisfy the
obligations of
Reorganized JWP thereunder, (iii) that certain Credit Agreement,
dated as of
February 24, 1994, between JWP, certain guarantors, and Belmont
Capital
Partners II, L.P., the Additional Interest Amount of New Common
Stock, up to
523,810 shares, is to be distributed to Belmont Capital Partners
II, L.P. and
up to 84,392 shares of New Common Stock are to be held to satisfy
the
obligations of Reorganized JWP in respect of the Additional
Interest Amount of
New Warrants issued to Belmont Capital Partners II, L.P., and
Articles II
and III of the Plan, 1,464,796 shares are to be held to satisfy
the obligations
of Reorganized JWP under the New Series X Warrants, the New
Series Y Warrants,
and the New Series Z Warrants.
F. New Series X Warrants and New Series Y Warrants. The New
Series X Warrants
shall consist of warrants to purchase 600,000 shares of New
Common Stock, plus
the Additional Interest Amount, at a price equal to $12.55 for
each share of
New Common Stock. The New Series Y Warrants shall consist of
warrants to
purchase 600,000 shares of New Common Stock, plus the Additional
Interest
Amount, at a price equal to $17.55 for each share of New Common
Stock. The New
Series X Warrants and the New Series Y Warrants shall (1) expire
on
the fifth
anniversary of the Effective Date, (2) be issued pursuant to
warrant agreements
substantially in the form of Exhibits O and P to the Plan
containing
antidilution and other provisions, (3) be subject to early
expiration when the
market price for New Common Stock reaches a certain level, as set
forth in the
applicable warrant agreement and (4) be distributed to the
holders of allowed
claims in class 6 and to Belmont Capital Partners II, L.P.
G. New Series Z Warrants. The New Series Z Warrants shall
consist of warrants
to purchase 250,000 shares of New Common Stock, plus the
Additional Interest
Amount, at a price equal to $50.00 for each share of New Common
Stock. The New
Series Z Warrants shall (1) expire on the second anniversary of
the Effective
Date, (2) be issued pursuant to a warrant agreement substantially
in the form
of Exhibit R to the Plan containing antidilution and other
provisions, and (3)
be distributed to, or reserved for, the holders of claims or
interests in
classes 7, 8, 9, 10, and 11, as the case may be, and Belmont
Capital Partners
II, L.P.
III.
Classification and Treatment of
Claims and Equity Interests
A. Summary. The categories of claims and equity interests
listed below
classify allowed claims and allowed equity interests for all
purposes,
including voting, confirmation, and distribution pursuant to the
Plan.
CLASS STATUS - -------------------------------- ------------------------------- Class 1: Priority Claims......... Unimpaired-not entitled to vote Class 2: Old Note Claims......... Impaired-entitled to vote Class 3: Old Credit Agreement Claims......................... Impaired-entitled to vote Class 4A: Convenience Claims..... Unimpaired-not entitled to vote Class 4B: Other Borrowed Money Claims......................... Impaired-entitled to vote Class 4C: General Unsecured Claims Impaired-entitled to vote Class 5: Unimpaired Contingent Claims......................... Unimpaired-not entitled to vote Class 6: Subordinated Debt Claims Impaired-entitled to vote Class 7: Contingent and Statutory Subordinated Claims............ Impaired-entitled to vote Class 8: Old Preferred Stock...... Impaired-entitled to vote Class 9: Old Common Stock......... Impaired-entitled to vote Class 10: Equity Interest Claims-Class Action Plaintiffs.. Impaired-entitled to vote Class 11: Equity Interests- Warrants of Participation...... Impaired-entitled to vote |
B. Claims for Administrative Expenses. JWP shall pay each
allowed
claim for
administrative expenses in full, in cash, on the Effective Date
(or as soon
thereafter as is practicable), except to the extent that the
holder of an allowed claim for administrative expenses agrees to
a different
treatment; provided, however, that allowed claims for
administrative expenses
representing obligations incurred in the ordinary course of
business or assumed
by JWP shall be paid in full or performed by Reorganized JWP in
the ordinary
course of business. Notwithstanding the foregoing, professionals
employed at
the expense of JWP, whose compensation is subject to the approval
of the Court,
shall be paid in cash in the amounts awarded to such
professionals by order of
the Court as soon as practicable after such order is entered, but
no later than
the Effective Date for all orders entered prior thereto. The
claims
of Seaboard
Surety Company arising during the Reorganization Case, and on and
after
February 14, 1994, shall be treated as set forth in paragraph 9
of the Final
Order Under 11 U.S.C. (S) 364(c)(1) and Bankruptcy Rule 4001(c)
Authorizing
Debtor To Execute, Deliver And Perform General Agreement Of
Indemnity In Favor
Of Seaboard Surety Company, dated February 24, 1994.
C. Tax Claims. Each holder of an allowed claim of a
governmental
unit of the
kind specified in subsection 507(a)(7) of the Bankruptcy Code
shall
receive, in
the sole discretion of JWP, either cash or deferred cash payments
as specified
in subsection 1129(a)(9)(C) of the Bankruptcy Code.
D. Classification, Treatment, and Voting. The allowed claims
against JWP
shall be classified and receive the treatment specified below.
(1) Class 1. Priority Claims.
1. Classification: Class 1 consists of claims entitled to priority pursuant to subsection 507(a) of the Bankruptcy Code, other than a claim for administrative expenses or a claim of a governmental unit under section 507(a)(7) of the Bankruptcy Code.
2. Treatment: Each holder of an allowed claim in class 1 shall receive cash in an amount equal to the amount of its allowed claim, except to the extent that the holder of such claim agrees to a different treatment.
3. Voting: Class 1 is not impaired, and the holders of claims in class 1 are not entitled to vote to accept or reject the Plan.
(2) Class 2: Old Note Claims.
1. Classification: Class 2 consists of the claims evidenced by the Old Notes and the Old Note Agreements and is denominated as a separate class solely for purposes of effectuating the terms of the Intercreditor Agreement as it relates to the holders of claims in classes 2 and 3 without affecting the distributions to class 4B. For all other purposes under the Plan, including, without limitation, voting as to acceptance or rejection of the Plan, the claims in classes 2, 3, and 4B shall be treated as a single class of senior indebtedness claims against JWP.
2. Treatment: Each holder of an allowed claim in class 2 shall
receive, in full satisfaction of such claim, its Ratable Share of
(i) $51,000,000 in
principal amount of the Series A Secured Notes, (ii) the Class 2
Series B Percentage of the aggregate principal amount of the
Series B Secured Notes
(excluding the Additional Interest Amount of the Series B Secured
Notes, if any), and (iii) the Class 2 Residual Percentage of (a)
$60,000,000 principal
amount of the Series C Notes, (b) $46,000,000 principal amount of
the SellCo Subordinated Contingent Payment Notes, and (c)
9,000,000 shares
of the New Common Stock.
3. Voting: Class 2 is impaired and the holders of claims in class 2 are entitled to vote, together with the holders of claims in classes 3 and 4B, to accept or reject the Plan.
(3) Class 3: Old Credit Agreement Claims.
1. Classification: Class 3 consists of the claims evidenced by the Old Credit Agreement and is denominated as a separate class solely for purposes of effectuating the terms of the Intercreditor Agreement as it relates to the holders of claims in classes 2 and 3 without affecting the distributions to class 4B. For all other purposes under the Plan, including, without limitation, voting as to acceptance or rejection of the Plan, the claims in classes 2, 3, and 4B shall be treated as a single class of senior indebtedness claims against JWP.
2. Treatment: Each holder of an allowed claim in class 3 shall
receive, in full satisfaction of such claim, its Ratable Share of
(i) the Class 3 Series B
Percentage of the aggregate principal amount of the Series B
Secured Notes (excluding the Additional Interest Amount of the
Series B Secured
Notes, if
any) and (ii) the Class 3 Residual Percentage of (a) $60,000,000
principal amount of the Series C Notes, (b) $46,000,000 principal
amount of the SellCo
Subordinated Contingent Payment Notes, and (c) 9,000,000 shares
of the New Common Stock.
3. Voting: Class 3 is impaired and the holders of claims in class 3 are entitled to vote, together with the holders of claims in classes 2 and 4B, to accept or reject the Plan.
(4) Class 4: General Unsecured Claims.
1. Classification: Class 4 consists of all unsecured claims against JWP that are not claims for administrative expenses or priority tax claims or otherwise classified in class 1, 2, 3, 5, 6, or 7.
(a) Convenience Class-Class 4A. Class 4A consists of all claims in class 4 that, with respect to each holder, are in the aggregate $10,000 or less or, at the election of the holder of a class 4 claim, reduced to $10,000 in the aggregate.
(b) Other Borrowed Money Class 4 Claims-Class 4B. Class 4B consists of all class 4 claims which constitute "Senior Indebtedness" with respect to the claims in class 6 and is denominated as a separate class solely for purposes of effectuating the terms of the Intercreditor Agreement as it relates to the holders of claims in classes 2 and 3 without affecting the distributions to Class 4B. For all other purposes under the Plan, including, without limitation, voting as to acceptance or rejection of the Plan, the claims in classes 2, 3, and 4B shall be treated as a single class of senior indebtedness claims against JWP.
(c) All Other Class 4 Claims-Class 4C. Class 4C consists of all class 4 claims not included in classes 4A and 4B.
2. Treatment:
(a) Class 4A. Each holder of an allowed claim in class 4A shall be paid in full, in cash, on the Effective Date or as soon as practicable thereafter.
(b) Classes 4B and 4C. Each holder of an allowed claim in
classes
4B or 4C
shall receive, in full satisfaction of such claim, its Ratable
Share
(calculated as to all allowed claims in classes 4B and 4C) of (i)
a principal
amount of the Series A Secured Notes equal to the Class 4B and 4C
Series A
Amount and (ii) the Class 4B and 4C Residual Percentage of (a)
$60,000,000
principal amount of the Series C Notes, (b) $46,000,000 principal
amount of the
SellCo Subordinated Contingent Payment Notes, and (c) 9,000,000
shares of the New Common Stock.
3. Voting:
(a) Class 4A. Class 4A is not impaired and is not entitled to vote on the Plan. Any holder of a class 4 claim or claims greater than $10,000, in the aggregate, who elects to reduce his claim or claims to $10,000, in the aggregate, accepts payment under the Plan as payment in full of such claim.
(b) Class 4B. Class 4B is impaired and the holders of claims in class 4B are entitled to vote, together with the holders of claims in classes 2 and 3, to accept or reject the Plan.
(c) Class 4C. Class 4C is impaired and the holders of claims in class 4C are entitled to vote to accept or reject the Plan.
(5) Class 5: Unimpaired Contingent Claims.
1. Classification: Class 5 consists of all unsecured claims against JWP specified on Schedule 1 to the Plan, except as and to the extent denoted on Schedule 1 to the Plan and as otherwise provided in subsection H of Article III to the Plan.
2. Treatment: Class 5 is not impaired and the allowed claims in class 5, including the claims of those certain bonding companies which satisfy the requirements of subsection H of Article III of the Plan (which claims shall be deemed allowed as filed), shall be reinstated in accordance with subsection 1124(1) or (2) of the Bankruptcy Code.
3. Voting: The holders of claims in class 5 are not entitled to vote to accept or reject the Plan.
(6) Class 6: Subordinated Debt Claims.
1. Classification: Class 6 consists of the claims against JWP
(i) evidenced by the Indenture dated as of September 1, 1987,
between Neeco Inc. and State
Street Bank and Trust Co., as Trustee, and the 73/4% Convertible
Subordinated Debentures due 2012, and (ii) evidenced by JWP's 12%
Subordinated Notes due 1996.
2. Treatment: Each holder of an allowed claim in class 6 shall receive, in full satisfaction of such claim, its Ratable Share of the New Series X Warrants and the New Series Y Warrants; provided, however, that no holder of an allowed claim in class 6 shall receive any distribution of property under the Plan unless (i) class 6 votes to accept the Plan in accordance with the requirements of section 1126(c) of the Bankruptcy Code, (ii) such holder shall have delivered to Reorganized JWP for cancellation the instrument or instruments and all related documents on which its claim is based on or before the first anniversary of the Effective Date, and (iii) those claims in classes 2, 3, and 4B which constitute "Senior Indebtedness" with respect to the claims in class 6 vote to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code (counting all such claims in classes 2, 3, and 4B as a single class for purposes of this clause). In addition, in the event class 6 does not vote to accept the Plan in accordance with the requirements of section 1126(c) of the Bankruptcy Code, the holders of claims or interests in classes 8, 9, 10, and 11 shall receive no distribution of property under the Plan. Any New Series X Warrants and New Series Y Warrants not distributed on or prior to the first anniversary of the Effective Date as a result of the failure by a holder of a claim in class 6 to deliver its respective debt instruments to Reorganized JWP shall be cancelled.
3. Voting: Class 6 is impaired and the holders of claims in class 6 are entitled to vote to accept or reject the Plan.
(7) Class 7: Contingent and Statutory Subordinated Claims.
1. Classification: Class 7 consists of (i) the indemnification
or contribution claims, if any, by current or former officers and
directors of JWP
or by other parties in connection with the claims asserted or
assertable in
AUSA Life Insurance Company, et al. v. Andrew T. Dwyer et al., 93
Civ. 6830
(CLB) (S.D.N.Y.), and (ii) any intercompany claims that the Court
determines
should be subordinated to general unsecured claims.
2. Treatment: Each holder of an allowed claim in class 7 shall
receive, in
full satisfaction of such claim, its Ratable Share of 1,388 New
Series Z
Warrants; provided, however, that in the event any of classes 4C
or 7 does not
vote to accept the Plan in accordance with the requirements of
section 1126(c)
of the Bankruptcy Code, the holders of claims or interests in
class 7 shall
receive no distribution of property under the Plan. Holders of
allowed claims
in class 7 shall have the option to receive cash from Reorganized
JWP in lieu
of New Series Z Warrants as provided in Article IV., section J.,
6. of the Plan.
3. Voting: Class 7 is impaired and the holders of claims in class 7 are entitled to vote to accept or reject the Plan.
(8) Class 8: Equity Interests - Old Preferred Stock.
1. Classification: Class 8 consists of the equity interests evidenced by all the issued and outstanding 4.25% Convertible Exchangeable Preferred Stock of JWP, par value $1.00.
2. Treatment: Each holder of an allowed equity interest in class 8 shall receive, in full satisfaction of such interest, its Ratable Share of 29,297 New Series Z Warrants; provided, however, that the holders of interests in class 8 shall receive no distribution of property under the Plan if either (i) any of classes 4C, 6, and 8 does not vote to accept the Plan in accordance with the requirements of section 1126(c) of the Bankruptcy Code, or (ii) class 7 does not vote to accept the Plan in accordance with the requirements of section 1126(c) of the Bankruptcy Code and until such time as all claims in class 7 have been disallowed or expunged. Holders of allowed interests in class 8 shall have the option to receive cash from Reorganized JWP in lieu of New Series Z Warrants as provided in Article IV., section J., 6. of the Plan.
3. Voting: Class 8 is impaired and the holders of equity interests in class 8 are entitled to vote to accept or reject the Plan.
(9) Class 9: Equity Interests - Old Common Stock.
1. Classification: Class 9 consists of (i) the equity interests
evidenced by
all the issued and outstanding shares of common stock of JWP,
$.10 par value, as of the Petition Date, and any options,
warrants, or rights, contractual or
otherwise, to acquire such shares of common stock which are
exercised within sixty (60) days of the Effective Date, and (ii)
equity interests that may be asserted in respect of the
$43,000,000 principal amount of Businessland, Inc.
51/2% Convertible Subordinated Debentures, due 2007, and the
Share Issuance
Agreement, dated August 6, 1993, between JWP and ENTEX
Information Services,
Inc. The options in this class include, but are not limited to,
the incentive
stock options, non-qualified stock options, and stock
appreciation
rights to
acquire 1,125,000 shares of Old Common Stock pursuant to JWP's
1986 Incentive
Stock Option Plan and the options for key personnel to acquire
2,500,000 and
1,000,000 shares of Old Common Stock respectively pursuant to
JWP's 1991 and 1992 Stock Option Plans.
2. Treatment: Each holder of an allowed equity interest in class 9 shall receive, in full satisfaction of such interest, its Ratable Share of 195,667 New Series Z Warrants; provided, however, that the holders of interests in class 9 shall receive no distribution of property under the Plan if either (i) any of classes 4C, 6, or 8 does not vote to accept the Plan in accordance with the requirements of section 1126(c) of the Bankruptcy Code, (ii) any of classes 9, 10, or 11 does not vote to accept the Plan in accordance with the requirements of section 1126(c) of the Bankruptcy Code (unless Reorganized JWP determines, at its option, to make the distributions specified herein to all such classes), or (iii) class 7 does not vote to accept the Plan in accordance with the requirements of section 1126(c) of the Bankruptcy Code and until such time as all claims in class 7 have been disallowed or expunged. Holders of allowed interests in class 9 shall have the option to receive cash from Reorganized JWP in lieu of New Series Z Warrants as provided in Article IV, section J., 6. of the Plan.
3. Voting: Class 9 is impaired and the holders of equity interests in class 9 are entitled to vote to accept or reject the Plan.
(10) Class 10: Equity Interest Claims - Class Action Plaintiffs.
1. Classification: Class 10 consists of any claim with respect to a security classified in class 8 or class 9 which would be subordinated pursuant to section 510(b) of the Bankruptcy Code, including, but not limited to, those claims asserted in the Class Action.
2. Treatment: Each holder of an allowed claim in class 10 shall receive, in full satisfaction of such interest, its Ratable Share of 22,059 New Series Z Warrants; provided, however, that the holders of claims in class 10 shall receive no distribution of property under the Plan if either (i) any of classes 4C, 6, or 8 does not vote to accept the Plan in accordance with the requirements of section 1126(c) of the Bankruptcy Code, (ii) any of classes 9, 10, or 11 does not vote to accept the Plan in accordance with the requirements of section 1126(c) of the Bankruptcy Code (unless Reorganized JWP determines, at its option, to make the distributions specified herein to all such classes), or (iii) class 7 does not vote to accept the Plan in accordance with the requirements of section 1126(c) of the Bankruptcy Code and until such time as all claims in class 7 have been disallowed or expunged. Holders of allowed claims in class 10 shall have the option to receive cash from Reorganized JWP in lieu of New Series Z Warrants as provided in Article IV, section J., 6. of the Plan.
3. Liquidation of Claims: Each claim in class 10, whether filed on behalf of an individual holder or behalf of a class of such holders, is deemed a Disputed claim. Recognition of the existence of such Disputed claims in the Plan shall not be deemed an admission by JWP or its Board of Directors of any liability to such holders. No distribution will be made to the holder of a claim in class 10 unless and until the claim becomes an allowed claim. Holders of timely filed claims in class 10 who do not opt out of the Class Action shall have their claims allowed or disallowed exclusively by the Court with jurisdiction over the Class Action. Holders of timely filed claims in class 10 who opt out of the Class Action shall have their claims allowed or disallowed exclusively by the Bankruptcy Court, provided, however, that no proceeding to allow or disallow such a claim shall be commenced in the Bankruptcy Court until after disposition of the Class Action by a final order. Neither the Plan nor the Disclosure Statement shall be admissible as evidence in the Class Action.
4. Voting: Class 10 is impaired and the holders of allowed claims in class 10 are entitled to vote to accept or reject the Plan.
(11) Class 11: Equity Interests - Warrants of Participation.
1. Classification: Class 11 consists of equity interests represented by the 1,152,649 warrants of participation issued to the holders of Old Common Stock in 1969 pursuant to that certain Warrant Agreement, dated as of June 15, 1969, between Jamaica Water and Utilities, Inc. and First National City Bank, as agent.
2. Treatment: Each holder of an allowed interest in class 11 shall receive, in full satisfaction of such interest, its Ratable Share of 1,580 New Series Z Warrants; provided, however, that the holders of interests in class 11 shall receive no distribution of property under the Plan if either (i) any of classes 4C, 6, or 8 does not vote to accept the Plan in accordance with the requirements of section 1126(c) of the Bankruptcy Code, (ii) any of classes 9, 10, or 11 does not vote to accept the Plan in accordance with the requirements of section 1126(c) of the Bankruptcy Code (unless Reorganized JWP determines, at its option, to make the distributions specified herein to all such classes), or (iii) class 7 does not vote to accept the Plan in accordance with the requirements of section 1126(c) of the Bankruptcy Code and until such time as all claims in class 7 have been disallowed or expunged. Holders of allowed interests in class 11 shall have the option to receive cash from Reorganized JWP in lieu of New Series Z Warrants as provided in Article IV, section J., 6. of the Plan.
3. Voting: Class 11 is impaired and the holders of allowed interests in class 11 are entitled to vote to accept or reject the Plan.
E. Distributions of Cash Proceeds from Sales of Assets Prior to
Effective
Date.
1. Series B Secured Notes. On the Effective Date or as soon thereafter as is practicable, the Series B Cash Collateral shall be distributed to the Disbursing Agent. Immediately thereafter, the Disbursing Agent shall distribute, to the trustee for the indenture governing the Series B Secured Notes, the fraction of the Series B Cash Collateral allocable to Series B Secured Notes distributed on the Effective Date on account of allowed claims to be applied as mandatory prepayments of the Series B Secured Notes in accordance with the terms of such indenture.
2. Reserve for Holders of Disputed Claims Entitled to Series B Secured Notes. The remainder of the Series B Cash Collateral held by the Disbursing Agent on account of Disputed claims after the distributions provided in subsection 1. of this section E. shall be held by the Disbursing Agent in an interest-bearing account and used to make prepayments on account of Series B Secured Notes reserved for Disputed claims that become allowed claims. As soon as practicable after the allowance of all or any portion of a claim that was a Disputed claim, the holder of such claim shall receive that portion of the cash held by the Disbursing Agent allocable to the allowed portion of such claim plus interest actually earned thereon from the Effective Date to the date such claim is allowed. As soon as practicable after the disallowance of all or any portion of a claim which was a Disputed claim, that portion of the cash held by the Disbursing Agent allocable to such disallowed amount shall be allocated pro rata among (x) the holders of Series B Secured Notes to be applied as mandatory prepayments of such notes, and (y) the remaining holders of Disputed claims in classes 2 or 3 to be held in trust by the Disbursing Agent in an interest-bearing account and used to make additional prepayments as Disputed claims in classes 2 or 3 are allowed or disallowed. Solely for purposes of calculating the amount of Series B Cash Collateral to be held by the Disbursing Agent on account of Disputed claims pursuant to this subsection 3., all Disputed claims in classes 2 and 3 shall be treated as allowed claims and JWP shall make a good-faith estimate of the amount of any such Disputed claim that has been filed in an unliquidated amount.
F. Timing of Distributions and Reserve for Disputed Claims.
1. Administrative Expenses and Classes Not Impaired. On the Effective Date or as soon thereafter as is practicable, Reorganized JWP shall make the distributions required by the treatment provisions of this Article to each holder whose allowed claim is not impaired by the Plan and to each holder of a claim for an allowed administrative expense, except to the extent such holder agrees to receive its distribution at another time. No distributions shall be made and no reserves shall be kept with respect to claims in unimpaired classes or claims for administrative expenses which are Disputed.
2. Initial Distribution. Solely for purposes of calculating the
Class 2
Residual Percentage, the Class 3 Residual Percentage, the Class
4B
and 4C
Residual Percentage, and the Class 4B, and 4C Series A Amount for
the initial
distribution, JWP shall (i) treat all Disputed claims in classes
2, 3, 4B, and
4C as allowed claims, and (ii) make a good-faith estimate of the
amount of any
such Disputed claim that has been filed in an unliquidated
amount.
JWP shall
also make a good faith estimate of the Disputed claims or
interests in classes
6, 7, 8, 9, and 11. Based on such calculations and estimates, JWP
shall make an
initial distribution of securities to the holders of allowed
claims in classes
2, 3, 4B, 4C, and 6 on the Effective Date or as soon thereafter
as is practicable and to the holders of allowed claims or
interests in
classes 7, 8,
9, and 11 sixty (60) days after the Effective Date or as soon
thereafter as is
practicable. JWP shall make an initial distribution of securities
to Belmont
Capital Partners II, L.P. on the Effective Date or as soon
thereafter as is
practicable. No distributions shall be made with respect to
Disputed claims or
interests. JWP shall hold all securities that are not distributed
as part of
the initial distribution in reserve for the benefit of the
holders of claims or
interests in classes 2, 3, 4B, 4C, 6, 7, 8, 9, 10, and 11.
3. Subsequent Distributions. Every six months after the Effective Date JWP shall (i) distribute, or cause to be distributed, to each holder of a claim that has been allowed in the Reorganization Case subsequent to all previous distributions and to Belmont Capital Partners II, L.P., the amount of securities that would have been distributed to such holder if its claim had been allowed prior to the Effective Date, (ii) recalculate the Additional Interest Amount, the Class 2 Residual Percentage, the Class 3 Residual Percentage, the Class 4B and 4C Residual Percentage, and the Class 4B and 4C Series A Amount to take into account any Disputed claims that have been disallowed, expunged, or withdrawn since the last distribution, (iii) distribute, or cause to be distributed, to each holder of an allowed claim or equity interest and to Belmont Capital Partners II, L.P. on such distribution date such additional securities, if any, held in reserve in respect of Disputed claims or equity interests which are disallowed or expunged so as to fulfill the treatment provisions of Article III, and (iv) cancel the Series A Secured Notes, if any, held in reserve in respect of Disputed claims which are disallowed or expunged. Except for the distribution that occurs after the resolution of all Disputed claims, JWP may determine not to make an interim distribution if the aggregate change in the Disputed claims since the last interim distribution is less than $1,000,000. JWP shall continue to make distributions every six months until no further Disputed claims or equity interests remain outstanding. At such time, JWP shall cancel any Series A Secured Notes remaining in the reserve at that time, ratably distribute all securities, cash, or other proceeds, if any, to the holders of allowed claims in classes 2, 3, 4B, and 4C and eliminate the reserve.
4. Record Keeping. JWP shall keep a record of (i) each
calculation of the
Class 2 Series B Percentage, the Class 3 Series B Percentage, the
Class 2
Residual Percentage, the Class 3 Residual Percentage, the Class
4B and 4C
Residual Percentage, and the Class 4B and 4C Series A Amount,
(ii) the amount
of securities distributed on each distribution date, and (iii)
the amount of securities in the reserve.
5. Subsequent Cash Distributions on Account of Disputed Claims.
After the
Effective Date, any distributions of cash on account of Series A
Secured Notes
or Series B Secured Notes, as the case may be, held in reserve by
JWP in
accordance with subsection F of Article III of the Plan shall be
transferred to
the Disbursing Agent. Upon the allowance of any portion or all of
a Disputed
claim and the distribution of Series A Secured Notes or Series B
Secured Notes,
as the case may be, by JWP to the holder of such allowed claim,
the Disbursing
Agent shall distribute to the holder of such claim the cash
distributable on
account of such Series A Secured Notes or Series B Secured Notes,
plus any
interest actually earned thereon from the Effective Date to the
date such claim
is allowed, as the case may be, in accordance with the
Disbursement
Agreement.
The cash held by the Disbursing Agent on account of the Series A
Secured Notes
or Series B Secured Notes held by JWP on account of the
disallowed
portion of
such Disputed claim, plus any interest actually earned thereon,
shall be
transferred to the trustee for the indenture governing the Series
A Secured
Notes or Series B Secured Notes, as the case may be, in
accordance with the Disbursement Agreement.
G. Allowance of Claims in Class 2 and 3. The aggregate allowed
claims in
class 2 shall be $167,577,088. The aggregate allowed claims in
class 3 shall be $358,165,112.
H. Claims of Bonding Companies. Regardless of whether
Reorganized JWP, MES
and certain Nondebtor Subsidiaries have executed an agreement
substantially in
the form attached to the Plan as Exhibit K or other form
acceptable
to JWP and
the statutory committee of unsecured creditors appointed in the
Reorganization
Case (a "Claims Reduction Agreement"), (A) the claims of each
entity (a
"Bonding Company"), other than Wellington Guarantee and Reliance
Insurance
Corp., that has (i) provided performance bonds to any of the
Nondebtor
Subsidiaries immediately prior to the Petition Date, and (ii) on
or prior to the Effective Date, executed such a Claims Reduction
Agreement, shall be (w)
included in class 5, (x) allowed (whether contingent or fixed,
liquidated or
unliquidated), (y) assumed by MES as a primary obligation of MES
and (z)
treated as unimpaired and reinstated as against Reorganized JWP,
(B) all
contractors' general agreements of indemnity or similar
instruments
pursuant to
which bonds have been executed or procured prior to the Effective
Date shall
remain in full force and effect, and (C) the terms of section 4
of the agreement attached to the Plan as Exhibit K shall be
effective as against
Reorganized JWP, MES and those certain Nondebtor Subsidiaries and
shall be
deemed incorporated into the Plan by reference. In the event that
Reorganized
JWP, MES, and certain Nondebtor Subsidiaries fail to enter into a
Claims
Reduction Agreement with any such Bonding Company because of such
Bonding
Company's refusal to execute such an agreement, then the claims
of such company
or companies shall be classified and treated as class 4 claims
and JWP reserves
the right to object to such claims. The contingent claims of
Wellington
Guarantee and Reliance Insurance Corp. shall be treated in class
5. In the event that a Bonding Company executes and delivers a
Claims Reduction Agreement
and, subsequently, consents to an amendment of such agreement
which amendment
is materially adverse to Reorganized JWP or MES, the claims of
such Bonding Company arising out of or in connection with bonds
executed or procured prior
to the Petition Date, shall, by operation of the Claims Reduction
Agreement,
immediately prior to the effectiveness of such amendment and
without
requirement of any further action, be permanently reduced to zero
as against
JWP, Reorganized JWP and MES. The immediately foregoing sentence
shall not be
construed to modify or limit the provisions of a Claims Reduction
Agreement pertaining to the reduction to zero of such claims
under other circumstances explicitly set forth herein.
IV.
Implementation of the Plan
A. Issuance of New Securities. SellCo is a co-proponent of the
Plan. The
issuance of the securities described in Article II of the Plan is
hereby
authorized. The issuance of additional Series A Secured Notes,
Series B Secured
Notes, if any, Series C Notes, SellCo Subordinated Contingent
Payment Notes,
New Series X Warrants, New Series Y Warrants, New Series Z
Warrants, and shares
of New Common Stock is authorized solely for the purpose of
paying the
Additional Interest Amount to Belmont Capital Partners II, L.P.
Any such securities which are not used to pay such Additional
Interest Amount shall be cancelled.
B. Pledge Agreements. On the Effective Date the following
pledge agreements
shall be executed in respect of the Series A Secured Notes: (i) a
pledge agreement substantially in the form of Exhibit B-1 to
Exhibit A to
the Plan
executed by JWP which secures the repayment of the Series A
Secured
Notes with
a first priority lien on the Series A Substitute Collateral, the
capital stock
of MES and on the capital stock of SellCo, (ii) a pledge
agreement
substantially in the form of Exhibit B-2 to Exhibit A to the Plan
executed by
JWP which secures the repayment of the Series A Secured Notes
with
a second
priority lien on the Series B Substitute Collateral and the
capital
stock of
the Nondebtor Subsidiaries listed on Schedule 4 hereto, and (iii)
a pledge agreement substantially in the form of Exhibit B-3 to
Exhibit A to the Plan
executed by SellCo which secures SellCo's guarantee of the Series
A Secured
Notes with a lien on the capital stock of the Nondebtor
Subsidiaries listed on
Schedule 5 hereto, subject only to the Working Capital Lien. On
the
Effective
Date the following pledge agreements shall be executed in respect
of the Series
B Secured Notes: (i) a pledge agreement substantially in the form
of Exhibit
B-2 to Exhibit B to the Plan executed by JWP which secures the
repayment of the
Series B Secured Notes with a second priority lien on the Series
A Substitute
Collateral, the capital stock of MES and on the capital stock of
SellCo, (ii) a
pledge agreement substantially in the form of Exhibit B-1 to
Exhibit B to the
Plan executed by JWP which secures the repayment of the Series B
Secured Notes
with a first priority lien on the Series B Substitute Collateral
and the
capital stock of the Nondebtor Subsidiaries listed on Schedule 4
hereto, and
(iii) a pledge agreement substantially in the form of Exhibit B-3
to Exhibit B
to the Plan executed by SellCo which secures SellCo's guarantee
of the Series B
Secured Notes with a lien on the capital stock of the Nondebtor
Subsidiaries
listed on Schedule 5 hereto, subject only to the Working Capital
Lien and the
lien in favor of the Series A Secured Notes. On the Effective
Date
SellCo shall
execute a pledge agreement substantially in the form of Exhibit B
to Exhibit D
to the Plan to secure the repayment of the SellCo Subordinated
Contingent
Payment Notes with a lien on the stock of each of the Nondebtor
Subsidiaries
listed on Schedule 5 hereto, subject only to the Working Capital
Lien and the
liens in favor of the Series A Secured Notes and the Series B
Secured Notes,
and a first priority lien on the JWP Supplemental SellCo Note.
The
repayment of
the Series A Secured Notes, Series B Secured Notes, and SellCo
Subordinated
Contingent Payment Notes and all of the foregoing pledge
agreements
in respect
thereof shall be subject to the terms and conditions set forth in
the Collateral Intercreditor Agreement. On the Effective Date,
JWP shall deliver
the pledged properties to the appropriate indenture trustees and
Fleet Bank, as
agent under the Old Credit Agreement, shall deliver any property
held by it for
the benefit of the holders of claims under the Old Credit
Agreement
and the Old
Note Agreements to the trustee under the indenture for the Series
B Secured
Notes. On the Effective Date, Reorganized JWP shall execute
warrant agreements
substantially in the form of Exhibits O, P, and R to the Plan in
respect of the
New Series X Warrants, the New Series Y Warrants and the New
Series Z Warrants.
C. Guarantees. On the Effective Date, JWP shall cause SellCo
and MES to
execute guarantees of Reorganized JWP's obligations under the
Series A Secured
Notes. On the Effective Date, JWP shall cause MES and SellCo to
execute
guarantees of Reorganized JWP's obligations under the Series B
Secured Notes
subject to the discharge of all of Reorganized JWP's obligations
under the
Series A Secured Notes. On the Effective Date, JWP shall cause
MES
to execute a
guarantee of Reorganized JWP's obligations under the Series C
Notes subject to
the discharge of all of Reorganized JWP's obligations under the
Series A Secured Notes and the Series B Secured Notes.
D. Cancellation of Existing Securities and Agreements. On the
Effective Date
the Old Notes, the Old Note Agreement, the Old Credit Agreement,
the pledge agreements, if any, executed prior to the Petition
Date by JWP in
respect of the stock of any of the Nondebtor Subsidiaries listed
on Schedule 4 hereto, the
pledge agreements, if any, executed prior to the Petition Date by
JWP in
respect of any portion of the Series B Substitute Collateral, the
subordinated
notes and debentures governed by the agreements identified in
class
6, all
agreements or instruments evidencing claims in classes 2, 3, 4,
and 6, the Old
Common Stock, any options, warrants, or rights, contractual or
otherwise, to
acquire such shares of Old Common Stock (including, but not
limited to, the
incentive stock options, non-qualified stock options, and stock
appreciation
rights to acquire 1,125,000 shares of Old Common Stock pursuant
to
the 1986
Incentive Stock Option Plan and the options for key personnel to
acquire
2,500,000 and 1,000,000 shares of Old Common Stock, respectively,
pursuant to
the 1991 and 1992 Stock Option Plans of JWP), any interest
represented by the
1,152,649 warrants of participation issued to the holders of Old
Common Stock
in 1969 which may entitle such holders to receive shares of Old
Common Stock on
certain events with respect to the Jamaica Water Supply Company,
and all the
shares of preferred stock of JWP issued or authorized on or prior
to the Petition Date shall be canceled.
E. Corporate Action. On the Effective Date, the issuance of
securities
pursuant to Article III hereof, the election or appointment, as
the case may be, of directors and officers pursuant to Article IV
hereof, and the other
matters provided under the Plan involving the corporate structure
of JWP or Reorganized JWP, or corporate action by JWP or
Reorganized JWP, shall be deemed
to have occurred and shall be in effect from and after the
Effective Date pursuant to section 303 of the Delaware General
Corporation Law without any
requirement of further action by the stockholders or directors of
JWP or Reorganized JWP.
F. JWP Corporate Action.
1. New Charter and Bylaws. On the Effective Date or as soon
thereafter as is
practicable, Reorganized JWP shall file with the Secretary of
State of the State of Delaware, in accordance with sections 103
and 303 of the Delaware
General Corporation Law, the Certificate of Incorporation and
such certificate
shall be the new Certificate of Incorporation for Reorganized
JWP.
The
Certificate of Incorporation, provides, among other things, for
the issuance of the New Common Stock, (ii) seven members on the Board of Directors of Reorganized JWP, and (iii) a prohibition on the issuance of nonvoting equity securities. On the Effective Date, the Bylaws shall become the new bylaws of Reorganized JWP.
2. Board of Directors of JWP. On the Effective Date, the operation of Reorganized JWP shall become the general responsibility of its new Board of Directors, subject to, and in accordance with, the Certificate of Incorporation and the Bylaws. The initial directors of Reorganized JWP shall be selected as follows: (i) four directors by the holders of a majority in amount of claims in class 2; (ii) two directors by the holders of a majority in amount of claims in class 3; and (iii) one director selected by the Chairman of the Board of Directors and Chief Executive Officer of JWP. Such directors shall be deemed elected or appointed, as the case may be, pursuant to the order confirming the Plan, but shall not take office until the Effective Date. Those directors and officers not continuing in office shall be deemed removed therefrom as of the Effective Date pursuant to the order confirming the Plan.
G. MES and SellCo Corporate Action.
1. Charter and Bylaws. JWP and Reorganized JWP shall take all necessary action to assure that the certificates of incorporation and bylaws of MES and SellCo are substantially in the form of Exhibits G, H, I, and J to the Plan, respectively.
2. Board of Directors. The board of directors of Reorganized JWP shall select the officers and directors of MES and SellCo.
3. Transfer of Nondebtor Subsidiaries. As of the Effective Date, JWP shall transfer or cause its Nondebtor Subsidiaries, as appropriate, to transfer (i) the Nondebtor Subsidiaries listed on Schedule 5 to the Plan to SellCo, and (iii) all other Nondebtor Subsidiaries to MES (other than the Nondebtor Subsidiaries listed on Schedule 4 hereto, DYN Specialty Contracting, Inc. (and its subsidiaries B&B Contracting & Supply Company, Dynalectric Company, Dynalectric Company of Nevada, Inc., Contra Costa Electric, Inc. and JWP Systems/Kirkwood Electric Company, Inc.) and Sea Cliff which shall be owned directly by Reorganized JWP). JWP or Reorganized JWP, as the case may be, shall transfer Sea Cliff to Jamaica Water Securities Corp. as soon as practicable after the Effective Date, if not done prior to such time.
H. Operations and Sales of Assets.
1. Except as specified in this Article, Reorganized JWP, shall continue in the operation of JWP's businesses and in the ownership of the Nondebtor Subsidiaries. JWP shall obtain for Reorganized JWP or MES a working capital line of credit of up to $50 million which may be secured by a first priority lien on the assets of MES and/or any MES subsidiary.
2. Reorganized JWP shall implement a program to sell the assets of SellCo. Subject to the provisions of the indenture governing the Series A Secured Notes and the indenture governing the Series B Secured Notes, approval by a majority of the Board of Directors of Reorganized JWP shall be required for the sale of any of the assets of JWP or Reorganized JWP, or the assets or capital stock of any Nondebtor Subsidiaries, the net proceeds of which would exceed $3,000,000 for any individual asset or stock sale or series of related asset or stock sales.
I. Releases and Retention of Claims. As of the Effective Date,
JWP,
Reorganized JWP, and each creditor of JWP, Reorganized JWP,
and/or any
Nondebtor Subsidiary hereby waive, release, and discharge the
Seaboard Surety
Company, each of the holders of claims in the classes 2, 3, and
6,
the holders
of claims in class 4 to the extent ordered by the Bankruptcy
Court and all
officers, directors, employees, or agents (including
professionals
retained by
such holder) of such holder, from any and all claims arising
prior to the
Effective Date that could be brought by, through, or on behalf of
JWP or its
estate or any Nondebtor Subsidiary; provided, however, that
claims which are
waived, released, or discharged shall not include the claims of
any Nondebtor
Subsidiary for services rendered or goods sold to the holder of a
class 2, 3,
4, or 6 claim or the officers, directors, employees, or agents
(including
professionals retained by such holder) of such holder, if any, or
defenses of a
Nondebtor Subsidiary to any claim asserted by the Seaboard Surety
Company (or
other bonding company) solely in respect of such Nondebtor
Subsidiary's
liabilities or obligations on a bond; and provided, further, that
nothing
contained in this section I. shall affect the releases to
Seaboard
Surety Company provided for in the agreement attached hereto as
Exhibit K.
Such waiver, release, and discharge shall also act as an
injunction
against any
person or entity commencing or continuing any action, employment
of process, or
act to collect, offset, or recover any such waived, released, and
discharged
claim. In accordance with section 1123(b)(3) of the Bankruptcy
Code, all other
claims, rights, and causes of action held by JWP shall be
retained
by Reorganized JWP.
J. Method of Distribution Under the Plan.
1. In General. Any distribution under the Plan shall be made by Reorganized JWP or its designee to the holders of claims or equity interests in classes 1, 2, 3, 4, 6, 7, 8, 9, 10, and 11 as such holders are identified on the books and records of JWP. In the event such a claim has been properly transferred, such distribution shall be made to the transferee of such claim after receipt by Reorganized JWP of evidence reasonably satisfactory to it that such transfer has taken place. Transfer of a claim pursuant to Bankruptcy Rule 3001(e) shall be binding on Reorganized JWP.
2. Setoffs and Recoupments. JWP may, but shall not be required to, set off against or recoup from any claim that is not impaired by the Plan (other than the claims of the Bonding Companies) or from any class 4 claim that is not otherwise released by the effect of section I of Article IV of the Plan, and the payments to be made pursuant to the Plan in respect of such claim, any claims of any nature whatsoever JWP may have against the claimant, but neither the failure to do so nor the allowance of any claim hereunder shall constitute a waiver or release by JWP of any such claim JWP may have against such claimant.
3. Distribution of Unclaimed Property. Any distribution of property (cash or otherwise) under the Plan which is unclaimed after one year following the Effective Date shall be transferred to Reorganized JWP, notwithstanding state or other escheat or similar laws to the contrary. In the event that any securities are returned to Reorganized JWP as unclaimed property, then such securities shall be canceled.
4. Saturday, Sunday, or Legal Holiday. If any payment or act under the Plan is required to be made or performed on a date that is not a Business Day, then the making of such payment or the performance of such act may be completed on the next succeeding Business Day, but shall be deemed to have been completed as of the required date.
5. Fractional Debt Instruments. Series A Secured Notes, Series B Secured Notes, Series C Notes, and SellCo Subordinated Contingent Payment Notes shall be issued in multiples of $100. On the Effective Date, if a fraction of Series A Secured Notes, Series B Secured Notes, Series C Notes, or SellCo Subordinated Contingent Payment Notes would otherwise be distributed to the holder of a class 2, 3, 4B, or 4C claim (i) the actual distribution of securities shall be rounded down to the next lower multiple of $100, and (ii) cash in an amount equal to the fraction of securities which would otherwise be so distributed shall be distributed to the holders of such claims.
6. Fractional Shares and Cash in Lieu of New Series Z Warrants. No fractional shares of New Common Stock, New Series X Warrants, or New Series Y Warrants, or cash in lieu thereof, shall be distributed. No fractional shares of New Series Z Warrants shall be distributed, however, the New Series Z Warrants not distributed on account of such fractional shares shall be divided among classes 7, 8, 9, 10, and 11 in proportion to the number of New Series Z Warrants to be distributed to each such class, and each holder of a claim or interest in each such class shall receive its Ratable Share of such New Series Z Warrants attributable to its class. At the option of the holder of an allowed claim or interest in classes 7, 8, 9, 10, or 11, such holder shall be entitled to receive from Reorganized JWP $0.10 for each whole New Series Z Warrant such holder receives under the Plan, provided, however, that Reorganized JWP shall not be obligated to distribute cash to such holder on account of such whole New Series Z Warrants unless such holder is entitled to receive, in the aggregate, at least $1.00 on account of such whole New Series Z Warrants.
7. Provisions Concerning the Businessland, Inc. 51/2% Convertible
Subordinated Debentures and the ENTEX Share Issuance Agreement.
Reorganized JWP
shall reserve and keep available a number of New Series Z
Warrants
sufficient
to satisfy the distribution of New Series Z Warrants on account
of
the Old
Common Stock reserved to satisfy the conversion rights under the
Businessland,
Inc. 51/2% Convertible Subordinated Debentures and the ENTEX
Share
Issuance
Agreement. Reorganized JWP shall distribute such New Series Z
Warrants only
after all of the requirements for conversion set forth in the
Businessland,
Inc. 51/2% Convertible Subordinated Debentures and the ENTEX
Share
Issuance
Agreement have been satisfied.
K. Revesting of Assets. On the Effective Date, the estate of
JWP
shall revest
in Reorganized JWP. After the Effective Date, Reorganized JWP may
operate its
businesses, and may use, acquire, and dispose of property free of
any
restrictions of the Bankruptcy Code or the Bankruptcy Rules. As
of
the
Effective Date, the estate of JWP shall be free and clear of all
claims,
security interests, liens, and equity interests, except as
provided
herein.
L. Allocation of Consideration. The aggregate consideration to
be distributed
to the holders of allowed claims in each class under the Plan
shall be treated
as first satisfying an amount equal to the stated principal
amount of the
allowed claim for such holders and any remaining consideration as
satisfying
accrued, but unpaid, interest, if any.
M. Executory Contracts and Unexpired Leases. As of the
Effective
Date, all
executory contracts and unexpired leases that exist between JWP
and any person
are hereby specifically assumed, except for any executory
contracts
or
unexpired leases which are the subject of a motion to reject on
or before the confirmation date. Entry of the order confirming
the Plan by the Clerk of the
Court shall constitute approval of such assumptions pursuant to
subsection 365(a) of the
Bankruptcy Code.
Claims created by the rejection of executory contracts or
unexpired leases must
be filed with the Court no later than twenty (20) days after the
entry of an
order authorizing such rejection. Any claims not filed within
such time will be
forever barred from assertion against JWP and the estate of JWP.
Unless arising
from claims or interests in classes 6, 7, 9, or 11 or otherwise
ordered by the
Court, all such claims arising from the rejection of executory
contracts or
unexpired leases shall be classified in class 4 of the Plan.
N. JWP Management Stock Options. Within one year after the
Effective Date,
the Board of Directors of Reorganized JWP shall determine the
recipients of
options to purchase 500,000 shares of New Common Stock of
Reorganized JWP
pursuant to the Management Stock Option Plan and shall issue such
options to
such recipients in the respective amounts as determined by the
Board of
Directors of Reorganized JWP. The exercise price for such options
shall be
equal to the average market price of New Common Stock over the
20-day trading
period immediately preceding the date of issuance of the option;
provided,
however, that in no event shall such options be issued or the
exercise price be
determined prior to expiration of three months plus 20 days after
the Effective
Date; provided further, that if the average market price of New
Common Stock
for the applicable period cannot be determined, the exercise
price
shall be
determined by an investment advisor selected by the Compensation
Committee of
the Board of Directors of Reorganized JWP. Such options may be
exercised only
after they have vested. Vesting shall occur over a three-year
period, with
one-third vesting each year. The Board of Directors of
Reorganized
JWP is
authorized to issue additional options pursuant to the Management
Stock Option
Plan to then-current employees of Reorganized JWP or the
Nondebtor
Subsidiaries
to purchase up to 500,000 shares of New Common Stock available
under the
Management Stock Option Plan. All options issued under the
Management Stock
Option Plan shall expire on the tenth anniversary of their
issuance.
O. Hart-Scott-Rodino Compliance. Any shares of New Common Stock
to be
distributed under the Plan to any entity required to file a
Premerger
Notification and Report Form under the Hart-Scott-Rodino
Antitrust
Improvement
Act of 1976, as amended, shall not be distributed until the
notification and
waiting periods applicable under such act to such entity shall
have
expired or
been terminated.
P. Listing of New Common Stock; Registration of Securities.
Reorganized JWP
or SellCo, as the case may be, shall use its best efforts to (i)
cause, as
promptly as practicable after the Effective Date, the shares of
New
Common
Stock and the other securities issued hereunder to be listed on a
national
securities exchange or quoted in the national market system of
the
National
Association of Securities Dealers' Automated Quotation System,
file, as
promptly as practicable after the Effective Date, and be declared
effective as
soon as possible thereafter, a registration statement or
registration
statements under the Securities Act of 1933, as amended (the
"Securities Act"),
for the offering on a continuous or delayed basis in the future
of
each of the
shares of New Common Stock, the Series A Secured Notes, the
Series
B Secured
Notes, the Series C Notes, the SellCo Subordinated Contingent
Payment Notes,
the New Series X Warrants, the New Series Y Warrants, and the New
Series Z
Warrants (the "Shelf Registration"), (iii) keep the Shelf
Registration
effective for a two-year period, commencing on the date on which
the Shelf
Registration is declared effective, and (iv) supplement or make
amendments to
the Shelf Registration, if required under the Securities Act or
by
the rules or
regulations promulgated thereunder or if requested by any holder
or
underwriter
of any of the securities covered by the Shelf Registration, and
have such
supplements and amendments declared effective as soon as
practicable after
filing.
Q. JWP Supplemental SellCo Note. On the Effective Date,
Reorganized JWP shall
deliver to SellCo the JWP Supplemental SellCo Note. The JWP
Supplemental SellCo
Note shall (a) be in an aggregate principal amount equal to the
amount of all
the Net Cash Proceeds received directly or indirectly by JWP or
any
of the
Nondebtor Subsidiaries on or after December 1, 1993, and prior to
the Effective
Date in connection with any Asset Sale or Asset Sales of (i) the
Nondebtor
Subsidiaries listed on Schedule 4 to the Plan or their assets in
excess of
$11,357,000 and (ii) any of JWP's other assets or the assets of
Nondebtor
Subsidiaries, less $1,000,000, (b) be senior indebtedness of
Reorganized JWP,
(c) accrue interest commencing on the Effective Date at a rate of
8% per annum,
compounded semiannually, which shall be payable upon maturity,
and
(d) mature on the earlier of (i) the tenth anniversary of the
Effective
Date or
(ii) one day prior to the date on which the SellCo Subordinated
Contingent
Payment Notes are deemed cancelled pursuant to section D of
Article
II hereof.
R. Intercreditor Agreement. Upon the Effective Date, the
Intercreditor
Agreement shall be cancelled and the terms and conditions thereof
shall be
rendered null and void. The distributions under the Plan to the
holders of
claims in classes 2 and 3 are in lieu of and in complete
satisfaction of any
rights such holders may have under the Intercreditor Agreement.
V.
Effectiveness of the Plan
A. Conditions Precedent. The Plan shall not become effective
unless and until
the following conditions shall have been satisfied in full or
waived in
accordance with the provisions specified below:
1. The order confirming the Plan (i) shall be satisfactory in form to the holders of a majority in amount of the claims in each of class 2 and class 3 and (ii) shall have been entered and not been reversed, stayed, modified, or amended, and either (a) the time to appeal, seek review or rehearing, or petition for certiorari has expired and no timely filed appeal or petition for review, rehearing, remand, or certiorari is pending or (b) any appeal taken or petition for certiorari filed has been resolved by the highest court to which such order was appealed or from which certiorari was sought;
2. Unless waived by the holders of two-thirds in amount of the claims in each of classes 2 and 3 who voted on the Plan, the filing with the Court of a statement by JWP providing that JWP believes, after conducting an analysis of the claims in class 4B, that the allowed amount of such claims will not exceed $100,000,000;
3. Reorganized JWP or MES shall have executed an agreement, subject only to the occurrence of the Effective Date, for a working capital facility in an amount at least sufficient to repay and replace any financing provided to JWP pursuant to section 364 of the Bankruptcy Code; and
4. Each of the indentures governing the Series A Secured Notes, Series B Secured Notes, SellCo Subordinated Contingent Payment Notes, and the Series C Notes shall be duly qualified under the Trust Indenture Act of 1939.
B. Waiver of Conditions. Each of the conditions specified above
(other than the conditions specified in subsection A.2 of Article
V) may be waived by a writing signed by the authorized
representatives of JWP and a majority in
amount of those holders of claims in each of class 2 and class 3
which voted on the Plan.
C. Effect of Failure of Conditions. If each of the conditions
to effectiveness and the occurrence of the Effective Date has not
been satisfied or duly waived on or before the first Business Day
that is more than 179 days after the date the Court enters an
order confirming the Plan, or by such later
date as is proposed and approved, after notice and a hearing, by
the Court,
upon motion by JWP or any party in interest made before the time
that each of
the conditions has been satisfied or duly waived, the order
confirming the Plan
may be vacated by the Court; provided, however, that
notwithstanding the filing
of such a motion, the order confirming the Plan shall not be
vacated if each of
the conditions to consummation is either satisfied or duly waived
before the
Court enters an order granting the relief requested in such
motion.
If the
order confirming the Plan is vacated pursuant to this section,
the
Plan shall
be null and void in all respects, and nothing contained in the
Plan shall (a)
constitute a waiver or release of any claims against or equity
interests in JWP
or (b) prejudice in any manner the rights of the holder of any
claim or equity
interest or JWP.
VI.
Administrative Provisions
A. Discharge.
1. Scope. Other than with respect to the claims in class 5, entry of the order confirming the Plan acts as a discharge of all debts of, claims against, liens on, and interests in each of JWP, its assets, or properties, which debts, claims, liens, and interests arose at any time before the entry of the order confirming the Plan. Other than with respect to the claims in class 5, the discharge of JWP shall be effective as to each claim, regardless of whether a proof of claim therefore was filed, whether the claim is an allowed claim, or whether the holder thereof votes to accept the Plan. On the date the Court enters an order confirming the Plan, as to every discharged claim and equity interest, any holder of such claim or equity interest shall be precluded from asserting against JWP or against JWP's assets or properties, or any successors of JWP, any other or further claim or equity interest based on any document, instrument, act, omission, transaction, or other activity of any kind or nature that occurred before the date the Court enters the order confirming the Plan.
2. Injunction. In accordance with section 524 of the Bankruptcy Code, the discharge provided by this section and section 1141 of the Bankruptcy Code, inter alia, acts as an injunction against the commencement or continuation of any action, employment of process, or act to collect, offset, or recover the claims discharged hereby.
B. Claims and Equity Interests Objections. Unless otherwise
ordered by the
Court, all claims objections shall be filed and served on the
applicable
claimant by 120 days after the Effective Date or 120 days after a
claim is
filed, whichever is later. After the date the Court enters an
order
confirming
the Plan, only JWP or Reorganized JWP shall have the authority to
file, settle,
compromise, withdraw, or litigate to judgment objections to
claims.
After the
date the Court enters an order confirming the Plan, JWP or
Reorganized JWP may
settle or compromise any Disputed claim in accordance with
Bankruptcy Rule
9019.
C. Claims Incurred After the Confirmation Date. Claims against
JWP or
Reorganized JWP incurred after the date and time of the entry of
the order
confirming the Plan, including (without limitation) claims for
professionals'
fees and expenses, shall not be subject to application or proof
of
claim and
may be paid by JWP or Reorganized JWP, as the case may be, in the
ordinary
course of business and without further Court approval.
D. Retention of Jurisdiction. The Court shall have exclusive
jurisdiction of
all matters arising out of, and related to, the Reorganization
Case
and the
Plan pursuant to, and for the purposes of, sections 105(a) and
1142 of the
Bankruptcy Code and for, among other things, the following
purposes:
1. To hear and determine pending applications for the assumption or rejection of executory contracts or unexpired leases, if any are pending, and the allowance of claims resulting therefrom;
2. To determine any and all pending adversary proceedings, applications, and contested matters;
3. To ensure that distributions, if any, to holders of allowed claims are accomplished as provided herein;
4. To resolve disputes as to the ownership of a claim;
5. To hear and determine any timely objections to claims for administrative expenses or to proofs of claims and equity interests filed, both before and after the date the Court enters an order confirming the Plan, including any objections to the classification of any claim or equity interest, and to allow or disallow any Disputed claims for administrative expenses, Disputed claim, or Disputed equity interest, in whole or in part;
6. To enter and implement such orders as may be appropriate in the event the order confirming the Plan is for any reason stayed, revoked, modified, or vacated;
7. To issue such orders in aid of execution of the Plan, to the extent authorized by section 1142 of the Bankruptcy Code;
8. To consider any modifications of the Plan, to cure any defect or omission, or reconcile any inconsistency in any order of the Court, including, without limitation, the order confirming the Plan;
9. To resolve disputes concerning nondebtor releases and injunctions contained herein;
10 To hear and determine all applications for compensation and
reimbursement
of expenses of professionals under sections 330, 331, and 503(b)
of the Bankruptcy Code;
11 To hear and determine disputes arising in connection with the interpretation, implementation, or enforcement of the Plan;
12 To hear and determine matters concerning state, local, and
federal taxes
in accordance with sections 346, 505, and 1146 of the Bankruptcy
Code;
13 To hear any other matter not inconsistent with the Bankruptcy Code; and
14 To enter a final decree closing the Reorganization Case.
E. Exemption from Transfer Taxes. Pursuant to section 1146(c)
of the
Bankruptcy Code, the issuance, transfer, or exchange of notes or
equity
securities under the Plan, the creation of any mortgage, deed of
trust, or
other security interest, the making or assignment of any lease or
sublease, or
the making or delivery of any deed or other instrument of
transfer
under, in
furtherance of, or in connection with the Plan, including any
deeds, bills of
sale, or assignments executed in connection with any of the
transactions
contemplated under the Plan shall not be subject to any stamp,
real estate
transfer, mortgage recording, or other similar tax.
F. Payment of Statutory Fees. All fees payable pursuant to section 1930 of title 28 of the United States Code, as determined by the Court at the hearing pursuant to section 1128 of the Bankruptcy Code, shall be paid on or before the Effective Date.
G. Exculpation. Reorganized JWP, the holders of claims in
classes
2, 3, and
6, the statutory committee of unsecured creditors, the official
committee of
junior creditors and interest holders, the Seaboard Surety
Company,
and their
respective members, officers, directors, employees, or agents
(including any
professionals retained by such persons) shall have no liability
to any holder
of a claim or equity interest for any act or omission in
connection
with, or
arising out of, the pursuit of approval of the disclosure
statement
for the
Plan or the solicitation of votes for or confirmation of the
Plan, the
consummation of the Plan, or the administration of the Plan or
the property to
be distributed under the Plan, except for willful misconduct or
gross negligence, and in all respects, shall be entitled to rely
upon the advice of
counsel with respect to their duties and responsibilities under
the Plan.
H. Headings. Headings are used in the Plan for convenience and
reference
only, and shall not constitute a part of the Plan for any other
purpose.
I. Binding Effect. The Plan shall be binding upon and inure to
the benefit of
JWP, its creditors, the holders of equity interests, and their
respective
successors and assigns.
J. Notices. Any notice required or permitted to be provided
under
the Plan
shall be in writing and served by either (a) certified mail,
return
receipt
requested, postage prepaid, (b) hand delivery, or (c) reputable
overnight
delivery service, freight prepaid, to be addressed as follows:
To JWP, Debtor in Possession, or Reorganized JWP:
JWP INC.
Six International Drive
Rye Brook, New York 10573-1058
Attn: Sheldon I. Cammaker, Esq.
with a copy to:
Stroock & Stroock & Lavan 7 Hanover Square New York, New York 10004 Attention: Lewis Kruger, Esq.
Lawrence M. Handelsman, Esq.
K. Governing Law. Unless a rule of law or procedure is supplied
by federal
law (including the Bankruptcy Code and Bankruptcy Rules) or the
Delaware
General Corporation Law, the laws of the State of New York shall
govern the
construction and implementation of the Plan and any agreements,
documents, and
instruments executed in connection with the Plan.
L. Filing or Execution of Additional Documents. On or before
substantial
consummation of the Plan, JWP shall file with the Court or
execute,
as
appropriate, such agreements and other documents as may be
necessary or
appropriate to effectuate and further evidence the terms and
conditions of the
Plan.
M. Withholding and Reporting Requirements. In connection with
the
Plan and
all instruments issued in connection therewith and distributions
thereon, JWP
shall comply with all withholding and reporting requirements
imposed by any
federal, state, local, or foreign taxing authority and all
distributions
hereunder shall be subject to any such withholding and reporting
requirements.
Dated New York, New York
August 9, 1994
Respectfully submitted,
JWP Inc.
Debtor and Debtor in Possession
/s/ Frank T. MacInnis
By:
Chairman of the Board of Directors,
President and Chief Executive Officer
|
SELLCO Corporation
/s/ Frank T. MacInnis
By:
President
|
Exhibits to the Plan
Exhibit A: Series A Secured Note Indenture
Exhibit B: Series B Secured Note Indenture
Exhibit C: Series C Note Indenture
Exhibit D: SellCo Subordinated Contingent Payment Note Indenture
Exhibit E: Bylaws of Reorganized JWP
Exhibit F: Certificate of Incorporation of Reorganized JWP
Exhibit G: Certificate of Incorporation of MES
Exhibit H: Certificate of Incorporation of SellCo
Exhibit I: Bylaws of MES
Exhibit J: Bylaws of SellCo
Exhibit K: Claims Reduction Agreement
Exhibit L: JWP Management Incentive Stock Option Plan
Exhibit M: Nondebtor Subsidiaries
Exhibit N: Disbursement Agreement
Exhibit O: New Series X Warrant Agreement
Exhibit P: New Series Y Warrant Agreement
Exhibit Q: JWP Supplemental SellCo Note
Exhibit R: New Series Z Warrant Agreement
Schedules to the Plan
Schedule 1: Class 5 claims-(Unimpaired)
Schedule 2: Old Note Agreements
Schedule 3: Intentionally Omitted
Schedule 4: Nondebtor Subsidiaries constituting the Collateral
for
the Series B Secured Notes
Schedule 5: Subsidiaries comprising SellCo
AMENDED SCHEDULE 1
CREDITORS TO BE UNIMPAIRED
Creditor Basis for Claim
- -------------------------------------
- -----------------
1. U.S.A. General Services Administration....... Guarantee
2. Foster Wheeler Energy Corp. .................. Guarantee
3. George Hyman Company.......................... Guarantee
4. Virginia Dept. of Transportation.............. Guarantees
5. PCL Construction Group Inc.....................Guarantee
6. NY City Health and Hospitals Corp..............Guarantees
7. State of Utah.................................. Guarantee
8. Sundt Corp..................................... Guarantee
9. PACCO Ltd. of Guam............................. Guarantee
10. PCL Construction Group Inc..................... Guarantee
11. Lehrer, McGovern, Bovis........................ Guarantee
12. Mannesmann Demag Corporation................... Agreement
13. Costain Construction Limited................... Guarantee
14. Fleetway House Construction Management
Limited........................................ Guarantee
15. Limeback........................................ Guarantee
16. ERSB Sellafield................................. Guarantee
17. John Mowlen & Co. PLC........................... Guarantee
18. Olympia & York Limited.......................... Guarantees
19. Olympia & York Canary Wharf Ltd................. Guarantees
20. British Rail.................................... Guarantee
21. Try Construction Ltd. .......................... Guarantee
22. Amec Design & Management Ltd.................... Guarantee
23. Thames Water Utilities Ltd...................... Guarantee
24. John Lang Construction Ltd...................... Guarantee
25. British Airways................................. Guarantee
26. Property Services Agency......................... Comfort
Letter/Guarantee
27. Wessex Regional Health Authority................. Guarantee
28. Herbert Construction (U.K.) Ltd.................. Guarantees
29. United Dominions Trust........................... Guarantee
30. Lombard Water North Central PLC.................. Guarantee
31. NatWest Securities Limited....................... Guarantee
32. IBOS Finance Ltd. ............................... Guarantee
33. Seaboard Surety
Company*.......................Indemnification
34. CIGNA*........................................
Indemnification
35. Reliance Insurance Corp.......................
Indemnification
36. Wellington Guarantee......................... Indemnification
37. State of Nevada.............................. Indemnification
38. State of Florida EPA........................ Contingent
Liability
39. State of Maryland EPA........................ Contingent
Liability
40. State of Illinois EPA........................ Contingent
Liability
41. JWP 401K Plan................................. ERISA Plan
42. JWP Defined Compensation Pension Plan......... ERISA Plan
43. Connecticut General Life Insurance Company
(medical/dental policy)........................
Indemnification
44. Prudential (Erlanger)......................... Guarantee
45. London Underground Limited.................... Guarantees
46. Bank of Montreal.............................. Guarantee
- -----------------------------------------------------------------
|
* Inclusion of creditor on Schedule 1 is expressly contingent upon the satisfaction by such creditor of the conditions set forth in section H of Article III of the Plan.
SCHEDULE 2
OLD NOTE AGREEMENTS
The Old Note Agreements are those respective agreements pursuant to which the following notes were issued:
1. $10,714,500 9.25% senior note payable to the order of Principal Mutual Life Insurance Company.
2. $1,428,600 9.25% senior note payable to the order of Principal Mutual Life Insurance Company.
3. $2,500,050 9.25% senior note payable to the order of Equitable Variable Life Insurance Company.
4. $2,500,050 9.25% senior note payable to the order of National Integrity Life Insurance Company.
5. $2,142,900 9.25% senior note payable to the order of Merrill Lynch Life Insurance Company of New York.
6. $3,571,500 9.25% senior note payable to the order of The Life Insurance Company of Virginia (LICOVA & Co.).
7. $2,142,900 9.25% senior note payable to the order of Northwestern National Life Insurance Company.
8. $1,428,600 9.25% senior note payable to the order of Northern National Life Insurance Company.
9. $714,300 9.25% senior note payable to the order of Pan American Assurance Company.
10. $1,428,600 9.25% senior note payable to the order of Pan American Life Insurance Company.
11. $20,000,000 10.95% senior note payable to the order of Northwestern Mutual Life Insurance Company.
12. $10,000,000 10.95% senior note payable to the order of Principal Mutual Life Insurance Company.
13. $6,000,000 10.25% senior note payable to the order of The Mutual Life Insurance Company of New York.
14. $6,000,000 10.25% senior note payable to the order of Principal Mutual Life Insurance Company.
15. $5,000,000 10.25% senior note payable to the order of Crown Life Insurance Company.
16. $500,000 10.25% senior note payable to the order of The Minnesota Mutual Life Insurance Company.
17. $500,000 10.25% senior note payable to the order of Mutual Service Life Insurance Company.
18. $4,000,000 10.25% senior note payable to the order of Provident Life and Accident Insurance Company.
19. $2,000,000 10.25% senior note payable to the order of Century Life of America.
20. $1,000,000 10.25% senior note payable to the order of Century Life Insurance Company.
21. $3,000,000 10.25% senior note payable to the order of The Union Central Life Insurance Company.
22. $2,000,000 10.25% senior note payable to the order of Guarantee Mutual Life Insurance Company.
23. $4,000,000 10.25% senior note payable to the order of The Mutual Life Insurance Company of New York.
24. $3,000,000 10.25% senior note payable to the order of Life Investor Insurance Company of America.
25. $2,000,000 10.25% senior note payable to the order of Ausa U.S. Life Insurance Company.
26. $4,000,000 10.25% senior note payable to the order of Bankers United Life Assurance Company.
27. $1,000,000 10.25% senior note payable to the order of General Services Life Insurance Company.
28. $1,000,000 10.25% senior note payable to the order of Principal Mutual Life Insurance Company.
29. $4,000,000 10.25% senior note payable to the order of The Minnesota Mutual Life Insurance Company.
30. $1,000,000 10.25% senior note payable to the order of Provident Life and Accident Insurance Company.
31. $25,000,000 9.95% senior note payable to The Prudential Insurance Company of America.
32. $12,750,000 9.95% senior note payable to Massachusetts Mutual Life Insurance Co.
33. $1,250,000 9.95% senior note payable to MML Pension Insurance Co.
34. $1,000,000 9.95% senior note payable to The Massmutual Participation Investor Fund.
35. $10,000,000 9.95% senior note payable to The Mutual Life Insurance Company of New York.
36. $6,000,000 9.95% senior note payable to Principal Mutual Life Insurance Company.
37. $4,000,000 9.95% senior note payable to Crown Life Insurance Co.
38. $50,000,000 10.35% senior note payable to The Prudential Insurance Company of America due 11/30/2005.
39. $15,000,000 10.27% senior note payable to The Variable Annuity Life Insurance Co. due 11/30/2005.
40. $3,000,000 10.27% senior note payable to Ausa Life Insurance Company due 11/30/2005.
41. $2,000,000 10.27% senior note payable to Monumental Life Insurance Company due 11/30/2005.
42. $5,000,000 9.56% senior note payable to Provident National Assurance Company due 11/30/97.
43. $5,000,000 9.51% senior note payable to New York Life Insurance Company due March 31, 1996.
44. $5,000,000 9.65% senior note payable to New York Life Insurance Company due March 31, 1997.
45. $5,000,000 9.83% senior note payable to New York Life Insurance Company due March 31, 1998.
46. $5,000,000 9.10% senior note payable to New York Life Insurance and Annuity Corp. due March 31, 1994.
47. $5,000,000 9.33% senior note payable to New York Life Insurance and Annuity Corp. due March 31, 1995.
48. $25,000,000 9.10% senior note payable to the order of The Prudential Insurance Company of America due March 6, 2002.
49. $10,000,000 9.10% senior note payable to the order of American General Life and Accident Insurance Company due March 6, 2002.
50. $5,000,000 9.10% senior note payable to the order of Ohio National Life Insurance Company due March 6, 2002.
51. $5,000,000 9.10% senior note payable to the order of Modern Woodmen of America due March 6, 2002.
52. $4,250,000 9.10% senior note payable to the order of The Paul Revere Life Insurance Company due March 6, 2002.
53. $3,750,000 9.10% senior note payable to the order of The Paul Revere Protective Life Insurance Company due March 6, 2002.
54. $3,000,000 9.10% senior note payable to the order of The Union Central Life Insurance Company due March 6, 2002.
55. $2,000,000 9.10% senior note payable to the order of The Paul Revere Variable Annuity Insurance Company due March 6, 2002.
56. $2,000,000 9.10% senior note payable to the order of The Manhattan Life Insurance Company due March 6, 2002.
SCHEDULE 3
INTENTIONALLY OMITTED
SCHEDULE 4
Non-debtor Subsidiaries Constituting The
Collateral For The Series B Senior Secured Notes
Maris Equipment Company
JWP Pacific International, Inc.
University Energy Services of California Inc.
JWP Energy Products, Inc.
JWP Telecom, Inc.
Subsidiaries of the Above-named Companies
Jamaica Technical Trading Company
JWP Technical Services (C.N.M.I.) Inc.
JWP Technical Services Hong Kong Limited
JWP Technical Services (Singapore) PTE Ltd.
JWP Thailand
JWP Telecommunication Services Inc.
JWP Telephone Services Inc.
Standard Telecommunications, Inc.
Standard Telecommunications Equipment Inc.
SCHEDULE 5
Principal Subsidiaries Comprising SellCo.
University Cogeneration, Inc.
General Energy Development, Inc.
Water Companies
Wachtel Duklauer & Fein, Incorporated
Superior Engineering Corporation
University Mechanical Contractors, Inc. (Washington)
JWP Brandt Engineering Co., Inc.
Other Subsidiaries of SellCo.
A to Z Equipment Corp.
Afgo Engineering Corporation
Afgo Engineering Corp. of Washington
American Cable Products, Inc.
Antwerp Education Center N.V.
AZCO Inc.
Brandt Engineering Company of Arkansas, Inc.
Brandt Service Company
Businessland Canada Ltd.
Businessland (Hong Kong) Limited
Case/Acme Systems, Inc.
Communications Management Inc.
Computer Maintenance Corporation
Drake & Scull France SARL
E.M.A. International, Inc.
Fort Corp.
Gone Inc.
Guzovsky/JWP Electrical Inc.
G/M Tech Inc.
Intec Business Phones Inc.
ISYS Security Systems, Inc.
Jamaica Water Securities Corp.
Jamaica Water Supply Company
JWP Voc I
JWP Voc II
JWP Asset Management Inc.
JWP Communications Inc.
JWP Controls Inc.
JWP Controls Holding, Inc.
JWP Credit Corp.
JWP E.C. Corp.
JWP Environmental Services Company
JWP Environmental Services III Inc.
JWP Environmental Composting Technologies, Inc.
JWP Equipment Services Inc.
JWP Espana SA
JWP France SARL
JWP Guzovsky Electrical Corp.
Other Subsidiaries of SellCo.
JWP/HCCII Corp.
JWP of Hartford, Inc.
JWP Information Services, Inc.
JWP Information Services SARL
JWP/IS Network Integration Services, Inc.
JWP Mechanical Services of New York, Inc.
JWP Merger Sub Inc.
JWP New England Inc.
JWP/SHI Corp.
JWP Technical Services Corp.
Kerby Saunders, Inc.
Kerby Saunders-Warkol, Inc.
Marlon of Texas, Inc.
Metalair Industries, Inc.
Micro Avenue
MicroCom
North Am. Heating & Air Conditioning Company
Photo-Scan Management Systems, Inc.
Sea Cliff Water Company
Sivea Benelux
SLR Constructors Inc.
Sutter Hill Industries, Inc.
Teletime Limited
University Nuclear Systems, Inc.
Wachtel, Duklauer & Fein Incorporated, a New Jersey corporation
Walker Engineering, Inc.
Worldwide Communications, Inc.
JWP Unrestricted Sub 3 Inc.
JWP Unrestricted Sub 9 Inc.
JWP Unrestricted Sub 12 Inc.
Exhibit 2
CREDITORS' COMMITTEE
TCW Asset Management Company
865 South Figueroa Street
Los Angeles, CA 90017
Attn: Mr. Richard Masson, Managing Director
Bear Stearns Securities Corp.
245 Park Avenue, 4th Floor
New York, NY 10167
Attn: Mr. Steven Gidumal
Morgens, Waterfall, Vintaidis & Co., Inc.
610 Fifth Avenue, 7th Floor
New York, NY 10153
Attn: Mr. Jooko Tamminen
Baker Nye Advisors
767 Fifth Avenue
New York, NY 10153
Attn: Mr. George Konomos
Credit Suisse
12 East 49th Street
New York, NY 10017
Attn: Mr. Jan Kofol
Bank of America
335 Madison Avenue
New York, NY 10017
Attn: Ms. Faith R. Larsen
Mr. Mark P. Woods
UBS Securities, Inc.
299 Park Avenue
New York, NY 10171
Attn: Mr. Kevin Toner
Exhibit 3
JUNIOR COMMITTEE
Norman Wechsler
c/o Wechsler & Company
105 S. Bedford Road
Mt. Kisco, NY 10549
Grazia Pontoni
P.O. Box 195
225 E. Mill Street
Athens, MI 49011
c/o Mr. Raymond Pontoni
348 E. Mill Street, Box 98
Athens, MI 49011
Mr. Edward Sievers
207 E. Mich Avenue
Paw Paw, MI 49079
Richard R. Taylor
626 Jennings Lane
Battle Creek, MI 49015
Milton Klein
84 Tardy Lane
Wantagh, NY 11793
Exhibit 4
JWP INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Page
No.
- --------
Management's Discussion and Analysis of Financial
Condition and Results of Operations for the
three years ended December 31, 1992
(unaudited)................................................ 4-1
Consolidated Financial Statements and Notes as
of December 31, 1992 and 1991 and for the three years ended
December 31, 1992 (unaudited):
Consolidated Balance Sheets................................ 4-11
Consolidated Statements of Operations...................... 4-12
Consolidated Statements of Cash Flows...................... 4-13
Consolidated Statements of Shareholders' (Deficit)
Equity..................................................... 4-14
Notes to Consolidated Financial Statements................. 4-15
Management's Discussion and Analysis of JWP Inc.
and Subsidiaries Financial Condition and
Results of Operations for the two years ended
December 31, 1993 (unaudited).............................. 4-37
Condensed Consolidated Financial Statements and Notes
as of December 31, 1993 and 1992 and for the two years
ended December 31, 1993 (unaudited):
Condensed Consolidated Balance Sheets...................... 4-46
Condensed Consolidated Statements of Operations............ 4-47
Condensed Consolidated Statements of Cash Flows............ 4-48
Condensed Consolidated Statements of Shareholders'
(Deficit) Equity........................................... 4-49
Notes to Condensed Consolidated Financial Statements....... 4-50
Condensed Consolidated Financial Statements and
Notes as of March 31, 1994 and for the three
months ended March 31, 1994 (unaudited):
Condensed Consolidated Balance Sheet....................... 4-59
Condensed Consolidated Statement of Operations............. 4-60
Condensed Consolidated Statement of Cash Flows............. 4-61
Condensed Consolidated Statement of Shareholders'
(Deficit).................................................. 4-62
Notes to Condensed Consolidated Financial Statements....... 4-63
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF JWP INC. AND SUBSIDIARIES
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS FOR THE THREE YEARS ENDED
DECEMBER 31, 1992
(Unaudited)
Results of Operations
In 1992, JWP INC. (the "Company") incurred a net loss of $612.4
million or
$15.13 per share, had negative cash flow from operations of $49.6
million and
was in violation of certain financial and other covenants
contained
in its loan
agreements. The net loss includes losses of $363.5 million or
$9.00
per share
from continuing operations and $253.2 million or $6.24 per share
from
discontinued operations. As of December 31, 1992, the Company had
negative net worth of $176.0 million and a working capital
deficit of $364.9 million after
the reclassification of debt in default aggregating $501.0
million. For the year ended December 31, 1993, the Company
continued to experience losses. Cash flow from operations
continues to be inadequate to fund its operations and
service its debt and other obligations. From September 1992 to
February 1994, when the Company obtained debtor-in-possession
financing, the Company did not have available credit facilities
and, consequently, funded its operations from
working capital and proceeds from the sale of businesses and
other assets. The Company's surety companies are reviewing bid
and performance bonding requests on a case-by-case basis for
large construction projects and those with a
duration of more than two years. In addition, a surety company
that had been the primary source of surety bonds for certain
subsidiaries, which together comprised approximately 20% of the
Company's 1993 revenues of those mechanical/
electrical companies which the Company currently plans to retain,
is no longer engaged in the business of issuing such bonds. As a
result, these subsidiaries are currently not receiving such
bonds. However, the absence of available bonding for these
subsidiaries has not resulted in a material reduction in
their backlog. The Company and these subsidiaries are actively
engaged in discussions with another surety company which has
undertaken due diligence for the purpose of entering into a new
surety bonding arrangement.
However, there
can be no assurance that such a new surety bonding arrangement
can
be obtained.
On December 21, 1993, three holders of the Company's 73/4%
Convertible
Subordinated Debentures filed an involuntary petition under
Chapter
11 of the
U.S. Bankruptcy Code against the Company. The Company on February
14, 1994
consented to the entry of an order for relief under Chapter 11 of
the
Bankruptcy Code. At that time the Company adopted a proposed plan
of reorganization which, as modified, has the support of the
Official Unsecured
Creditors Committee and the Official Unsecured Junior Creditors
and Interest
Holders Committee. The proposed plan of reorganization
contemplates the
exchange of substantially all of the Company's indebtedness for
new
notes of
the reorganized Company, all of its common stock and warrants to
purchase
common stock of the reorganized Company. Holders of the Company's
common and
preferred stock and warrants of participation will receive
warrants
to purchase
common stock of the reorganized Company in exchange for their
equity interests.
The proposed plan also contemplates a business restructuring plan
which the
Company initially developed in the third quarter of 1992 to
divest
certain of
its non-core businesses. However, there can be no assurance that
the proposed
plan of reorganization will be consummated or, if so, its timing.
See
"Liquidity and Capital Resources" for additional discussion with
respect to the
Company's restructuring plan.
The accompanying financial statements have been prepared on a
going concern
basis and do not include any adjustments relating to the
recoverability and
classification of assets or the amounts and classification of
liabilities that
might be necessary should the Company be unable to continue as a
going concern.
The Company's continuation as a going concern is dependent upon
its
ability to
restructure its indebtedness in connection with its
reorganization
under
Chapter 11 of the U.S. Bankruptcy Code, obtain sufficient bonding
to guarantee
its performance on construction contracts, return to
profitability,
obtain
credit facilities and otherwise generate sufficient cash flow to
meet its restructured and other obligations on a timely basis.
See "Liquidity and Capital Resources".
The Company has restated its financial statements for the years
and quarters ended December 31, 1991 and 1990 as well as for each
of the quarters in the nine month period ended September 30, 1992
based primarily upon a revaluation of certain adjustments
originally recorded in 1992. As a result, net income for
the year ended December 31, 1991 has been reduced from the
previously reported amount of $60.3 million to $29.0 million and
earnings per share has been reduced from the previously reported
$1.54 per share to $0.73 per share. The 1991 restatement reflects
pre-tax charges of $47.9 million, of which $36.7
million relates to continuing operations and $11.2 million
relates to discontinued operations. The 1991 restatement of
continuing operations reflects a $4.5 million increase to
insurance reserves, a $6.6 million loss from the
sale of a business which the Company had decided to sell in 1991
and a $25.6 million reduction in the carrying value of certain
assets, principally receivables. Substantially all of the
restated charges in 1991 applicable to
discontinued operations relate to the Company's information
services business and include $9.9 million of costs and expenses
relating to the acquisition of
Businessland, Inc. which was acquired by the Company in August
1991. These
costs and expenses were previously charged to reserves
established
as part of
that acquisition.
Net income for the year ended December 31, 1990 has been
reduced
from the
previously reported amount of $59.3 million to $50.2 million and
earnings per
share has been reduced from $1.56 per share to $1.32 per share.
The
restatement
of the 1990 operating results reflects pre-tax charges of $9.6
million
consisting of $8.3 million related to continuing operations and
$1.3 million to
discontinued operations. The restatement of continuing operations
in 1990
reflects $4.8 million of adjustments to correct the accounting
for
goodwill and
a net $3.5 million reduction in the carrying value of certain
assets, primarily long-term investments. See Notes 1 and 16 to
the Consolidated Financial Statements with respect to the
restatement of the 1990 and 1991 financial
statements and the restatement of each of the quarters in the
nine month period ended September 30, 1992 and the fourth quarter
of 1990 and 1991, respectively.
As a result of the restatements of the Company's first and
second quarter earnings of 1992 and write-offs and losses
announced by the Company on August 4, 1992 and on October 2,
1992, class action lawsuits were filed on behalf of
shareholders against the Company and certain other defendants.
The class action lawsuits have been consolidated and the single
consolidated amended class action complaint alleges, among other
things, that the Company intentionally and materially overstated
assets and earnings in various public disseminations
in violation of Section 10(b) of the Securities and Exchange Act
of 1934 and Rule 10b-5 promulgated thereunder. The complaint
seeks an unspecified amount of damages. The Company has denied
the material allegations contained in the
complaint. The parties are now engaged in discovery proceedings.
However, under the terms of the Company's proposed plan of
reorganization, no damages will be recoverable from the Company
by the claimants in the class action
litigation, although they will receive warrants to purchase the
common stock of the
reorganized Company. See Note 17 to the Consolidated Financial
Statements for additional discussion with respect to the
shareholder litigation.
The Company has been informed by the Securities and Exchange
Commission (the "SEC") that it is conducting a private
investigation to determine whether there
have been violations of certain provisions of the federal
securities laws
and/or the rules and regulations of the SEC in connection with
the Company's
financial records, reports and public disclosures. The Company
has been cooperating with the SEC's staff and has voluntarily
produced requested documents and information. On April 12, 1994,
the SEC's staff informed the
Company of its intention to recommend that the SEC file a civil
injunction action against the Company. The Company is currently
engaged in discussions with the SEC's staff concerning a possible
consensual resolution of the matter.
The net loss in 1992 reflects (i) a continuing slump in the
Company's mechanical and electrical services business,
principally attributable to a
downturn in commercial construction; (ii) intense competition in
the Company's
information services business; (iii) restructuring charges
related
to the
planned disposition and downsizing of (a) the information
services
business,
(b) other non-core businesses and (c) certain
mechanical/electrical
operations;
(iv) significant provisions for losses on accounts receivable and
inventories;
(v) a provision for losses on net assets held for sale; and (vi)
expenses associated with the shareholder litigation, the
Company's efforts to
restructure its debt through a consensual arrangement and the
restatement of the Company's financial statements.
A significant portion of the net loss in 1992, particularly
with respect to
the losses on accounts receivable and to the write down of
inventories, arose
as a result of management's review conducted in connection with
the
preparation
of the Company's financial statements for the year ended December
31, 1992. As
a result of such review, the Company recorded write-offs and
losses
in 1992 for
impairment of goodwill and other intangibles, for the
establishment
of asset
valuation and restructuring reserves associated with net assets
held for sale
under a debt restructuring and recapitalization plan it had then
developed and
as a result of the decision to discontinue its information
services business.
The Company is focused on returning to profitability and
restructuring its
operations around a smaller international mechanical/electrical
services
business. In this regard, in March 1993, the Company's Board of
Directors
approved the disposition of the Company's U.S. information
services
business.
The Board of Directors had previously decided to sell the
Company's
overseas
information services business. Accordingly, operating results
reflect the
information services business as discontinued operations. See
Notes
10 and 11
to the Consolidated Financial Statements. Revenues of the
information services
business were $1.7 billion, $1.2 billion and $0.7 billion in
1992, 1991 and 1990, respectively. The information services
business incurred a net loss from
operations of $201.1 million in 1992 compared to net income of
$18.4 million
and $15.4 million in 1991 and 1990, respectively. The loss in the
information
services business includes charges of $67.3 million which consist
of the
write-off of goodwill and other intangible assets related to the
U.S.
information services business and costs attributable to employee
severance and
facilities consolidation. The loss also reflects intense
competition among
personal computer resellers, decreases in the prices of personal
computers and
the rapid introduction of new technology. The difficulties
encountered by the
Company in successfully integrating the back office operations
and
accounting
systems of Businessland Inc., which was acquired in August 1991,
with the Company's preexisting information services back office
operations resulted in
additional losses. In August 1993, the Company sold substantially
all the assets of its U.S. information services subsidiary. The
transaction
did not result in a material gain or loss to the Company. See
"Liquidity and Capital
Resources" for additional information with respect to the
disposition of such subsidiary.
In connection with the plan to dispose of the Company's
overseas information
services business and certain other of its U.S. information
services
businesses, the Company provided for losses aggregating $49.5
million in 1992.
These charges primarily represent the estimated losses to be
realized upon the
disposition of such business units. Such amount is in addition to
the
aforementioned net loss from operations of $201.1 million and is
included in
the accompanying Consolidated Statement of Operations under the
caption "Loss
from disposal of businesses" in Discontinued Operations.
In April 1992, the Company announced its intention to sell its
water supply
business. However, in July 1993, the Company's Board of Directors
decided not
to proceed with the divestiture due to uncertainties created by
then pending
rate-related proceedings and litigation. As described below, in
December 1993,
the Company's subsidiary, Jamaica Water Supply Company ("JWS"),
entered into an
agreement that became effective February 2, 1994 with respect to
the rate
proceedings and litigation (See Note 17) thereby eliminating
significant
uncertainties relating to the water supply business. Accordingly,
the Company
reinstated its plan of divestiture in the first quarter of 1994.
The
Consolidated Financial Statements for all periods presented
reflect
the water
supply business as a discontinued operation. See Note 17
regarding the status
of a proceeding initiated in 1988 by the City of New York with
respect to the
possible condemnation of the water distribution system of JWS
that is located in New York City.
Revenues from continuing operations were $2.4 billion, $2.3
billion and $2.1
billion in 1992, 1991 and 1990, respectively. Operating loss from
continuing operations was $235.6 million in 1992 compared to
operating income of $57.7
million and $82.8 million in 1991 and 1990, respectively. The
operating loss in
1992 includes restructuring charges of $38.7 million relating to
the downsizing
and consolidation of the North American mechanical/electrical
services
operations described under "Mechanical/Electrical Services".
Restructuring charges related to continuing operations consist
of $10.8
million applicable to permanent impairment of goodwill and $27.9
million for
severance payments, facilities consolidation costs, provisions
for contract losses and the write-down of certain assets to net
realizable value.
In connection with the Company's proposed plan of
reorganization, certain
mechanical/electrical services business units and non-core
businesses have been
identified for sale or downsizing. The operating results of such
businesses are
included in continuing operations. In 1992, 1991 and 1990 such
business units
had revenues of $526.9 million, $501.7 million and $444.2
million,
respectively, and an operating loss of $41.2 million in 1992
compared to
operating income of $15.3 million and $12.6 million in 1991 and
1990, respectively.
Selling, general and administrative expenses ("SG&A") were
$440.7 million,
$286.9 million and $248.6 million in 1992, 1991 and 1990,
respectively. The
significant increase in SG&A in 1992 includes a provision of
$100.4
million for
losses on accounts and other receivables and an increase in
general
corporate
expenses of $29.2 million and $13.6 million applicable to the
write-off of
goodwill. See "Mechanical/Electrical Services" below for a
discussion regarding
the provision for losses on accounts receivable. General
corporate
expenses
were $48.4 million in 1992 compared to $19.2 million in 1991 and
$12.2 million
in 1990. The increase in such expenses in 1992 was primarily
attributable to
(a) fees paid to lenders for extensions of, amendments to and
waivers of
provisions of the Company's revolving credit agreement ($4.5
million), (b) the
write-off of deferred debt expense in connection with the
Company's
planned
restructuring of its debt ($2.9 million), (c) legal, consulting
and
other
professional fees arising out of the shareholder litigation,
defaults of
covenants contained in loan agreements and associated debt
restructuring
activities and the restatement of the Company's financial
statements ($9.6
million), (d) employee termination costs ($1.8 million), (e)
relocation of the
Company's corporate headquarters, primarily the write-off of
leasehold
improvements and costs related to an abandoned lease ($4.2
million), and (f)
the accelerated vesting of deferred compensation as a result of
the
termination
of employment of certain officers and employees in accordance
with the terms of
a deferred compensation plan ($5.6 million). SG&A as a percentage
of revenues
was 12.4% in 1991 compared to 12.1% in 1990. The increase in SG&A
expenses in
1991 was primarily related to the Company's growth and expansion.
Net interest expense applicable to continuing operations was
$44.2 million in
1992 compared to $43.9 million in 1991 and $36.6 million in 1990.
In 1992, the Company sold certain energy and environmental
related
businesses and a division of its equipment rental business from
which it
realized a net gain of $12.0 million and a net loss of $4.5
million,
respectively. In 1992, the Company also recorded net losses on
businesses sold
or held for sale in the amount of $83.6 million. In 1991, the
Company incurred
a loss of $6.6 million from disposition of a certain subsidiary.
See Note 11 to
the Consolidated Financial Statements.
Effective January 1, 1992, the Company adopted the Statement of
Financial
Accounting Standards No. 109 "Accounting for Income Taxes" (SFAS
109). The
cumulative effect of adopting SFAS 109 was to record an income
tax
benefit of
$4.3 million or $0.11 per share as of January 1, 1992.
Mechanical/Electrical Services
The mechanical/electrical services business revenues were $2.4
billion, $2.3
billion and $2.1 billion for the years ended December 31, 1992,
1991 and 1990,
respectively. In 1992, this business incurred an operating loss
of $187.2
million compared to operating income of $76.9 million and $95.0
million in 1991
and 1990, respectively. As discussed above, the Company has
restated its
financial statements for the years ended December 31, 1991 and
1990. The
restatement had the effect of decreasing the operating income of
this segment
in 1991 and 1990 by $32.4 million and $6.7 million, respectively,
from the
amounts previously reported. The operating loss in 1992 reflects,
among other
things, the negative impact of the recession and oversupply in
the
commercial
real estate market which caused a sharp reduction in new
construction. This reduction of commercial work caused many of
the
Company's
mechanical/electrical services business units to pursue
noncommercial projects,
primarily governmental and municipal facilities, at lower margins
than
historically available in the commercial market place. Certain of
the business
units were not experienced in performing noncommercial projects
and as a result
incurred significant losses. The operating loss in 1992 includes
a
provision
for losses on accounts and other receivables of $100.4 million
due
in part to
the impact of the recession on the financial condition of
customers
of the
Company's mechanical/electrical services business. Additionally,
the Company's
financial condition and negative cash flow has impacted its
ability
to settle
claims and unapproved change orders on a favorable basis. The
operating loss in
1992 includes restructuring charges of $38.7 million for the
downsizing of the
Company's North American mechanical/electrical services
operations
(see Note 12
to the Consolidated Financial Statements), $13.6 million
applicable
to the
write-off of goodwill and a net charge of $15.6 million relating
to
the
write-off of the small tool inventory. Small tools are located at
numerous
construction sites and generally have short lives. The Company
made
the
decision to write-off its small tool inventory because of the
difficulty and
expense associated with taking periodic physical inventories
required to
maintain the tools as an asset.
The increase in revenues of 12% in 1991 was attributable to the
acquisition
of Comstock Canada in February 1991 and internal growth within
the European
mechanical/electrical services operations. Operating margins in
1991 declined
to 3.3% from 4.6% in 1990. Revenues and operating margins in the
U.S. for 1991
were adversely affected by the recession which created
competitive
pressure for
small contracts, a slowdown in retrofit and service activities
and
delays in
the start-up of certain projects in the Company's energy and
environmental
related operations. In 1991, the Company focused its attention on
large
industrial, utility and governmental projects to offset the
effects of the
continuing weakness in the U.S. commercial office building
construction marketplace.
At December 31, 1992, the mechanical/electrical services
business backlog was
$1.6 billion compared to $1.0 billion at December 31, 1993. Such
backlog
included $1,263 million at December 31, 1992 and $954.2 million
at December 31,
1993 relating to subsidiaries which the Company currently intends
to retain.
The Company's overall backlog in its North American regions and
in the United Kingdom has stabilized at approximately $1.0
billion through May 1994. The
initial decline was attributable to a downsizing in the Company's
operations, the Company's weakened financial condition which
continues to adversely affect
its ability to obtain new contracts and the continuing recession
in the U.S.
and overseas construction markets. The Company's surety companies
have become
more selective in issuing new bonds, especially on larger
projects
and those
with a duration of more than two years. Additionally, the surety
companies will
generally not bond new projects for certain non-core businesses
which the
Company has identified for sale. Surety bonds are frequently a
precondition to
the award of a mechanical or electrical contract. Prospects for a
recovery in
the commercial office building market in both North America and
the United Kingdom remain poor for the immediate future.
Included in the accompanying Consolidated Balance Sheet at
December 31, 1992
under the caption "Excess of cost of acquired businesses over net
assets, less
amortization" is $61.5 million of goodwill. Such goodwill relates
to
mechanical/electrical services business units which the Company
intends to
retain. Management believes that such goodwill has not been
permanently
impaired. However, if the Company were to decide to divest
certain of these
units, goodwill and other write-offs might be required depending
upon the then
existing market conditions and their future business prospects.
Supply of Water (included in discontinued operations)
Revenues from the Company's water supply business were $59.8
million, $63.1
million and $59.2 million for the years ended December 31, 1992,
1991 and 1990,
respectively. Operating income was $4.8 million, $14.6 million
and $13.3
million in 1992, 1991 and 1990, respectively. The decrease in
revenues of 5.2%
in 1992 compared to 1991 was primarily due to reduced customer
consumption as a
result of cool and wet weather conditions in the New York City
area
in the
summer of 1992. The increase in revenues of 6.6% in 1991 as
compared to 1990 was the result of a rate increase
effective March 1991
and an increase in customer consumption as a result of abnormally
dry and hot
weather during the summer of 1991.
On December 22, 1993, JWS, the New York State Consumer
Protection
Board,
Nassau County, certain other governmental bodies and a consumer
advocate group
executed an agreement that ended several regulatory and legal
proceedings
against JWS. The agreement was approved by the New York State
Public Service
Commission (the "PSC") on February 2, 1994. The agreement
provides
for, among
other things, a three year general moratorium on rates charged by
JWS, resolution of the economic issues raised by the PSC arising
from
its 1992
operational audit of JWS, settlement of related litigation and
the
dismissal of
an action brought against JWS by Nassau County of the State of
New
York
alleging violations of the Racketeer Influenced and Corrupt
Organizations Act
and common law fraud. JWS also agreed, in consideration of
avoided
litigation
and other costs associated with the proceedings, to make payments
over the next
three years totalling $11.7 million to customers in Nassau and
Queens Counties
of the State of New York. In connection with this settlement, the
Company
provided a charge of $7.0 million in 1992. See Note 17 to the
Company's
Consolidated Financial Statements. Additionally, the agreement
provides that
JWS will use its best efforts to bring about the separation of
Jamaica Water
Securities Corp., a subsidiary of the Company which holds
substantially all the
common stock of JWS, from the Company.
Liquidity and Capital Resources
For the year ended December 31, 1992, the Company's operations used $49.6 million in cash primarily to fund operating losses and working capital requirements. From September 1992 to February 1994, the Company had no available lines of credit and experienced significant cash outflow as a result of adverse publicity associated with the restatements of its first and second quarter 1992 financial statements, defaults under its loan agreements, senior management changes and from operating losses. In February 1994, the Company obtained a $35 million debtor-in-possession credit facility ("DIP Loan") from Belmont Capital Partners II, L.P., an affiliate of Fidelity Investments ("Belmont"), which is described in greater detail below.
Despite aggressive cash management measures that have been
implemented on a worldwide basis throughout the Company,
operating cash flow continued to
deteriorate throughout 1993 with approximately $44.5 million of
cash used to fund operations through December 31, 1993. The
Company's consolidated cash balance decreased from $86.8 million
at December 31, 1992 to $39.5 million at
December 31, 1993. The December 31, 1993 cash balance included
$3.0 million in foreign bank accounts. Such bank accounts are not
available to support the Company's domestic mechanical/electrical
services business or to pay corporate
expenses. The negative operating cash flow reflects continued
pressure on accounts payable and other increases in working
capital requirements caused by the Company's weakened financial
condition, restructuring costs, professional
fees resulting from debt restructuring negotiations and
shareholder litigation and cash deposits made to secure insurance
obligations.
As a consequence of the Company's financial difficulties, an
asset disposition program was initiated in the third quarter of
1992 with respect to the Company's non-core businesses and
certain other assets in order to raise
cash to reduce operating cash outflow and to reduce debt. A total
of $139.0 million of net cash proceeds was realized from such
program in 1992 including:
$84.1 million from the sale of five energy and environmental
related businesses, $21.1 million from the sale of the Company's
computer lease
portfolio, $18.4 million from the sale of the Company's interest
in
a
hospital's central utility plant and $8.8 million from the sale
of
a rental
equipment business. The cash proceeds from these asset
dispositions
in 1992
were used to reduce debt and for working capital requirements.
From
January 1,
1993 to December 31, 1993, the Company received net cash proceeds
of $43.4
million from the sale of certain overseas information services
business units,
other non-core businesses and other assets. Such proceeds were
used
primarily
for working capital requirements.
In February 1994, the Company and substantially all of its
subsidiaries
entered into an agreement with Belmont with respect to a DIP
Loan.
The
agreement provides a credit facility to the Company of up to $35
million at an interest rate of 12% per annum during the period of
the
reorganization proceeding. Also, Belmont will receive, as
additional interest,
a percentage of the securities to be issued under the Company's
plan of
reorganization. The DIP Loan is secured by a first lien on
substantially all of
the assets of the Company and most of its subsidiaries. As of
June
1994, the
Company had drawn down $20 million under the DIP Loan.
The Company is in default of certain covenants of the DIP Loan.
Pursuant to
written waivers of default, dated April 27, 1994 and May 6, 1994,
the Company
has been permitted by Belmont to draw on its line of credit.
Under
the
circumstances, any additional borrowings under the DIP Loan will
require
further waivers of default.
The DIP Loan is intended to be repaid upon the effective date
of
the proposed
plan of reorganization. The Company is actively seeking a working
capital
facility of approximately $40 million. The proceeds of this new
facility will
be used to refinance the Company's borrowings under the DIP Loan
and to provide
working capital to the reorganized Company. However, there can be
no assurance
that the Company will be able to obtain a new working capital
facility or, if
so, the amount of any such facility. Obtaining such a facility is
a condition
of the confirmation of the Company's plan of reorganization.
In August 1993, the Company sold substantially all the assets
of
its U.S.
information services subsidiary to ENTEX Information Services,
Inc.
("ENTEX"),
a newly organized company owned by a private investor and the
management of the
U.S. information services subsidiary. As part of the
consideration
for its
sale, the Company received warrants to buy up to 10% of the
purchaser's common
stock for a nominal amount. The Company has ascribed no value to
these
warrants. Additionally, ENTEX assumed substantially all the debt
and other
liabilities and obligations relating to the ongoing operations of
the U.S.
information services subsidiary; that subsidiary retained certain
lease
obligations and certain tax liabilities. The Company was also
released from
approximately $210 million of its guarantees of indebtedness and
similar
obligations of the subsidiary. In October 1993, this subsidiary
filed a
voluntary petition under Chapter 7 of the U.S. Bankruptcy Code.
As described in Notes 1 and 3 to the Company's Consolidated
Financial
Statements, the Company is in default of covenants contained in
its
loan
agreements under which approximately $501.0 million was
outstanding
at December
31, 1992, including $484.4 million owed to senior lenders and
$16.6
million
owed to subordinated note holders. With respect to the defaulted
senior loan
agreements, "standstill arrangements" were negotiated which
covered
the period
from mid-December of 1992 through April 30, 1993. Under the
standstill
arrangements, the senior lenders agreed, in principle, to
forebear
the receipt
of principal and to accept payment of interest during such
periods
at reduced
rates ranging from 4% to 6.75%. Since April 30, 1993, no
standstill
arrangement
has been in place and the Company ceased making principal and
interest
payments. However, interest continued to accrue under the terms
of the
respective loan agreements which in certain circumstances
included
default rate
premiums of an additional 2% and in one case 4%. Interest ceased
to accrue on
December 21, 1993, the date on which an involuntary bankruptcy
petition was
filed against the Company. At December 31, 1993 and 1992, accrued
interest on
defaulted debt was $43.3 million and $5.8 million, respectively.
The Company
has pledged to the holders of its senior notes and bank
indebtedness the common
stock of certain subsidiaries held for sale and certain proceeds
from the sale of one of these subsidiaries. The combined net book
value of these subsidiaries was $23.3 million at December
31,1992.
The Company has not made scheduled semiannual interest payments
since September 1, 1993 with respect to its 73/4% Convertible
Subordinated Debentures. All interest payments on such debt were
previously made when due.
The outstanding principal balance of the debentures at December
31, 1992, in the amount of approximately $7.0 million, has been
included in "Debt in default" in the accompanying Consolidated
Balance Sheet.
In June 1993, the Company's management developed a business
restructuring plan. The plan contemplates the sale of a number of
domestic mechanical and electrical services business units and
the reorganization of the Company
principally around a smaller international mechanical/electrical
services business which had revenues of approximately $1.9
billion in both 1992 and
1993. As described above and in Notes 10 and 11 to the Company's
Consolidated Financial Statements, the Company's business
restructuring plan contemplated
the sale of its information services business, certain of its
mechanical/electrical business units, its water supply business
and
certain
non-core businesses. As a result, the net assets of businesses to
be sold have
been classified in the accompanying Consolidated Balance Sheet as
of December
31, 1992 as "Net assets held for sale" and carried as either
current or
long-term assets on the basis of their actual or expected
disposition dates.
The Company's proposed plan of reorganization contemplates that
the creditors
of JWP INC. will exchange approximately $623 million of holding
company debt
and other liabilities for approximately $139 million of recourse
debt,
approximately $48 million of nonrecourse debt, 100% of the equity
of the
Company and warrants to purchase common stock of the reorganized
Company. All
of the new debt, except for approximately $67 million, is
expected
to be paid
from the proceeds of asset sales. As previously indicated, under
the proposed
plan of reorganization, holders of the Company's common and
preferred stock and
warrants of participation will receive warrants to purchase
common
stock of the
reorganized Company in exchange for their equity interests.
Only JWP INC., the holding company, is the subject of the
proceeding under
Chapter 11. The Company's mechanical/electrical, water supply and
other
operating subsidiaries are not parties to this proceeding. All
operating
subsidiary payments have been made in the ordinary course of
business.
See "Results of Operations" with respect to the Company's ability to continue as a going concern.
The Company's Canadian subsidiary, Comstock Canada, is
negotiating with a Canadian bank to obtain a Canadian $7.5
million (approximately
U.S. $5.6 million) secured demand loan credit facility with
interest at the Canadian
prime rate (8% as of June 1994) plus 1.0%. The new credit
facility would be
secured by all the assets of Comstock Canada and would be
guaranteed by the Company.
In June 1994, a number of the Company's U.K. subsidiaries
entered into a
demand credit facility from a U.K. bank with an aggregate credit
limit of Pounds14.1 million (approximately U.S.$21.7 million).
The credit facility
consists of the following components with the individual credit
limits as
indicated: an overdraft line of up to Pounds7.0 million
(approximately
U.S.$10.7 million), a facility for the issuance of guarantees,
bonds and
indemnities of up to Pounds7.4 million (approximately U.S.$11.4
million) and
other credit facilities of up to Pounds0.75 million
(approximately
U.S.$1.2 million). The overdraft facility is secured by
substantially all
of
the assets
of the Company's principal U.K. subsidiaries. The overdraft
facility provides
for interest at the U.K. bank reference rate (51/2% as of June
1994) plus 3%.
JWS, a subsidiary of the Company carried in "Net assets held
for
sale" in the
Consolidated Balance Sheet as of December 31, 1992, had two
revolving credit
agreements each of which permitted unsecured borrowings of up to
$10.0 million
with interest rates equal to the prime rate (71/4% at June 1994).
Both
agreements expired on April 30, 1994 and the borrowings
thereunder
have been
permitted by the lenders to remain outstanding. JWS is currently
negotiating
new revolving credit agreements. As of December 31, 1992, JWS had
equal
borrowings under each agreement aggregating $4.8 million.
For the years ended December 31, 1992, 1991 and 1990, capital
expenditures
including those financed were $70.1 million, $58.8 million and
$44.2 million,
respectively. Capital expenditures for the year ended December
31,
1992 include
$32.0 million for environmental related projects which were
included in the
businesses sold in the fourth quarter of 1992. The Company's
mechanical/electrical services business does not require
significant
commitments for capital expenditures. The Company's water supply
business anticipates making capital expenditures approximating
$57.0
million
for the
utility plant over the five years ending December 31, 1997 which
includes $7.5
million expended in 1993. These capital expenditures are expected
to be
financed by internally generated funds from the water supply
business with any
remaining long-term financing requirements during that period
obtained from the
proceeds of newly issued first mortgage bonds and from bank
loans.
However, the
Company's financial difficulties are making it difficult for the
water supply
business to finance its capital programs.
At December 31, 1992, the Company and a wholly-owned captive
insurance
subsidiary ("Defender") had letters of credit outstanding
totalling
$38.2
million which in effect secure their workers' compensation,
automobile and
general liability insurance obligations. The letters of credit
were intended to
serve as collateral for the obligations of Defender to reimburse
the Company's
unrelated insurance carriers for claims paid in respect of
certain
years'
insurance programs. In December 1993, these letters of credit
were
reduced to
$36.4 million. $34.9 million of such letters of credit expire in
December 1994
and $1.5 million expire in February 1995. Since October 1992,
neither the
Company nor Defender have been able to obtain additional letters
of
credit to
secure their insurance obligations and, as a result, have been
required to make
cash collateral deposits to a third party insurance company to
secure those
type obligations. The deposits totalled $7.7 million as of
December
31, 1992
and are included in Other Assets under the caption
"Miscellaneous"
in the
accompanying Consolidated Balance Sheet. Such deposits have
increased to $29.7
million as of June 30, 1994. They expect to be required to post
additional cash
collateral insurance deposits until the Company completes its
reorganization
under the Chapter 11 proceedings. The need to provide cash
collateral has
adversely affected the Company's cash flow.
The Company's proposed plan of reorganization contemplates that
the letters
of credit described above will be drawn upon by the unrelated
insurance
carriers and that the Company's obligations to Defender which
were
pledged as
collateral to the banks issuing such letters of credit, will be
impaired under
the Chapter 11 proceeding as well as any related Company
obligations to those
banks. Beginning in February 1994, Defender ceased making
payments
for amounts
owed to the unrelated insurance carriers, which obligations are
in
effect
secured by the letters of credit, and the Company's unrelated
insurance
carriers have commenced partial draw downs against certain of the
letters of
credit. Approximately $5 million has been drawn against the
letters
of credit
through June 1994.
In 1993, the Company's French and Belgian information services
subsidiaries
filed petitions in their respective countries seeking relief from
their
creditors. The French and Belgian subsidiaries have outstanding
unsecured credit facilities guaranteed by the Company which
aggregate approximately $5.9 million. Such amount has been
provided for as a loss in the accompanying
Consolidated Statements of Operations for the year ended December
31, 1992.
The Company has not paid dividends on its preferred stock since September 1992. Cumulative unpaid dividends through December 31, 1993 aggregate $2.3 million.
At December 31, 1992, the Company had net operating loss
carryforwards ("NOL") for U.S. Federal income tax purposes of
approximately $220 million. Because of significant tax losses in
1993, the NOL is estimated to have increased to over $500 million
as of December 31, 1993. If the Company exchanges its existing
indebtedness for newly issued equity and debt as
contemplated by the proposed plan of reorganization (See Notes 1
and 3 to the Consolidated Financial Statements), a significant
portion of the NOL may not be available to reduce future U.S.
taxable income. Additionally, due to recent
changes in U.S. Federal income tax laws, the timing of any such
reorganization
could further impact and reduce the amount of the NOL.
See "Supply of Water" with respect to pending payments by JWS to its customers in 1994 to 1996 totalling $11.7 million. The payments are expected to be funded by JWS through cash on hand, cash flow from operations and additional borrowings, if necessary.
In September 1992, the PSC issued an order that resulted in the suspension of dividend payments to the Company by JWS for the last two quarters of 1992 and for the year ended December 31, 1993. Dividends paid by JWS in 1992 and 1991 amounted to $1.2 million and $2.0 million, respectively. As a result of the settlement agreement described in "Supply of Water", JWS recommenced the payment of dividends in 1994.
Impact of New Accounting Pronouncements
As discussed in Note 7 to the Consolidated Financial
Statements, effective January 1, 1993, the Company adopted
Statement of Financial Accounting
Standards No. 106 "Employers' Accounting for Postretirement
Benefits Other than Pensions". The adoption of this standard did
not have a material impact upon the Company's consolidated
financial position or its results of operations.
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 112 "Employers' Accounting for
Postemployment Benefits" which will be effective beginning in
1994. This standard will not
have a material impact upon the Company's consolidated financial
position or its results of operations.
JWP INC. and Subsidiaries Consolidated Balance Sheets (unaudited) (In
thousands)
December 31,
----------------------
1992 1991
- -------------------------------------------------------------------------------- ---------- -----------
As Restated
ASSETS
Current Assets
Cash and cash equivalents..................................................... $86,836 $76,593
Accounts receivable, less allowance for doubtful accounts
of $42,630 and $29,541.......................................................... 458,273 1,038,723
Costs and estimated earnings in excess of billings on uncompleted contracts... 67,817 132,644
Inventories................................................................... 6,618 359,033
Prepaid expenses and other.................................................... 9,746 45,287
Net assets held for sale...................................................... 32,894 -
---------- -----------
Total Current Assets............................................................ 662,184 1,652,280
---------- -----------
Net assets held for sale........................................................ 85,611 -
Investments, notes and other long-term receivables.............................. 22,440 44,605
Property, plant and equipment, net.............................................. 51,087 323,439
Other Assets
Excess of cost of acquired businesses over net assets, less amortization...... 61,542 149,496
Miscellaneous................................................................. 24,720 64,007
---------- -----------
86,262 213,503
---------- -----------
Total Assets.................................................................... $907,584 $2,233,827
========== ===========
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Current Liabilities
Notes payable................................................................. $6,452 $110,600
Current maturities of long-term debt and capital lease obligations............ 2,634 44,012
Debt in default............................................................... 501,007 -
Accounts payable.............................................................. 224,840 808,596
Billings in excess of costs and estimated earnings on uncompleted contracts... 125,764 140,700
Accrued payroll and benefits.................................................. 45,665 67,710
Other accrued expenses and liabilities........................................ 120,733 112,525
---------- -----------
Total Current Liabilities....................................................... 1,027,095 1,284,143
---------- -----------
Long-term debt.................................................................. 4,111 425,080
Other long-term obligations and deferred credits................................ 52,357 68,468
Shareholders' (Deficit) Equity
Preferred Stock, $1 par value, 25,000,000 shares authorized, 425,000 shares of
Series A issued and outstanding................................................. 21,250 21,250
Common Stock, $.10 par value, 75,000,000 shares authorized, 40,754,051 and
40,178,907 outstanding, excluding 591,775 and 225,749 treasury shares in
1992 and 1991................................................................... 4,075 4,018
Warrants of Participation..................................................... 576 576
Capital surplus............................................................... 203,505 212,703
Cumulative translation adjustments............................................ (3,930) 4,807
Retained (deficit) earnings................................................... (401,455) 212,782
---------- -----------
Total Shareholders' (Deficit) Equity............................................ (175,979) 456,136
---------- -----------
Total Liabilities and Shareholders' (Deficit) Equity............................ $ 907,584 $2,233,827
========== ===========
|
The accompanying notes to consolidated financial statements are
an
integral
part of these statements.
JWP INC. and Subsidiaries Consolidated Statements of Operations (unaudited) (In
thousands, except per share data)
Year Ended December 31,
-------------------------------------
1992 1991 1990
- ------------------------------------------------------ ----------- ------------ ------------
As Restated As Restated
Revenues.............................................. $2,404,577 $2,318,112 $2,057,607
----------- ------------ ------------
Costs and Expenses
Cost of sales......................................... 2,160,723 1,973,561 1,726,207
Selling, general and administrative................... 440,725 286,900 248,649
Restructuring charges................................. 38,741 - -
----------- ------------ ------------
2,640,189 2,260,461 1,974,856
----------- ------------ ------------
Operating (Loss) Income............................... (235,612) 57,651 82,751
Interest expense...................................... (45,894) (46,240) (39,340)
Interest income....................................... 1,713 2,348 2,713
Net (loss) on businesses sold or held for sale........ (76,078) (6,628) -
----------- ------------ ------------
(Loss) Income From Continuing Operations Before Income
Taxes and Cumulative Effect of Accounting Change...... (355,871) 7,131 46,124
Provision for income taxes............................ 7,644 2,419 17,475
----------- ------------ ------------
(Loss) Income From Continuing Operations Before
Cumulative Effect of Accounting Change................ (363,515) 4,712 28,649
Discontinued Operations
(Loss) income from operations, net of income taxes.... (203,739) 24,263 21,600
(Loss) from disposal of businesses.................... (49,491) - -
----------- ------------ ------------
(Loss) income from discontinued operations............ (253,230) 24,263 21,600
----------- ------------ ------------
Cumulative Effect of Change in Method of Accounting
for Income Taxes...................................... 4,315 - -
----------- ------------ ------------
Net (Loss) Income..................................... $(612,430) $28,975 $50,249
=========== ============ ============
(Loss) Earnings Per Share
Continuing operations................................. $(9.00) $0.10 $0.75
Discontinued operations
(Loss) income from operations......................... (5.02) 0.63 0.57
(Loss) from disposal of businesses.................... (1.22) - -
----------- ------------ ------------
(Loss) income from discontinued operations............ (6.24) 0.63 0.57
----------- ------------ ------------
Cumulative effect of change in method of accounting
for income taxes...................................... 0.11 - -
----------- ------------ ------------
Net (loss) income..................................... $(15.13) $0.73 $1.32
=========== ============ ============
|
The accompanying notes to consolidated financial statements are
an
integral
part of these statements.
JWP INC. and Subsidiaries Consolidated Statements of Cash Flows
(unaudited) (In
thousands)
Year Ended December 31,
- -----------------------------------
1992 1991 1990
- ----------------------------------------------------------------
As Restated As Restated
- ----------------------------------------------------------------
Net (Loss) Income........................................$(612,430) $28,975 $50,249
Adjustments to Reconcile Net (Loss) Income to Net Cash
(Used in) Provided by Operating Activities
Depreciation and amortization........................... 68,993 49,072 33,930
Restructuring charges applicable to continuing operations 38,741 - -
Restructuring charges applicable to discontinued operations 25,950 - -
Net loss from businesses sold or held for sale............. 76,078 6,628 -
Provision for losses on accounts and other receivables.....113,903 16,241 6,425
Inventory valuation adjustments............................ 59,787 5,300 -
Write-off of deferred debt issuance cost................... 2,876 - -
Write-off of fixed assets and miscellaneous assets......... 11,167 8,200 -
Write-off of goodwill and other intangibles................ 54,873 - -
Stock compensation........................................... 9,518 3,808 4,713
Deferred income taxes...................................... 7,137 13,418 13,359
Loss from disposal of discontinued operations.............. 49,491 - -
Equity and other losses in unconsolidated subsidiary......... 5,690 - -
Cumulative effect of accounting change for income taxes.... (4,315) - -
Other, net................................................. 21,112 10,829 (4,137)
---------- ----------- -----------
(71,429) 142,471 104,539
Change in Operating Assets and Liabilities Excluding Effect
of Businesses Disposed of and Acquired
Decrease (increase) in accounts receivable................. 73,379 (119,774) (35,592)
Decrease (increase) in inventories and contracts in progress 123,884 (41,309) (35,293)
(Decrease) increase in accounts payable and accrued expenses(190,752) 114,595 75,686
Changes in other assets and liabilities..................... 15,335 6,490 (23,568)
- ----------- ----------- -----------
Net Cash (Used in) Provided by Operations.....................(49,583) 102,473 85,772
- ----------- ----------- -----------
Cash Flows from Financing Activities
Proceeds from long-term debt.................................. 85,302 47,660 78,300
Payments of long-term debt and capital lease obligations...... (68,514) (78,710) (39,055)
Payment of Businessland 101/4% Senior Notes................... - (18,750) -
Proceeds from issuance of common stock and exercise
of stock options................................................ 1,911 2,169 4,827
Payment of preferred dividends................................ (1,354) (711) -
Purchase of Company warrants.................................. - - (4,000)
Acquisition of common stock for the treasury.................. (8,130) (7,877) (4,424)
Increase (decrease) in notes payable, net..................... 30,258 89,544 (21,245)
----------- ----------- -----------
Net Cash Provided by Financing Activities....................... 39,473 33,325 14,403
----------- ----------- -----------
Cash Flows from Investment Activities
Proceeds from sale of businesses and other assets............. 138,971 10,066 -
Acquisition of businesses, net of cash acquired............... (15,899) (62,600) (31,682)
Purchase of property, plant and equipment..................... (36,411) (56,000) (34,232)
Purchase of environmental facilities.......................... (32,044) - -
Net disbursements for other investments....................... (9,695) (4,779) (15,134)
Cash balance of businesses held for sale or sold.............. (26,241) - -
Other, net.................................................... 1,672 (2,619) (7,532)
----------- ----------- -----------
Net Cash Provided by (Used in) Investment Activities............ 20,353 (115,932) (88,580)
----------- ----------- -----------
Increase in Cash and Cash Equivalents........................... 10,243 19,866 11,595
Cash and Cash Equivalents at Beginning of Year.................. 76,593 56,727 45,132
---------- ----------- -----------
Cash and Cash Equivalents at End of Year........................ $86,836 $76,593 $56,727
=========== =========== ===========
|
The accompanying notes to consolidated financial statements are an integral part of these statements.
JWP INC. and Subsidiaries Consolidated Statements of
Shareholders' Equity
(Deficit) (unaudited) (In thousands)
Cumulative Retained Preferred Common Warrants of
Capital Translation Earnings Shareholders' Stock Stock Participation
Surplus Adjustments (Deficit) Equity (Deficit)
--------- ------- -------------
- --------- ----------- ----------- ----------------
Balance December 31, 1989... $- $3,731 $576 $173,363 $- $134,269 $311,939
Common stock offering....... - 10 - 1,794 - - 1,804
Common stock issued
in connection with
acquisitions................ - 6 - 1,903 - - 1,909
Purchase of Company
warrants.................... - - - (4,000) - - (4,000)
Exercise of stock options... - 28 - 2,995 - - 3,023
Foreign currency translation
adjustment.................. - - - - 2,836 - 2,836
Other, net.................. - 22 - 2,731 - - 2,753
Net income, as restated..... - - - - - 50,249 50,249
--------- ------- ---------------------- ----------- ----------- ----------------
Balance December 31, 1990
(As Restated)............... - 3,797 576 178,786 2,836 184,518 370,513
Common stock issued
in connection with
acquisitions................ - 190 - 29,048 - - 29,238
Preferred stock issued
in exchange for
Businessland's 101/4%
Senior Notes................ 21,250 - - - - - 21,250
Foreign currency translation
adjustment.................. - - - - 1,971 - 1,971
Preferred stock dividends... - - - - - (711) (711)
Other, net.................. - 31 - 4,869 - - 4,900
Net income, as restated..... - - - - - 28,975 28,975
--------- ------- ---------------------- ----------- ----------- ----------------
Balance December 31, 1991
(As Restated)............... 21,250 4,018 576 212,703 4,807 212,782 456,136
Common stock issued
in connection with
acquisitions................ - 10 - 739 - - 749
Exercise of stock options... - 14 - 1,897 - - 1,911
Acquisition of common stock
for the treasury............ - (57) - (8,073) - - (8,130)
Guaranteed future value of
stock issued to acquire
businesses.................. - - - (12,308) - - (12,308)
Deferred compensation and
officer bonus............... - 55 - 9,463 - - 9,518
Foreign currency translation
adjustment.................. - - - - (8,737) - (8,737)
Preferred stock dividends... - - - - - (1,807) (1,807)
Other, net.................. - 35 - (916) - - (881)
Net loss.................... - - - - - (612,430) (612,430)
--------- ------- ---------------------- ----------- ----------- ----------------
Balance December 31, 1992... $21,250 $4,075 $576 $203,505 $(3,930) $(401,455) $(175,979)
========= ======= ====================== =========== =========== ================
|
The accompanying notes to consolidated financial statements are an integral part of these statements.
JWP INC. and Subsidiaries Notes to Consolidated Financial Statements (unaudited)
(1) Basis of Presentation
The accompanying financial statements have been prepared
assuming
that JWP
INC. (the "Company") will continue as a going concern. The
matters
discussed
below raise substantial doubt about the Company's ability to
continue as a
going concern. The financial statements do not include any
adjustments relating
to the recoverability and classification of assets or the amounts
and
classification of liabilities that might be necessary should the
Company be
unable to continue as a going concern. The Company's continuation
as a going
concern is dependent upon its ability to restructure its
indebtedness in
connection with its proceeding under Chapter 11 of the U.S.
Bankruptcy Code,
obtain sufficient bonding to guarantee its performance on
construction
contracts, return to profitability, obtain new credit facilities
and otherwise
generate sufficient cash flow to meet its restructured and other
obligations on a timely basis.
The Company incurred a net loss of $612.4 million for the year
ended December 31, 1992, has a working capital deficit of $364.9
million after
the reclassification of long-term debt in default (See Note 3)
and has a
shareholders' deficit at December 31, 1992 of $176.0 million.
Many of the
Company's mechanical/electrical services contracts require surety
bonds to
guarantee the performance of such contracts. In light of the
Company's
financial condition, the Company's surety companies are issuing
new
bonds but
are reviewing bonding requests on a case-by-case basis for large
construction
projects and those with durations of more than two years. In
addition, a surety
company that had been the primary source of surety bonds for
certain
subsidiaries, which together comprised approximately 20% of the
Company's 1993
revenues of those mechanical/electrical companies which the
Company
currently
plans to retain, is no longer engaged in the business of issuing
such bonds. As
a result, these subsidiaries are currently not receiving such
bonds. However,
the absence of available bonding for these subsidiaries has not
resulted in a
material reduction in their backlog. The Company and these
subsidiaries are
actively engaged in discussions with another surety company which
has
undertaken due diligence for the purpose of entering into a new
surety bonding
arrangement. However, there can be no assurance that such a new
surety bonding
arrangement can be obtained.
The Company is focused on returning to profitability and
restructuring its
operations primarily around a smaller international
mechanical/electrical
services business. The Company has formulated a business
restructuring plan
which includes the sale of its information services business,
water
supply
business, several non-core businesses and certain
mechanical/electrical
services operations and the closing or downsizing of unprofitable
operations
(See Notes 10 and 11). The proceeds from the sale of those
businesses and other
assets to date have been used for working capital and to reduce
debt. There is
no assurance that the Company will be able to consummate the
remaining sales
and, if consummated, whether the Company will realize the
proceeds
contemplated
by the plan.
As described in Note 3, the Company is in default of covenants
contained in
its senior note agreements, bank credit agreement, 12%
subordinated
note
agreements and its 73/4% Convertible Subordinated Debentures and
is
presently
in a Chapter 11 proceeding. The outstanding amount of such debt
in default at December 31, 1992 is $501.0 million.
On December 21, 1993, three holders of the Company's 73/4%
Convertible Subordinated Debentures filed an involuntary petition
under Chapter 11 of the
U.S. Bankruptcy Code against the Company. The Company on February
14, 1994
consented to the entry of an order for relief under Chapter 11 of
the
Bankruptcy Code. At that time the Company adopted a proposed plan
of
reorganization and its subsidiaries continue to operate in the
normal course.
The proposed plan of reorganization which, as modified, has the
support of the
Official Unsecured Creditors Committee and the Official Unsecured
Junior
Creditors and Interest Holders Committee. The proposed plan of
reorganization
contemplates that the Company's creditors will exchange
approximately $623
million of holding company debt and other liabilities for
approximately $139
million of recourse debt, approximately $48 million of
nonrecourse
debt, 100%
of the equity of the Company and warrants to purchase common
stock of the reorganized
Company. All
of the new debt, except for approximately $67 million, is
expected
to be paid
from the proceeds of asset sales. Additionally, the holders of
the
Company's
common and preferred stock and warrants of participation will
receive warrants
to purchase common stock of the reorganized Company in exchange
for their equity interests.
The Company's mechanical/electrical services, water supply and
other operating subsidiaries are not parties to the Chapter 11
proceeding. All
operating subsidiary payments continue to be made in the ordinary
course of
business. There can be no assurance, however, that the proposed
plan of reorganization will be consummated or, if so, its timing.
The Company has restated its financial statements for the years
and quarters ended December 31, 1991 and 1990 as well as for each
of the quarters in the nine month period ended September 30, 1992
based principally upon the review of certain adjustments
originally recorded in 1992. As a result, net income for
the year ended December 31, 1991 has been reduced from the
previously reported amount of $60.3 million to $29.0 million and
earnings per share has been reduced from $1.54 per share to $.73
per share. The 1991 restatement reflects pre-tax charges of $47.9
million consisting of $36.7 million applicable to
continuing operations and $11.2 million related to discontinued
operations. The 1991 restatement of continuing operations
reflects a $4.5 million increase in insurance reserves, a $6.6
million loss from the sale of a business which the
Company had decided to sell in 1991 and a $25.6 million reduction
in the carrying value of certain assets, principally receivables.
Substantially all of the restated charges in 1991 applicable to
discontinued operations relate to
the Company's information services business and include $9.9
million of costs and expenses relating to the acquisition of
Businessland, Inc. which was
acquired by the Company in August 1991. These costs and expenses
were previously charged to reserves established as part of that
acquisition.
Net income for the year ended December 31, 1990 has been
reduced
from the
previously reported amount of $59.3 million to $50.2 million and
earnings per
share has been reduced from $1.56 per share to $1.32 per share.
The restatement
of the 1990 operating results reflects pre-tax charges of $9.6
million,
consisting of $8.3 million related to continuing operations and
$1.3 million
related to discontinued operations. The restatement of continuing
operations in
1990 includes $4.8 million of adjustments to correct accounting
for
goodwill
and a net $3.5 million reduction in the carrying value of certain
assets,
primarily long-term investments.
The restatement of the 1991 and 1990 operating results had the
effect of
decreasing retained earnings at December 31, 1991 and 1990 by
$40.4
million and
$9.1 million, respectively.
In April 1992, the Company announced its intention to sell its
water supply
business. However, in July 1993, the Company's Board of Directors
decided not
to proceed with the divestiture due to uncertainties created by
the then pending rate-related matters and litigation which are
described
in
Note 17. In
December 1993, the Company's subsidiary, Jamaica Water Supply
Company ("JWS"),
entered into an agreement with respect to the rate related
proceedings and
litigation thereby eliminating significant uncertainties relating
to the water
supply business. Subsequently, this agreement was approved by the
New York
State Public Service Commission on February 2, 1994. Accordingly,
the Company
reinstated its plan of divestiture in the first quarter of 1994.
In
March 1993,
the Company's Board of Directors approved the disposition of the
Company's U.S.
information services subsidiary. The Board of Directors had
previously decided
to sell the Company's overseas information services subsidiaries.
Accordingly,
operating results for all periods presented have been
reclassified
to reflect
the Company's information services business and water supply
business as
discontinued operations (See Notes 10 and 11).
As described above and in Notes 10 and 11, the Company has
developed a
business restructuring plan which contemplates the sale of its
information
services business, certain of its mechanical/electrical services
business
units, its water supply business and certain other non-core
businesses. As a
result, the net assets of businesses to be sold have been
classified in the Consolidated
Balance Sheet as
of December 31, 1992 as "Net assets held for sale" and carried as
either
current or long-term assets on the basis of their actual or
expected
disposition dates.
As described in Note 17, a consolidated class action lawsuit
for
unspecified
damages was filed against the Company, certain former officers
and
directors,
four current directors, a former subsidiary officer and the
Company's then
auditors, Ernst & Young. The complaint alleges violations of
Section 10(b) of
the Securities and Exchange Act of 1934, Rule 10b-5 promulgated
thereunder and
common law fraud and deceit on the part of the Company and other
named
defendants. The Company has denied the material allegations
contained in the
complaint. The parties are now engaged in discovery proceedings.
However, the
Company expects that under the terms of its proposed plan of
reorganization, no
damages will be recoverable from the Company by claimants in the
class action
litigation, although they will receive warrants to purchase the
common stock of
the reorganized Company.
(2) Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Significant intercompany accounts and transactions have been eliminated.
Certain reclassifications have been made to conform prior years' data to the current presentation.
Revenue Recognition
Revenues on long-term contracts are recognized on the
percentage-of-completion method. Percentage-of-completion for the
mechanical
contracting business is measured principally by the percentage of
costs incurred and accrued to date for each contract to estimated
total costs for
each contract ("cost to cost"). Certain of the Company's
electrical contracting
business units measure percentage of completion by the percentage
of labor
costs incurred and accrued to date for each contract to the
estimated total
labor costs for such contract, while others are on the cost to
cost
method.
Provisions for estimated losses on uncompleted contracts are made
in the period
in which such losses are determined. Changes in contract
performance and
estimated profitability, including those arising from contract
penalty
provisions and final contract settlements, may result in
revisions
to costs and
income and are recognized in the period in which the revisions
are
determined.
Profit incentives are included in revenue when their realization
is
reasonably
assured.
Accounts receivable at December 31, 1992 includes $85.2 million
billed under
retainage provisions included in contracts. In accordance with
industry
practice, certain of these receivables relate to contracts having
production
cycles longer than one year and, therefore, a portion will not be
realized
within one year. Disputes involving customers often arise in the
normal course
of the Company's business, primarily on projects where the
Company
is a
subcontractor and is contesting with general contractors, owners
or both, for
additional funds because of events such as delays or changes in
contract
specifications. Such disputes, whether for claims or for
unapproved change
orders in process of negotiation, are recorded at their estimated
net realizable value only when realization is probable and can be
reliably
estimated. Claims against the Company are recognized when the
loss is
considered probable and amounts are reasonably determinable.
Accounts
receivable and costs and estimated earnings in excess of billings
on
uncompleted contracts at December 31, 1992 include claims and
change orders in
the process of negotiation which aggregate approximately $46.6
million net of
valuation allowances. A portion of these receivables were not
realized in one
year.
Costs and estimated earnings on uncompleted contracts and related amounts
billed are as follows:
1992 1991
------------- -------------
(In thousands)
Costs incurred on uncompleted contracts........... $2,796,376 $3,410,854
Estimated earnings................................ 259,393 411,201
------------- -------------
3,055,769 3,822,055
Less billings to date............................. (3,113,716) (3,830,111)
------------- -------------
$(57,947) $(8,056)
============= =============
Such amounts are included in the accompanying
Consolidated Balance Sheets under the following captions:
1992 1991
------------- -------------
(In thousands)
Costs and estimated earnings in excess of billings
on uncompleted contracts......................... $ 67,817 $132,644
Billings in excess of costs and estimated earnings
on uncompleted contracts........................ (125,764) (140,700)
------------- -------------
$(57,947) $(8,056)
============= =============
|
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Utility plant
and equipment,
which is classified as net assets held for sale as of December
31, 1992,
includes, in addition to direct labor and materials, such costs
as related
employee benefits, taxes, interest and other costs attributable
to the
construction activity. The water supply business provides for
depreciation on
the straight-line basis at amounts equivalent to a composite rate
of approximately 2% of the average depreciable plant. All other
subsidiaries
provide for depreciation by principally using the straight-line
method over
estimated useful lives.
Property, plant and equipment consists of:
1992 1991
------- --------
(In thousands)
Utility plant and equipment................. $- $164,160
Machinery and equipment..................... 51,530 118,512
Furniture and fixtures...................... 25,344 45,633
Rental equipment............................ - 28,485
Land, buildings and leasehold improvements.. 23,396 63,780
Energy and environmental facilities......... - 37,113
------- --------
100,270 457,683
Accumulated depreciation and amortization... 49,183 134,244
------- --------
$51,087 $323,439
======= ========
|
Inventories
Inventories are stated at the lower of cost or market. The
finished goods and
service spare parts inventories relate to discontinued operations
and other
businesses held for sale and are included in net assets held for
sale as of
December 31, 1992 (See Notes 10 and 11). Cost is determined by
principally
using average costs. The following are the major classes of
inventories as of
December 31:
1992 1991
------ --------
(In thousands)
Finished goods.................... $- $274,831
Service spare parts............... - 42,604
Construction materials and other.. 6,618 41,598
------ --------
|
Net Assets Held for Sale
Net assets held for sale are stated at the lower of cost or
estimated net
realizable value.
Cost in Excess of Net Assets Acquired
Cost in excess of net assets acquired (goodwill) is amortized
on a straight
line basis over 40 years. The amounts included in the
accompanying
Consolidated
Balance Sheets are net of cumulative amortization at December 31,
1992 and 1991
of $6.9 million and $16.5 million, respectively. The Company
periodically
reviews whether new events and circumstances warrant the
write-off
of goodwill
or a revision to the estimated useful life.
The Company's Board of Directors have approved a plan to
downsize
the
Company's North American mechanical/electrical services business
and to sell
non-core businesses and certain mechanical/electrical business
units. In 1992,
the Company wrote-off goodwill of $48.5 million related to such
businesses to
reflect the net realizable value of businesses held for sale and
the permanent
impairment of goodwill.
Net (Loss) Earnings Per Common Share
Net (loss) earnings per common share has been calculated based
on
the
weighted average number of common shares outstanding and common
share
equivalents relating to warrants and stock options outstanding
when
the effect
of such equivalents are dilutive (40,583,185, 38,800,000 and
38,100,000 shares
in 1992, 1991 and 1990, respectively). Per share amounts of
(loss)
income from
continuing operations and net (loss) income reflect amounts of
dividends paid
and accrued on the Company's preferred stock. References to
number
of shares of
common stock and per share amounts have been adjusted to give
effect to the
acquisition of Neeco, Inc. (see Note 9) and to reflect a 3-for-2
common stock
split, effected on July 16, 1990.
Statements of Cash Flows
For purposes of the Consolidated Statements of Cash Flows, the
Company
considers all highly liquid instruments with original maturities
of three months or less to be cash equivalents.
Income Taxes
Effective January 1, 1992, the Company adopted the provisions
of Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS
109). The adoption of SFAS 109 changed the Company's method of
accounting for
income taxes from the deferred method as discussed in the
Accounting Principles
Board Opinion No. 11, "Accounting for Income Taxes," to an asset
and liability
approach. Previously, the Company deferred the tax effects of
timing
differences between financial reporting and taxable income. The
asset and liability approach requires the recognition of deferred
tax liabilities and assets for the expected future tax
consequences of temporary differences between
the carrying amounts and the tax bases of assets and liabilities.
Valuation allowances are
established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense is the tax
payable for the period and the change during the period in
deferred tax assets and liabilities.
Prior years' financial statements have not been restated for such
accounting change (See Note 5).
At December 31, 1992 and January 1, 1992 (after having given
effect to the
adoption of SFAS No. 109), the valuation allowances recorded
against deferred
tax assets were $138.3 million and $0, respectively. These
amounts relate to certain deferred tax assets for which
realization requires taxable income in
the subsidiary which gave rise to the deferred tax asset.
(3) Debt In Default
Debt in default at December 31, 1992 consists of (in thousands):
Notes payable to banks under revolving credit facility at prime
plus 3/4%$155,795
Senior notes payable to insurance companies, 9.1% to
10.95%............. 328,572
--------
Total senior debt...................... 484,367
Subordinated notes payable to
insurance companies, 12%.............. 9,600
73/4% Convertible Subordinated
Debentures............................ 7,040
----
$501,007
|
The Company failed to make principal and interest payments and
is in default
of various financial covenants contained in its senior notes and
12%
subordinated notes including minimum tangible net worth and
minimum current
ratio. The revolving credit facility contains certain financial
and other
covenants, including minimum tangible net worth and minimum
current
ratio,
under which the Company was also in default at December 31, 1992.
As a result, the entire amount of such notes and bank
indebtedness has been classified in the accompanying Consolidated
Balance Sheet as "Debt in default".
Additionally, the Company has not made scheduled semiannual
interest payments since September 1, 1993 with respect to its 7
3/4% Convertible Subordinated Debentures and,
accordingly, such debentures have been classified as "Debt in
default" in the accompanying Consolidated Balance Sheet.
Effective April 1993, the Company ceased making payments of
principal and interest under its revolving credit facility and
its senior and subordinated notes. Interest continued to accrue
in accordance with the provisions of these loan documents which
in certain circumstances included default rates of an
additional 2% and in one case 4%. Interest ceased to accrue on
December 21, 1993, the date on which an involuntary bankruptcy
petition was filed against
the Company. The Company has pledged to the holders of its senior
notes and bank indebtedness the common stock of five subsidiaries
held for sale and certain proceeds of the sale of one of those
subsidiaries which had a combined
net book value of $23.2 million as of December 31, 1992.
Certain of the Company's loan agreements contain covenants which restrict its ability to pay dividends on its common stock. The Company does not meet the financial ratio requirements under such covenants and consequently is restricted from paying dividends on its common stock.
The Company's 7 3/4% Convertible Subordinated Debentures are
convertible into common stock at any time on or prior to
September 1, 2012 at $30.11 per share
which is subject to change as defined in the indenture agreement
pursuant to which the debentures were issued. The debentures are
redeemable, at the Company's option, on any date prior to
maturity at redemption prices (expressed
as percentages of principal amount) ranging from 102.325% in 1994
to 100% in 1997 and thereafter, plus accrued interest. In 1992,
1991 and 1990, the Company
purchased $8.7 million, $7.6 million and $10.5 million of its 7
3/4% debentures,
respectively. In 1991, the Company also retired its $10.0 million
11% senior notes prior to maturity. The Company realized a net
gain of $1.8 million, $0.6 million and $l.5 million in 1992, 1991
and 1990, respectively, from early retirement of such debt.
See Note 1 with respect to the contemplated exchange of the
debt
in default
for new debt and equity securities under the Company's proposed
plan of
reorganization.
As of June 1994, the estimated fair value of the Company's
obligations under
its revolving credit facility approximates $50 million or
approximately 30% of
the amount of its pre-bankruptcy petition date principal and
accrued interest.
The estimated fair value of the senior notes approximates $122
million or
approximately 34% of the amount of its pre-bankruptcy petition
date
principal
and accrued interest. Such valuations were based upon recent
private
transactions involving the purchase and sale of a limited number
of
such debt
instruments. However, the estimated values described above are
not
necessarily
indicative of their fair market value because these debt
instruments are not
actively traded or exchanged. The estimated fair value of the
defaulted 12%
subordinated notes and 73/4% Convertible Subordinated Debentures
is
nominal.
Such valuations were based upon comparison with similarly rated
securities and
are not necessarily indicative of the current market value.
(4) Long-Term Debt
The following is a summary of the Company's long-term debt,
excluding current
maturities of $1.9 million and $38.0 million in 1992 and 1991,
respectively:
1992 1991
------ ---------
(In thousands)
9.1% to 12% Senior Notes, due 1992 to 2005 (See Note 3)......... $- $ 330,119
7~% to 11% First Mortgage Bonds, due 1995 to 2029............... - 34,500
7~% Convertible Subordinated Debentures, due 2012 (See Note 3).. - 15,764
5.5% Convertible Subordinated Debentures, due 2007.............. - 19,262
Bank loans under revolving credit agreements.................... - 4,300
Other long-term debt............................................ 4,111 21,135
------ ---------
$4,111 $425,080
====== =========
|
The aggregate amount of long-term debt maturing during the next
five years
is: $1.0 million, $1.9 million, $0.3 million, $0.3 million and
$0.3
million.
The debt of JWS, described below, is carried as an element of
"Net assets
held for sale" in the Company's Consolidated Balance Sheet as of
December 31,
1992 (See Note 11).
A series of first mortgage bonds issued by JWS requires annual
redemption
payments of $2.0 million beginning April 1, 2020 and two other
series require
annual redemption payments of $0.5 million each, commencing
August 1, 1994 and
December 1, 2005, respectively. A fourth series aggregating $4.5
million is due
May 1, 1995. The utility plant and equipment of JWS, which has a
net book value
of $131.9 million at December 31, 1992, is subject to a lien
pursuant to the
Indenture under which the first mortgage bonds were issued. The
fair value of
the first mortgage bonds approximates $41.6 million. There is no
active quoted
market for the bonds. The fair value was determined primarily
based
upon sales
prices, or bid and asked quotes for similar debt securities.
JWS has two revolving credit agreements each of which permitted
unsecured
borrowings of up to $10 million with interest at rates equal to
the
prime rate
(6% at December 31, 1992). Both of the agreements expired on
April 30, 1994 and
borrowings thereunder have been permitted by the lenders to
remain outstanding.
JWS is currently negotiating new credit agreements. Borrowings
under the
revolving credit agreements are classified as long-term as it was
the intent of
JWS to extend the agreements as they expire, refinance the
borrowings under an
expiring agreement with funds borrowed under the other agreement,
or refinance
borrowings under both agreements through the issuance of
long-term
securities.
As of December 31, 1992, JWS had equal borrowings outstanding
under
the
agreements aggregating $4.8 million. The fair value of these
borrowings
approximates the carrying amounts.
(5) Income Taxes
Effective January 1, 1992, the Company adopted the Statement of
Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). The
cumulative effect of adopting SFAS 109 was to record an income
tax benefit of
$4.3 million or $0.11 per share as of January 1, 1992. Such
amount has been reflected in the Consolidated Statements of
Operations under the caption
"Cumulative
Effect of Change in Method of Accounting for Income Taxes."
The Company files a consolidated federal income tax return
including all U.S.
subsidiaries. At December 31, 1992, the Company had a net
operating
loss
carry-forward ("NOL") for U.S. income tax purposes of
approximately
$220
million expiring in years through 2007. As described in Notes 1
and
3, under
the Company's proposed plan of reorganization, newly issued
equity
and debt
securities will be exchanged for existing debt of the Company. If
the Company
effectuates its proposed plan of reorganization, a substantial
portion of the
NOL may not be available to reduce future U.S. taxable income.
Additionally,
due to recent changes in the U.S. Federal income tax laws, the
timing of any
such plan of reorganization could further impact and reduce the
amount of the
NOL. The Company also has an alternative minimum tax credit
carry-forward of
approximately $2 million available to offset future regular
income
taxes
payable to the extent such regular taxes exceed alternative
minimum
taxes
payable.
U.S. income and foreign withholding taxes have not been
provided
on
undistributed earnings of certain foreign subsidiaries. Such
undistributed
earnings aggregated $16.2 million at December 31, 1992. The
Company considers
these earnings to be permanently invested in the business and,
under the tax
laws, not subject to such taxes until distributed as dividends.
The provision (benefit) for income taxes relating to continuing
operations
consists of:
1992 1991 1990
--------- --------- -------
(In thousands)
Current
Federal.......... $- $663 $ 4,025
State and local.. 1,248 1,092 2,339
Foreign.......... 1,106 2,834 467
--------- --------- -------
2,354 4,589 6,831
--------- --------- -------
Deferred
Federal.......... 4,487 (5,440) 5,790
State and local.. (56) (156) 784
Foreign.......... 859 3,426 4,070
--------- --------- -------
5,290 (2,170) 10,644
--------- --------- -------
$7,644 $2,419 $17,475
========= ========= =======
|
The provision (benefit) for income taxes relating to
discontinued
operations consists of:
1992 1991 1990
------- -------- -------
(In thousands)
Current
Federal.......... $(237) $(525) $ 9,984
State and local.. 7 (218) 2,633
------- -------- -------
(230) (743) 12,617
------- -------- -------
Deferred
Federal.......... 983 13,287 2,417
State and local.. 864 2,301 298
------- -------- -------
1,847 15,588 2,715
------- -------- -------
$1,617 $14,845 $15,332
======= ======== =======
|
Factors accounting for the variation from U.S. statutory income tax rates relating to continuing operations are as follows:
1992 1991 1990
----------- ------- --------
(In thousands)
Federal income taxes at the statutory rate........ $(120,996) $2,425 $15,682
State and local income taxes, net of federal tax.. 787 618 2,061
Amortization and write-off of intangibles......... 29,791 (488) 637
Valuation allowance against deferred tax asset.... 96,849 - -
Other............................................. 1,213 (136) (905)
----------- ------- --------
$7,644 $2,419 $17,475
=========== ======= ========
|
Factors accounting for the variation from U.S. statutory income tax rates relating to discontinued operations are as follows:
1992 1991 1990
---------- --------- -------
(In thousands)
Federal income taxes at the statutory rate........ $(85,548) $13,296 $12,557
State and local income taxes, net of federal tax.. 575 1,375 1,935
Amortization and write-off of intangibles......... 28,289 - 327
Valuation allowance against deferred tax asset.... 58,409 - -
Other............................................. (108) 174 513
---------- --------- -------
$1,617 $14,845 $15,332
========== ========= =======
|
The sources of significant timing differences for 1991 and 1990 which gave rise to deferred taxes and their effects were as follows:
Continuing Discontinued
Operations Operations
------------------- ---------------
1991 1990 1991 1990
--------- --------- ------- -------
(In thousands)
Difference between book and tax accruals,
principally contracts....................................... $(1,804) $(2,523) $261 $437
Appraisal differences........................................ 1,316 7,637 3,953 1,392
Depreciation................................................. (258) 1,244 1,071 657
State and local deferred taxes, net of federal tax benefits.. (103) 517 1,519 197
Acquisition adjustments...................................... (382) 1,972 - (75)
Terminated leases and severance pay.......................... - - 7,616 -
Other, net................................................... (939) 1,797 1,168 107
--------- --------- ------- -------
$(2,170) $10,644 $15,588 $2,715
========= ========= ======= =======
|
The components of the net deferred income tax liability as of December 31, 1992 are as follows (in thousands):
Deferred tax assets:
Net operating loss carry-forward............... $74,787
Excess of amounts expensed for financial statement
purposes over amounts deducted for income tax
purposes....................................... 93,891
Other......................................... 2,816
--------
Total deferred tax asset......................... 171,494
Deferred tax liabilities:
Costs capitalized for financial statement purposes
and deducted for income tax purposes................33,086
Foreign deferred tax liability.................... 1,635
--------
Total deferred tax liability.........................34,721
----------
Net deferred tax asset before valuation allowance....136,773
Valuation allowance for net deferred tax asset......(138,274)
-----------
Net deferred tax liability......................... $(1,501)
===========
|
(Loss) income before income taxes from continuing operations consists of the following:
1992 1991 1990
----------- ---------- -------
(In thousands)
United States.. $(342,304) $(11,013) $32,426
Foreign........ (13,567) 18,144 13,698
----------- ---------- -------
$(355,871) $7,131 $46,124
=========== ========== =======
|
(Loss) income before income taxes from discontinued operations consists of the following:
1992 1991 1990
----------- ------- -------
(In thousands)
United States.. $(228,754) $36,010 $36,932
Foreign........ (22,859) 3,098 -
----------- ------- -------
|
The above amounts applicable to discontinued operations include
a loss of
$49.5 million in 1992 with respect to the disposition of the
Company's overseas
information services business and certain units of the domestic
information services business.
(6) Capital Stock and Warrants
In August 1991, the Company issued 425,000 shares of preferred
stock in connection with the acquisition of Businessland, Inc.
(See Note 9).
The preferred stock is convertible into common stock of the
Company,
at any time,
at the option of the holder at a conversion price of $20.00 per
share, subject
to customary anti-dilution provisions and exchangeable for 8.5%
Convertible
Subordinated Notes due 2006 of the Company in whole, but not in
part, at the
option of the Company after July 31, 1993. The Company has the
option to redeem
the shares of preferred stock after July 31, 1993 at $50.00 per
share. Each share of preferred stock entitles the holder to
receive cumulative cash dividends at the annual rate of $4.25 per
annum per share. The Company has not
paid dividends on its preferred stock since September 1992.
Cumulative unpaid dividends at December 31, 1992 aggregate $0.5
million.
In 1969, the Company distributed 1,152,649 warrants of participation to holders of its common stock. The warrants of participation, which expire on December 31, 1994, may entitle their holders to receive shares of common stock of the Company in the event that JWS disposes of all or any significant portion of its water distribution system or the Company disposes of any shares of JWS. The number of shares of common stock to be issued, if any, will be determined on the basis of a specified formula and will be distributed to warrant holders on a pro rata basis.
Under the Company's 1992 and 1991 Stock Option Plans, a maximum of 2,500,000 shares and 1,000,000 shares of common stock, respectively, have been reserved for grant to key personnel. The per share exercise price of an option may not be less than the fair market value of a share of common stock on the date of grant. The options are exercisable at various dates and expire ten years from the date of grant.
The 1986 Incentive Stock Option and Appreciation Plan, as
amended
(the
"Option Plan"), provides that incentive stock options ("ISOs"),
non-qualified
stock options and stock appreciation rights ("SARs") may be
granted
to a
maximum of 1,125,000 shares of common stock. If ISOs are granted,
the per share
exercise price of the option must be the fair market value of a
share of common
stock on the date of grant. The per share exercise price of a
non-qualified
stock option may be below the fair market value of a share of
common stock on
the date of grant.
Neeco, Inc., a computer reseller which the Company acquired
(See
Note 9), had
outstanding stock options which were assumed by the Company on
the
date of
acquisition. The Neeco options were granted at not less than fair
market value
at the date of grant, are exercisable at various dates and expire
five years
from date of grant.
A summary of stock option transactions for the years ended
December 31, 1992,
1991 and 1990 is as follows:
Number of Shares
- ---------------------------- -----------------------------------------
1992 1991 1990
- ---------------------------- ------------ -------------- -------------
Balance beginning of year... 1,231,310 1,124,189 1,114,122
Granted..................... 3,079,680 395,075 306,414
Exercised................... (145,706) (220,329) (278,644)
Lapsed or cancelled......... (939,045) (67,625) (17,703)
------------ -------------- -------------
Balance end of year......... 3,226,239 1,231,310 1,124,189
------------ -------------- -------------
Exercisable at year-end..... 747,965 598,196 580,439
------------ -------------- -------------
Option Price Per Share
- ---------------------------- -----------------------------------------
Outstanding at December 31.. $3.00-21.05 $ 6.67-21.05 $ 6.67-21.05
Granted..................... 3.00-18.25 14.00-15.625 20.92-21.05
Exercised................... 6.67-15.93 6.67-14.49 6.67-15.93
Lapsed or cancelled......... 3.50-21.05 6.67-21.05 6.67-15.93
|
As described in Note 1, under the Company's proposed plan of
reorganization,
the holders of the Company's existing preferred and common stock
and warrants
of participation will receive warrants to purchase common stock
of
the
reorganized Company in exchange for their equity interests.
(7) Retirement Plans
JWS and a foreign subsidiary have defined benefit pension plans
covering
substantially all eligible employees. The benefits under the
plans
are based on
wages and years of service with the respective company. The
Company's policy is
to fund the minimum amount required by law.
In 1990, the Company curtailed the pension benefits under one
of
its U.S.
plans and realized a net gain of $3.7 million. Effective May 31,
1991, the
Company terminated that plan and replaced it with a new defined
contribution
plan. The effect of the pension termination and settlement of the
benefit
obligation was not material to the operating income of the
Company.
Net pension expense for defined benefit plans for 1992, 1991 and 1990 consists of the following components:
Domestic Foreign
(Discontinued Operations) (Continuing Operations)
----------------------------- -----------------------------
1992 1991 1990 1992 1991 1990
--------- --------- --------- --------- --------- ---------
(In thousands)
Service cost-benefits earned............... $1,305 $939 $5,089 $1,301 $1,484 $1,853
Interest on projected benefit obligations.. 1,725 1,490 1,928 2,481 2,108 1,896
Actual return on plan assets............... (2,276) (2,331) (1,963) (5,473) (3,428) (2,241)
Net amortization and deferral.............. 760 869 (267) 2,452 838 (89)
--------- --------- --------- --------- --------- ---------
Net pension expense........................ $1,514 $967 $4,787 $761 $1,002 $1,419
========= ========= ========= ========= ========= =========
|
The benefit obligations and funded status of the plans at
December 31, 1992
and 1991 are as follows:
Domestic Foreign
(Discontinued Operatio(Continuing Operations
--------------------- ---------------------
1992 1991 1992 1991
---------- ---------- ---------- ----------
(In thousands)
Accumulated benefit obligations:
Vested................................................. $14,154 $14,379 $21,214 $20,009
Non-vested............................................. 657 902 - -
Impact of future salary increases........................ 8,579 9,235 3,393 3,200
---------- ---------- ---------- ----------
Projected benefit obligations............................ 23,390 24,516 24,607 23,209
Plan assets at market value.............................. 22,020 21,006 27,531 27,884
---------- ---------- ---------- ----------
(Deficiency) excess of plan assets over projected benefit
obligations.............................................. (1,370) (3,510) 2,924 4,675
Unrecognized net (gain) loss from past experience
different from that assumed and effect of changes in
assumptions.............................................. (3,551) 32 (1,670) (3,181)
Unrecognized net obligation (asset) from initial
application of SFAS No. 87............................... 854 925 (889) (1,189)
---------- ---------- ---------- ----------
(Accrued) prepaid pension................................ $(4,067) $(2,553) $ 365 $ 305
========== ========== ========== ==========
|
The assumptions used as of December 31, 1992, 1991 and 1990 in
determining
the pension cost and liability shown above were as follows:
Domestic Foreign
(Discontinued Operatio(Continuing Operations)
--------------------- -----------------------
1992 1991 1990 1992 1991 1990
------- ------ ------ ------- ------- -------
Discount rate................ 7.5% 6.5% 7.25% 10% 11% 9%
Rate of salary progressions.. 7% 7% 7% 7% 7% 7%
Rate of return on assets..... 8% 8% 8% 10% 11% 10%
|
The unrecognized net asset of the foreign plan is being
amortized
over 15
years. The U.S. plan assets are primarily invested in fixed
income
securities.
The foreign plan assets are invested 80% in equity securities and
20% in fixed
income securities.
The Company contributes to various union pension funds based
upon
wages paid
to union employees of the mechanical/electrical business units.
Such
contributions approximated $41.6 million, $38.5 million and $36.0
million in
1992, 1991 and 1990, respectively.
The Company has defined contribution retirement plans that
cover
its U.S.
non-union eligible employees. Contributions to these plans are
based on a
percentage of the employee's base compensation. The expense
recognized in 1992,
1991 and 1990 relating to continuing operations for the defined
contribution
plans was $4.7 million, $4.7 million and $1.8 million,
respectively.
Effective January 1, 1993, the Company adopted the provisions
of
Statement of
Financial Accounting Standards No. 106, "Accounting For
Postretirement Benefits
Other Than Pensions" (SFAS 106). The estimated present value of
the
accumulated
postretirement benefit obligations under SFAS 106 approximated
$7.0 million at
January 1, 1993. The adoption of SFAS 106 did not have a material
impact upon
the Company's Consolidated Statements of Operations.
(8) Lease Commitments
The Company and its subsidiaries lease land, buildings and
equipment under
various non-cancellable lease agreements. The lease agreements
frequently
include renewal options and require the Company to pay for
utilities, taxes,
insurance and maintenance expense.
Future minimum payments, by year and in the aggregate, under
capital leases
and non-cancellable operating leases with initial or remaining
terms of one
year or more relating to continuing operations consisted of the
following at
December 31, 1992:
Capital
Operating
Leases Leases
-------
- ---------
(In thousands)
1993........................................... $848 $31,227
1994........................................... 1,606 23,377
1995........................................... 867 18,054
1996........................................... 663 13,834
1997........................................... 205 9,923
Thereafter..................................... 751 45,691
-------
- ---------
Total minimum lease
payments......................................... 4,940 $142,106
=========
Amounts representing interest.................. 1,005
-------
Present value of net minimum lease payments
(includes current portion of $705)............ $3,935
=======
|
The above operating lease table includes lease obligations
retained by the
Company in connection with the sale of its domestic information
services
business (See Note 10). Future minimum payments under
non-cancellable operating
leases relating to discontinued operations are as follows (in
thousands):
$11,564, $11,133, $8,993, $6,056, $4,905 and $10,130 in 1993,
1994, 1995, 1996, 1997 and thereafter, respectively.
"Other long-term obligations and deferred credits" at December 31, 1992 and 1991 include capital lease obligations of $3.2 million and $21.0 million, respectively.
Rent expense relating to continuing operations for the years
ended December
31, 1992, 1991 and 1990 was $26.6 million, $22.8 million and
$21.3
million,
respectively. Rent expense relating to discontinued operations
for
the years
ended December 31, 1992, 1991 and 1990 was $20.7 million, $10.0
million and
$5.3 million, respectively.
(9) Business Combinations
In the fourth quarter of 1991, the Company completed the
acquisition of
Businessland, Inc. ("Businessland"). Pursuant to the acquisition,
the Company
paid $17.0 million in cash and exchanged 1,108,195 shares of its
common stock
for all the outstanding common stock of Businessland. The Company
acquired Businessland's 101/4% Senior Notes in the aggregate
principal amount
of $50.0 million for an aggregate of $18.75 million in cash and
425,000 shares
of its $4.25 Convertible Exchangeable Preferred Stock with a
liquidation
preference of $50.00 per share. Businessland was combined with
the
Company's
then existing information services business. The acquisition of
Businessland
was accounted for by the purchase method of accounting. The
Company
sold the
rental operations of Businessland in 1991 for $10.1 million in
cash. The sale
of the rental operations did not result in a gain or loss to the
Company.
On May 22, 1990, the Company acquired Neeco, Inc. ("Neeco"), a
computer
reseller. Neeco was combined with the Company's then existing
information
services business. The acquisition was accounted for as a pooling
of interests.
The Company issued 4,669,375 shares of its common stock to the
former holders
of Neeco common stock.
Including the acquisition of Businessland, the Company paid
approximately
$15.4 million and $133.7 million in 1992 and 1991, respectively,
in
cash, notes
and common stock for its acquisitions. Net tangible assets
acquired
in 1992 and
1991 were approximately $7.0 million and $80.3 million,
respectively.
Except for Neeco, the acquisitions in 1992 and 1991 were
accounted for by the
purchase method of accounting and, accordingly, the consolidated
results of
operations include the results of the acquired companies from
acquisition
dates. Pro forma combined revenues from continuing operations of
the acquired
businesses would have been approximately $2.4 billion in 1991 and
$2.5 billion
in 1990, if the acquisitions had taken place on January 1. Pro
forma combined
income from continuing operations and net income per share from
continuing
operations would have been approximately $7.3 million and $0.14,
respectively,
in 1991 and $31.4 million and $0.74, respectively, in 1990. Pro
forma amounts
for the year ended December 31, 1992 are not materially different
from the
actual amounts.
(10) Discontinued Operations
Discontinued operations includes the Company's information
services business
and water supply business.
In 1992, the Company's information services business was
negatively impacted
by several industry factors, such as rapid technology change,
steep
price
discounting and by the problems encountered with the integration
of
Businessland.
In March 1993, the Company's Board of Directors approved the
disposition of
the Company's U.S. information services business. The Board of
Directors had
previously decided to sell the Company's overseas information
services
business. Accordingly, operating results of the information
services business
have been classified as discontinued operations. In August 1993,
the Company
sold substantially all the assets of its U.S. information
services
business.
The Company did not realize a material gain or loss from the
sale.
The assets
of the U.S. information services business consisted primarily of
inventory held
for resale and accounts receivable. Under the terms of the
agreement, the
purchaser assumed the debt and other liabilities relating to the
ongoing
operations of the business. The Company received warrants to buy
up
to 10% of
the purchaser's common stock for a nominal amount. A subsidiary
of
the Company
retained certain lease obligations aggregating $15 million, net
of
estimated
settlement amounts and subrentals, at December 31, 1992. Such
lease
obligations
relate to closed facilities and facilities identified to be
closed.
These lease
obligations are included in the accompanying Consolidated Balance
Sheet under
the captions "Other accrued expenses and liabilities" and "Other
long-term
obligations and deferred credits" in the amounts of $8.2 million
and $6.8
million, respectively. At December 31, 1992, net assets of the
information
services business aggregated approximately $5.0 million. Such
amount is
included in current assets under the caption "Net assets held for
sale" in the
accompanying Consolidated Balance Sheet.
The information services business operated primarily in the
United States,
Europe and Canada. The following presents information about
operations in such
geographical areas:
Operating Identifiable
Revenues (Loss) Income Assets
---------- ------------- ------------
(In thousands)
1992
United States.. $1,418,350 $(144,743) $378,913
Europe......... 245,497 (37,727) 78,072
Canada......... 28,573 (5,469) 10,186
---------- ------------- ------------
$1,692,420 $(187,939) $467,171
========== ============= ============
1991
United States.. $1,106,711 $32,987 $723,759
Europe......... 91,088 1,824 116,094
Canada......... 15,970 (775) 16,781
---------- ------------- ------------
$1,213,769 $34,036 $856,634
========== ============= ============
|
In 1990, the information services business was located only in
the United
States. Revenues and operating income of the information services
business in
1990 were $710.8 million and $29.6 million, respectively. The
information
services business' operating loss in 1992 includes $41.3 million
attributable
to the write-off of goodwill and other intangibles and $26.0
million primarily
relating to severance payments and facilities consolidation.
In connection with the plan to dispose of the overseas
information services
business and certain other of its U.S. information services
businesses, the
Company provided for a loss of $49.5 million in 1992. This loss
represents the
estimated loss to be realized upon the disposition of such
businesses. Such
loss includes $32.1 million related to the write-off of goodwill
and other
intangible assets and $17.4 million for estimated losses to be
incurred up to
the expected disposal dates and the write-down of other assets to
estimated net
realizable value.
In April 1992, the Company announced its intention to sell its
water supply
business. However, in July 1993, the Company's Board of Directors
decided not
to proceed with the divestiture due to uncertainties created by
then pending
rate related proceedings and litigation. In December 1993, JWS
entered into an
agreement with respect to the rate related proceedings and
litigation.
Subsequently, the agreement was approved by the New York State
Public Service
Commission on February 2, 1994. Accordingly, the Company
reinstated
its plan of
divestiture in the first quarter of 1994 and recorded a $7.4
million loss in
1993 to write-down the assets of the water supply business to
estimated net
realizable value. The financial statements for all periods
presented reflect
the water supply business as discontinued operations.
See Note 17 with respect to the status of a proceeding
initiated
in 1988 by
the City of New York to acquire by condemnation all of the water
distribution
system of JWS that is located in New York City.
The assets of the water supply business consists primarily of
utility plant
and equipment which are located in Nassau and Queens Counties in
the State of
New York. The net assets of the water supply business, which
aggregate $57.2
million at December 31, 1992, are classified as long-term assets
in the
accompanying Consolidated Balance Sheet under the caption "Net
assets held for
sale" because the disposition of the water supply business is
expected to take place after 1993.
Revenues of the water supply business were $59.8 million, $63.1
million and
$59.2 million in 1992, 1991 and 1990, respectively. Operating
income of the
water supply business was $4.8 million, $14.6 million and $13.3
million in
1992, 1991 and 1990, respectively. The 1992 results include a
provision of $7.0
million related to the settlement litigation referred to above.
Combined operating results of discontinued operations including
both the
information services and the water supply businesses are as
follows:
1992 1991 1990
----------- ---------- --------
(In thousands)
Revenues.................................... $1,752,171 $1,276,876 $769,994
Costs and expenses.......................... 1,935,349 1,228,281 727,090
----------- ---------- --------
Operating (loss) income..................... (183,178) 48,595 42,904
Interest expense............................ 18,944 9,487 5,972
----------- ---------- --------
(Loss) income before taxes.................. (202,122) 39,108 36,932
Provision for income taxes.................. 1,617 14,845 15,332
----------- ---------- --------
(Loss) income from discontinued operations.. $(203,739) $24,263 $21,600
=========== ========== ========
|
(11) Other Businesses Sold and Net Assets Held For Sale
On October 16, 1992, the Company completed the sale of five
environmental
businesses for which it received net cash proceeds of $84.1
million. The five
businesses sold were two air pollution control businesses, JWP
Air Technologies, Inc. and JWP Amcec Corp., two sludge
pelletization projects,
located in New York City and Baltimore, Maryland and Enviro-Gro
Technologies Co., a sludge processing business. The Company
realized a net gain
of
approximately $12.0 million from the sale of these businesses.
The
Company has
sold a number of other non-core businesses and other assets in
1993
for net
cash proceeds of $43.4 million and notes and other assets with an
aggregate
carrying value of $10.9 million. The Company's Board of Directors
have approved
a plan for the sale of the Company's remaining energy and
environmental related
businesses, other non-core businesses and certain
mechanical/electrical
services operations. In connection with this asset disposition
plan, a loss of
$88.1 million was provided for in 1992. The loss represents the
loss on
businesses sold and the estimated loss to be realized upon the
disposition of
the businesses held for sale. The loss includes $24.1 million
attributable to
the write-off of goodwill and $64.0 million related to the
write-down of other
assets to net realizable value. In 1991, the Company incurred a
loss of $6.6
million in connection with the sale of a certain subsidiary. The
operating
results of these businesses as well as the provisions for
write-down of assets
are included in (loss) income from continuing operations.
Revenues and operating (loss) income of the other businesses
sold
and held
for sale for the years ended December 31, 1992, 1991 and 1990 are
as follows:
1992 1991 1990
--------- -------- --------
Revenues................. $526,894 $501,696 $444,242
Operating (loss) income.. (41,151) 15,325 12,592
|
The condensed combined balance sheet relating to discontinued
operations and
other net assets held for sale at December 31, 1992 is as follows
(in thousands):
Cash........................... $ 25,297
Accounts receivable, net....... 340,847
Costs and estimated earnings in
excess of billings............. 35,449
Inventories.................... 189,744
Other current assets........... 18,450
--------
609,787
Property, plant and equipment, net.. 200,080
Other assets........................ 17,161
--------
$827,028
========
Notes payable............................ $51,238
Current maturities of long-term debt
and capital lease obligations............ 8,582
Accounts payable......................... 345,446
Billings in excess of costs and estimated
earnings................................. 21,472
Accrued payroll and benefits............. 28,130
Other accrued expenses................... 137,590
--------
592,458
Long-term debt........................... 74,178
Other long-term liabilities.............. 41,887
Net assets held for sale-current......... 32,894
Net assets held for sale-long-term....... 85,611
--------
$827,028
========
|
(12) Restructuring Charges
In 1992, the Company recorded $38.7 million of restructuring
charges related
to continuing operations. The Company's business restructuring
plan
contemplates the downsizing and consolidation of the Company's
North American
mechanical/electrical services operations. The Company's strategy
also provides
for the disposition of non-core businesses and certain
mechanical/electrical
services operations. The restructuring charges consist of $10.8
million
applicable to permanent impairment of goodwill and $27.9 million
for severance
payments, facilities consolidation costs, provisions for contract
losses and
the write-down of certain assets to net realizable value.
(13) Insurance Reserves
The Company is primarily insured with an indirect wholly-owned
captive
insurance subsidiary ("Defender") for its workers' compensation,
automobile and
general liability insurance. The insurance liability is
determined
actuarially
based on claims filed and an estimate of claims incurred but not
yet reported.
The present value of such claims was determined as of December
31,
1992 using a
4% discount rate. The current portion of the insurance liability
was $16.5
million and $6.4 million at December 31, 1992 and 1991,
respectively. Such
amounts are included in "Other accrued expenses and liabilities"
in
the
accompanying Consolidated Balance Sheets. The noncurrent portion
of
the
insurance liability was $33.1 million and $12.5 million at
December 31, 1992
and 1991, respectively. Such amounts are included in "Other
long-term
obligations and deferred credits". The undiscounted liability was
approximately
$54.0 million and $20.9 million at December 31, 1992 and 1991,
respectively.
The Company has restated its 1991 financial statements among
other
things, to
increase its insurance liability by $4.5 million. The insurance
liability in
1991 was increased primarily to provide for losses on incurred
but
not reported
claims.
At December 31, 1992, the Company and Defender had letters of
credit
outstanding totalling $38.2 million which in effect secure their
insurance
obligations. The letters of credit were intended to serve as
collateral for the
obligations of Defender to reimburse the Company's unrelated
insurance carriers
for claims paid in respect of certain years' insurance programs.
In
December
1993, these letters of credit were reduced to $36.4 million.
$34.9 million of
such letters of credit expire in December 1994 and $1.5 million
expires in
February 1995. Since October 1992, neither the Company nor
Defender
have been
able to obtain additional letters of credit to secure their
insurance
obligations and, as a result, have been required to make cash
collateral
deposits to a third party insurance company to secure those type
obligations.
The deposits totalled $7.7 million as of December 31, 1992 and
are
included
under the caption "Miscellaneous" in Other Assets in the
accompanying
Consolidated Balance Sheet. Such deposits have increased to $29.7
million as of
June 30, 1994.
The Company's proposed plan of reorganization contemplates that
the letters
of credit, described above, will be drawn upon by the unrelated
insurance
carriers and that the Company's obligations to Defender, which
were
pledged as
collateral to the banks issuing such letters of credit, will be
impaired in the
Chapter 11 proceeding as well as any related Company obligations
to
those
banks. Beginning in February 1994, Defender ceased making
payments
of amounts
owed to the unrelated insurance carriers, which obligations are
in
effect
secured by the letters of credit, and the Company's unrelated
insurance
carriers have commenced partial draw downs against certain of the
letters of
credit. Approximately $5 million has been drawn down against the
letters of
credit through June 1994.
(14) Additional Cash Flow Information
1992 1991 1990
--------- ------- -------
(In thousands)
Cash paid (refunded) during the year for:
Interest................................................................ $ 62,582 $54,258 $45,044
Income taxes............................................................ (15,617) 14,400 13,850
Significant non-cash financing and investment transactions are as follows:
Debt assumed in acquisitions............................................ $929 $93,662 $11,107
Debt issued to acquire companies........................................ 2,566 9,648 1,750
Common stock issued for acquisitions.................................... 749 29,238 1,804
Preferred stock issued to retire debt................................... - 21,250 -
Debt issued to acquire fixed assets..................................... - - 4,122
Fixed assets acquired under capital lease obligations................... 1,616 2,760 5,831
|
(15) Segment Information
The following presents information about continuing operations
by
geographic
areas:
Operating Identifiable
Revenues Income (Loss) Assets
---------- ------------- ------------
(In thousands)
1992
United States............. $1,793,350 $(220,242) $582,426
Europe.................... 386,003 (15,985) 145,435
Canada.................... 225,224 615 61,218
Net assets held for sale.. - - 118,505
---------- ------------- ------------
$2,404,577 $(235,612) $907,584
========== ============= ============
1991
United States............. $1,713,651 $42,706 $1,842,391
Europe.................... 374,380 5,199 283,315
Canada.................... 230,081 9,746 108,121
---------- ------------- ------------
$2,318,112 $57,651 $2,233,827
========== ============= ============
1990
United States............. $1,712,517 $73,313 $1,323,201
Europe.................... 345,090 9,438 152,871
---------- ------------- ------------
$2,057,607 $82,751 $1,476,072
========== ============= ============
|
(16) Selected Unaudited Quarterly Information
As Restated
----------------------------------
1992 Quarterly Results March 31 June 30 Sept. 30 Dec. 31 Total
- ---------------------------------------- ----------- ---------- ----------- ----------- -----------
(In thousands, except per share data)
Revenues................................ $582,580 $606,824 $609,553 $605,620 $2,404,577
Gross Profit............................ 80,469 82,563 60,918 19,904 243,854
(Loss) from continuing operations before
cumulative effect of accounting change.. (7,822) (31,525) (89,599) (234,569) (363,515)
(Loss) from discontinued operations .... (9,712) (22,489) (38,176) (182,853) (253,230)
Cumulative effect of change in method of
accounting for income taxes............. 4,315 - - - 4,315
----------- ---------- ----------- ----------- -----------
Net (loss).............................. $ (13,219) $(54,014) $(127,775) $(417,422) $(612,430)
=========== ========== =========== =========== ===========
|
As Restated
--------------------------
1992 Quarterly Results March 31 June 30 Sept. 30 Dec. 31 Total
- ------------------------------------------------------- -------- -------- -------- --------- ---------
(In thousands, except per share data)
(Loss) income per share:
Continuing operations.................................. $(0.20) $(0.80) $(2.22) $(5.78) $(9.00)
Discontinued operations................................ (0.25) (0.54) (0.94) (4.51) (6.24)
Cumulative effect of change in method of accounting for
income taxes........................................... 0.11 - - - 0.11
-------- -------- -------- --------- ---------
Net (loss)............................................. $(0.34) $(1.34) $(3.16) $(10.29) $(15.13)
======== ======== ======== ========= =========
|
The loss from continuing operations in the fourth quarter of
1992 includes
the following: (i) restructuring charges of $13.9 million
primarily for
consolidation and downsizing of certain North American
mechanical/electrical
services business units, (ii) $70.2 million for losses
attributable to assets
held for sale, (iii) valuation allowances of $56.1 million
relating to accounts receivable, work-in-progress on uncompleted
contracts and inventory and (iv) a valuation allowance of $24.0
million provided against deferred tax assets. The loss from
discontinued operations in the fourth quarter of 1992
includes the following: (i) restructuring charges of $18.0
million relating to severance payments and facilities
consolidation, (ii) $37.6 million for losses
attributable to assets held for sale, (iii) valuation allowances
of $62.4 million relating to accounts receivable and inventory
and (iv) $29.3 million relating to write-off of goodwill and
other intangibles.
As
Restated
1991 Quarterly Results March 31 June 30 Sept. 30 Dec. 31 Total
(In thousands, except per share data)
Revenues.................................. $520,613 $560,015 $585,410 $652,074 $2,318,112
Gross Profit.............................. 86,761 89,065 91,993 76,732 344,551
Income (loss) from continuing operations.. 10,619 9,807 5,583 (21,297) 4,712
Income from discontinued operations....... 3,431 5,042 9,716 6,074 24,263
-------- ---------------- ---------- ----------
Net income (loss)......................... $14,050 $14,849 $15,299 $(15,223) $28,975
======== ================ ========== ==========
Income (loss) per share:
Continuing operations..................... $0.28 $0.26 $0.14 $(0.58) $0.10
Discontinued operations................... 0.09 0.13 0.25 0.16 0.63
-------- ---------------- ---------- ----------
Net income per share...................... $0.37 $0.39 $0.39 $(0.42) $0.73
======== ================ ========== ==========
|
As discussed in Note 1, the Company has restated its operating results for the quarters and years ended December 31, 1991 and 1990 and each of the quarters in the nine month period ended September 30, 1992. The effect of the restatement was to decrease net income and earnings per share for the fourth quarter of 1991 and 1990 by $31.3 million and $9.1 million or $0.81 and $0.24 per share, respectively, and to decrease (increase) net loss and net loss per share for each of the quarters in the nine month period ended September 30, 1992 as follows (in thousands, except per share data):
Net Loss
Quarter Ended Net Loss Per Share
- -------------------- -------- ---------
March 31, 1992...... $26,451 $ 0.65
June 30, 1992....... (153) (0.01)
September 30, 1992.. 7,554 0.19
|
(17) Legal Proceedings
Since August 1992, nineteen purported class action lawsuits have been filed against the Company arising out of the restatement of earnings, write-offs and losses announced by the Company on August 4, 1992 and October 2, 1992. Pursuant to Stipulation and Court Order on January 15, 1993, a single consolidated amended class action complaint (the "Complaint") was filed. The Complaint names as defendants the Company, certain former officers and directors, four current directors, a former subsidiary officer and the Company's then outside auditor, Ernst & Young.
The Complaint alleges violations of Section 10(b) of the Securities and Exchange Act of 1934, Rule 10b-5 promulgated thereunder and common law fraud and deceit on the part of the Company and certain other defendants. Among other things, the Company is alleged to have intentionally and materially overstated its inventory, accounts receivable and earnings in various public disseminations during the purported class period May 1, 1991 through October 2, 1992. The Complaint seeks an unspecified amount of damages. The Company denies the material allegations in the complaint. The parties are now engaged in discovery proceedings. However, the Company expects that under its proposed Chapter 11 plan of reorganization, no damages will be recoverable from the Company by claimants in the class action litigation, although they will receive warrants to purchase the common stock of the reorganized Company.
The Company has been informed by the Securities and Exchange Commission (the "SEC") that it is conducting a private investigation to determine whether there have been violations of certain provisions of the Federal securities laws and/or the rules and regulations of the SEC in connection with the Company's financial records, reports and public disclosures. The Company has been cooperating with the SEC's staff and has voluntarily produced requested documents and information. On April 12, 1994, the SEC's staff informed the Company of its intention to recommend that the SEC file a civil injunction action against the Company. The Company is currently engaged in discussions with the SEC's staff concerning a possible consensual resolution of the matter.
In January 1992, the Public Service Commission of the State of
New York ("PSC") ordered its staff to perform an audit covering
all aspects of operations of JWS. The audit report alleged that
mismanagement and imprudence on the part of JWS may have resulted
in excess charges to its customers of up to $10.6 million. Based
on the audit report, in June 1992 the PSC instituted a
proceeding requiring JWS to demonstrate that its rates charged to
customers are not excessive and provided for an investigation of
JWS's management practices.
As part of this proceeding and citing the audit report's
assertion without receiving the audit report in evidence, the PSC
ordered that $10.6 million of JWS's annual revenues be made
temporary and subject to refund, effective August
6, 1992, pending the completion of the investigation.
Between December 1992 and May 1993, representatives of JWS, the PSC, consumer advocate groups, the County of Nassau, the town of Hempstead and others appeared and submitted testimony in the PSC proceedings. On June 3, 1993, the PSC issued an order suspending hearings and appointed two administrative law judges for the purpose of effecting a settlement. Negotiations among the parties and the settlement judges were ongoing from that time.
In addition on February 5, 1993, the County of Nassau filed a complaint in the Supreme Court of the State of New York alleging that JWS intentionally filed false rate applications with the PSC and, as a result, for the period from March 31, 1987 through March 31, 1992, JWS had earnings that exceeded its projections by $8.7 million. The complaint alleged that this conduct constituted violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO") and common law fraud.
On December 22, 1993, JWS, the New York State Consumer
Protection Board, Nassau County, certain other governmental
bodies and a consumer advocate group
executed an agreement that ended the several regulatory and legal
proceedings against JWS described above. Subsequently, the
agreement was approved by the PSC on February 2, 1994. The
agreement provides for, among other things, a
three year general rate moratorium, resolution of the economic
issues raised by the PSC arising from its 1992 audit of JWS,
settlement of related litigation and the dismissal of Nassau
County's RICO lawsuit against JWS. JWS agreed, in
consideration of avoided litigation and other costs associated
with the proceedings, to make payments over the next three years
totalling $11.7 million to customers in Nassau and Queens
Counties in the State of New York. In connection with this
settlement, the Company provided a pre-tax charge of $7.0
million in 1992.
The agreement also provides that JWS will use its best efforts to bring about the separation of Jamaica Water Securities Corp., a subsidiary of the Company which holds substantially all the common stock of JWS, from the Company.
In 1986, the State of New York enacted a statute requiring the
City of New York (the "City") to acquire by condemnation all of
the JWS property constituting or relating to its water
distribution system located in the City
only if a Supreme Court of the State of New York (the "Supreme
Court") decides that the amount of compensation to be paid for
the system is determined solely by the income capitalization
method of valuation. If the Court determines
compensation by a method other than the income capitalization
method or the award is for more than the rate base of the
condemned assets, the statute
permits the City to withdraw the proceeding without prejudice or
costs. In 1988, the City instituted a proceeding pursuant to the
statute to acquire the system which constitutes approximately 75%
of JWS' water utility plant. JWS
argued at trial that the judicially recognized method for valuing
public utility property is by the method known as "Reproduction
Cost New, Less Depreciation". JWS also sought consequential and
severance damages that would result from separating the JWS
Nassau County water supply system from that in
the City. The aggregate compensation sought by JWS as of December
31, 1987 was approximately $924 million. The City submitted its
income capitalization valuation, as of December 31, 1987, at
approximately $63 million.
In June 1993, the Supreme Court dismissed the City's petition. The Supreme Court concluded, among other things, that the statute is unconstitutional because it directs the Court to render an advisory opinion.
In February 1994, the New York Court of Appeals held constitutional a nearly-identical statute dealing with another water utility. In April 1994, upon a request made by the City for reconsideration, the Supreme Court stated that it would reconsider its prior decision in light of the February decision of the Court of Appeals.
The Company cannot predict when or if the Supreme Court will conduct further proceedings under the statute nor is it possible to predict what the decision of the Supreme Court might be if it decides to value the JWS property or the effect of the pending litigation on the proposed sale of JWS.
In 1993, the Company's French and Belgian information services
subsidiaries filed petitions in their respective countries
seeking relief from their creditors. The French and Belgian
subsidiaries have outstanding unsecured
credit facilities which are guaranteed by the Company aggregating
approximately $5.9 million. Such amount has been provided for as
a loss in the accompanying Consolidated Statement of Operations
for the year ended December 31, 1992.
As described in Note 10, in August 1993 the Company sold its U.S. information services business and among other things, retained certain liabilities, primarily lease obligations. In October 1993, the subsidiary formerly carrying on this business filed a voluntary petition under Chapter 7 of the U.S. Bankruptcy Code.
In connection with an investigation of the plumbing industry being conducted by the New York County District Attorney's office, two related subsidiaries of the Company engaged in the plumbing business in New York City have received subpoenas for certain of their books and records. The subsidiaries have complied with those subpoenas. Additionally, certain employees of these subsidiaries have been subpoenaed to testify as witnesses before a grand jury and those employees have complied with the subpoenas.
The Company is subject to other legal proceedings and claims which have arisen in the ordinary course of business and have not been adjudicated. The Company cannot predict the outcome of such litigation or the impact that an adverse result in such litigation will have upon the Company's financial position or results of operations.
(18) Other
JWS is subject to a PSC order which requires that dividend
payments by JWS not exceed 50% of JWS's net income available to
common shareholders for the preceding twelve month period and
subject further to a debt/equity ratio
restriction. Under such PSC order, approximately $2.4 million of
JWS's retained earnings were available for the payment of
dividends and $52.7 million of JWS's retained earnings were
restricted as of December 31, 1992.
In September 1992, the PSC issued an order requiring additional
subjective certifications before the payment by JWS of cash
dividends on its common stock.
This resulted in the suspension of dividend payments to the
Company by JWS for the last two quarters of 1992 and all of 1993.
Dividends paid by JWS in 1992 and 1991 amounted to $1.2 million
and $2.0 million, respectively.
As a result of the settlement agreement described in Note 17, JWS
recommenced dividend payments in 1994.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF JWP INC. AND SUBSIDIARIES
FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE TWO YEARS
ENDED DECEMBER 31, 1993
(Unaudited)
Results of Operations
Revenues for the years ended December 31, 1993 and 1992 were
$2.2 billion and $2.4 billion, respectively. Net loss for the
years ended December 31, 1993 was
$123.1 million or $3.06 per share compared to a net loss of
$612.4 million or $15.13 per share in the year earlier period.
The Company's loss from continuing
operations for the years ended December 31, 1993 was $114.0
million or $2.84 per share compared to a loss of $363.5 million
or $9.00 per share for the year ended December 31, 1992.
Net loss from continuing operations for the year ended December
31, 1993 includes net interest expense of $50.2 million compared
to $44.2 million of net interest expense in 1992. The increase in
interest expense in 1993 primarily
reflects accruals for penalty interest on debt in default. Net
loss from continuing operations for the year ended December 31,
1993 includes a net gain on businesses sold or held for sale of
$1.0 million. Net loss from continuing
operations for the year ended December 31, 1992 includes a net
loss of $76.1 million on the businesses sold or held for sale.
Net loss from discontinued operations for the year ended
December 31, 1993 was $9.1 million or $0.22 per share compared to
$253.2 million or $6.24 per share for the year ended December 31,
1992. The loss from discontinued operations for the year ended
December 31, 1993 reflects a charge of $8.1
million related to an adjustment in the carrying value of
liabilities as a result of the bankruptcy filing under Chapter 7
of the U.S. Bankruptcy Code by the Company's subsidiary that
formerly carried on the Company's U.S.
information services business and a charge of $7.4 million to
write down the net assets of the water supply business to
estimated net realizable value.
The net loss in 1992 reflects (i) a continuing slump in the
Company's mechanical and electrical services business,
principally attributable to a downturn in commercial
construction; (ii) intense competition in
the Company's information services business; (iii) restructuring
charges related to the planned disposition and downsizing of (a)
the information services business,
(b) other non-core businesses and (c) certain
mechanical/electrical operations;
(iv) significant provisions for losses on accounts receivable and
inventories; (v) a provision for losses on net assets held for
sale; and (vi) expenses associated with the shareholder
litigation, the Company's efforts to restructure its debt through
a consensual arrangement and the restatement of
the Company's financial statements.
A significant portion of the 1992 loss, particularly with
respect to losses on accounts receivable and write down of
inventories, arose as a result of management's review of the
Company's year end 1992 financial statements.
Concurrent with such review, the Company recorded significant
write-offs and losses in 1992 for impairment of goodwill and
other intangibles, for the
establishment of asset valuation and restructuring reserves
associated with net assets held for sale and as a result of the
decision to discontinue the information services business.
On December 21, 1993, three holders of the Company's 73/4%
Convertible Subordinated Debentures filed an involuntary petition
under Chapter 11 of the U.S. Bankruptcy Code against the Company.
The Company on February 14, 1994 consented to the entry of an
order for relief under Chapter 11 of the
Bankruptcy Code. At that time the Company adopted a proposed plan
of reorganization which, as modified, has the support of the
Official Unsecured Creditors Committee and the Official Unsecured
Junior Creditors and Interest
Holders Committee. The proposed plan of reorganization
contemplates the exchange of substantially all of the Company's
indebtedness for new notes of
the reorganized Company, all of its common stock and warrants to
purchase common stock of the reorganized Company. Holders of the
Company's common and preferred stock and warrants of
participation will receive warrants to purchase
common stock of the reorganized Company in exchange for their
equity interests.
The proposed plan also contemplates a business restructuring plan
which the Company initially developed in the third quarter of
1992 to divest certain of its non-core businesses. However, there
can be no assurance that the proposed plan of reorganization will
be consummated or, if so, its timing. See "Liquidity and Capital
Resources" for additional discussion with respect to the
Company's business restructuring plan.
Following the Company's public announcement in October 1993 of its then proposed reorganization plan, the New York Stock Exchange took action resulting in the delisting of the Company's common stock.
As of December 31, 1993, the Company had negative net worth of
$302.3 million and a working capital deficit of $452.3 million
after the reclassification of debt in default aggregating $501.0
million. The Company is not in compliance
with certain covenants contained in its loan agreements. The
Company continues to experience inadequate cash flow to fund its
operations and service its debt and other obligations. From
September 1992 to February 1994, when the Company
obtained debtor-in-possession financing, the Company did not have
available credit facilities and, consequently, funded its
operations from working capital and proceeds from the sale of
businesses and other assets. The Company's surety
companies are reviewing bid and performance bonding requests on a
case-by-case basis with special attention paid to large
construction projects and those with a duration of more than two
years. In addition, a surety company that had been
the primary source of surety bonds for certain subsidiaries,
which together comprised approximately 20% of the Company's 1993
revenues of those mechanical/electrical companies which the
Company currently plans to retain, is no longer engaged in the
business of issuing such bonds. As a result, these
subsidiaries are currently not receiving such bonds. However, the
absence of available bonding for these subsidiaries has not
resulted in a material reduction in their backlog. The Company
and these subsidiaries are actively engaged in discussions with
another surety company which has undertaken due
diligence for the purpose of entering into a new surety bonding
arrangement.
However, there can be no assurance that such a new surety bonding
arrangement can be obtained.
The accompanying financial statements have been prepared on a
going concern basis and do not include any adjustments relating
to the recoverability and classification of assets or the amounts
and classification of liabilities that
might be necessary should the Company be unable to continue as a
going concern.
The Company's continuation as a going concern is dependent upon
its ability to restructure its indebtedness in the Chapter 11
proceeding, obtain sufficient bonding to guarantee its
performance on construction contracts, return to
profitability, obtain new credit facilities and otherwise
generate sufficient cash flow to meet its restructured and other
obligations on a timely basis. See "Liquidity and Capital
Resources."
As a result of the restatements of the Company's first and
second quarter earnings of 1992, write-offs and losses announced
by the Company on August 4, 1992 and on October 2, 1992, class
action lawsuits were filed on behalf of shareholders against the
Company and certain other defendants. The class action
lawsuits have been consolidated and the single consolidated
amended class action complaint alleges, among other things, that
the Company intentionally and materially overstated assets and
earnings in various public disseminations in violation of Section
10(b) of the Securities and Exchange Act of 1934 and
Rule 10b-5 promulgated thereunder. The complaint seeks an
unspecified amount of damages. The Company has denied the
material allegations contained in the complaint. The parties are
now engaged in discovery proceedings.
However, under the terms of the Company's proposed plan of
reorganization, no damages will be recoverable from the Company
by the claimants in the class action litigation,
although they will receive warrants to purchase the common stock
of the reorganized Company. See Note I to Condensed Consolidated
Financial Statements for additional discussion with respect to
the shareholder litigation.
The Company has been informed by the Securities and Exchange Commission (the "SEC") that it is conducting a private investigation to determine whether there have been violations of certain provisions of the federal securities laws and/or the rules and regulations of the SEC in connection with the Company's financial records, reports and public disclosures. The Company has been cooperating with the SEC's staff and has voluntarily produced requested documents and information. On April 12, 1994, the SEC's staff informed the Company of its intention to recommend that the SEC file a civil injunction action against the Company. The Company is currently engaged in discussions with the SEC's staff concerning a possible consensual resolution of the matter.
Selling, general and administrative expenses ("SG&A") were
$216.7 million in 1993 compared to $440.7 million in 1992. The
significantly higher SG&A expenses
in 1992 reflects a provision of $100.4 million for losses on
accounts and other receivables (See "Mechanical/Electrical
Services" below) and higher 1992 general corporate expenses of
$48.4 million compared to $26.4 million in 1993
(See "General Corporate and Other Expenses"). A reduction of SG&A
expenses in 1993 was realized from the Company's downsizing and
restructuring plan.
Mechanical/Electrical Services
Revenues of the mechanical/electrical services business units
for the year ended December 31, 1993 decreased 8.7% to $2.2
billion from $2.4 billion in 1992. Operating loss for the year
ended December 31, 1993 was $39.1 million
compared to an operating loss of $187.2 million for the year
ended December 31, 1992. In connection with the Company's
business restructuring plan, certain
mechanical/electrical services business units have been sold or
identified for sale. The operating results of such business units
are included in the aforementioned operating results. Revenues of
the mechanical/electrical business units sold or held for sale
for the years ended December 31, 1993 and
1992 were $257.9 million and $526.9 million, respectively. For
the year ended December 31, 1993, such business units had an
operating loss of $11.8 million
compared to an operating loss of $41.2 million in the year
earlier period.
The operating results in both 1993 and 1992 reflect, among
other things, the continuing negative impact of the recession and
oversupply in the commercial real estate market which has caused
intense competition for new commercial work. As a result of the
reduction of commercial work, many of the Company's
mechanical/electrical services business units have pursued
noncommercial projects, primarily governmental and municipal
facilities, at lower margins than historically available in the
commercial marketplace. Certain of these
business units were not as experienced in performing
noncommercial projects and, as a result, incurred losses on these
long-term contracts. The operating
loss in 1993 includes $13.0 million of losses incurred by the
Company's business units in the Midwest. Such losses primarily
consist of job write-downs and loss contingencies on certain
large completed industrial and municipal
projects. In the fourth quarter of 1993, certain of the Company's
mechanical business units in the Western region recorded charges
of approximately $13.1 million for estimated losses on certain
large uncompleted municipal projects.
The losses were primarily attributable to adverse weather
conditions, management turnover, inadequate estimating of job
costs and labor problems.
Operating margins in 1993 were also adversely affected by
approximately $7.6 million of losses in the United Kingdom and
Canada. Such losses reflect, among other things, the continued
recession in the United Kingdom and Canada,
downsizing costs in the United Kingdom and the inadequacy of
available bonding in Canada. The operating loss for the year
ended December 31, 1992 includes a provision for losses on
accounts and other receivables of $100.4 million, due
partially to the impact of the recession on the financial
condition of customers of the Company's mechanical/electrical
services business units.
Additionally, the Company's financial condition and negative cash
flow negatively impacted its ability to settle claims and
unapproved change orders on a favorable basis. The operating loss
for the year ended December 31, 1992
also includes restructuring charges of $38.7 million for the
downsizing of the Company's North American mechanical/electrical
services operations, $13.6
million applicable to the write-off of goodwill and a charge of
$15.6 million relating to the write-off of the small tool
inventory. Small tools are located at numerous construction sites
and generally have short lives. The Company made
the decision to write-off its small tool inventory because of the
difficulty and expense associated with taking periodic physical
inventories.
At December 31, 1993, the mechanical/electrical services business backlog was $1.0 billion compared to $1.6 billion at December 31, 1992. Such backlog included $954.2 million at December 31, 1993 and $1,263 million at December 31, 1992 relating to companies which the Company currently intends to retain. The Company's overall backlog in its North American regions and in the United Kingdom has stabilized at approximately $1.0 billion through May 1994. The initial decline is attributable to the downsizing of the Company's operations, the Company's weakened financial condition which continues adversely affects its ability to obtain new contracts and the continuing recession in the North American and overseas construction markets.
Prospects for a recovery in the commercial office building
market in both North America and the United Kingdom remain poor
for the immediate future.
Additionally, the surety companies will generally not bond new
projects for certain non-core businesses which the Company has
identified for sale. Surety bonds are frequently a precondition
to the award of a mechanical or electrical contract.
Included in the Condensed Consolidated Balance Sheet as of December 31, 1993 under the caption "Excess of cost of acquired businesses over net assets, less amortization" is $59.0 million of goodwill. Such goodwill relates to the mechanical/electrical services business units which the Company currently intends to retain. Management believes that such goodwill has not been permanently impaired. However, if the Company were to later decide to divest these units, goodwill and other write-offs might be required depending upon then existing market conditions and their future business prospects.
Discontinued Operations
In April 1992, the Company announced its intention to sell its
water supply business. However in July 1993, the Board of
Directors decided not to proceed with the divestiture due to the
then pending rate proceedings and litigation.
In December 1993, the Company's subsidiary, Jamaica Water Supply
Company ("JWS"), executed an agreement with respect to the rate
related proceedings and litigation (See Note I) thereby
eliminating significant uncertainties relating
to the Company's water supply business. Subsequently, the
agreement was approved by the New York State Public Service
Commission on February 2, 1994.
Accordingly, the Company reinstated its plan of divestiture in
the first quarter of 1994. In 1993, the Company recorded a $7.4
million loss to write-down the net assets of the water supply
business to estimated net realizable value. The Condensed
Consolidated Financial Statements reflect the
water supply business as a discontinued operation for all periods
presented.
See Note I regarding the status of a proceeding initiated in 1988
by the City of New York with respect to the possible condemnation
of the water distribution system of JWS that is located in New
York City.
For the year ended December 31, 1993, revenues of the water
supply business increased 11.9% to $66.8 million from $59.8
million in the year earlier period.
Operating income for the year ended December 31, 1993 was $15.4
million compared to $4.8 million in the year earlier period.
Operating results for the year ended December 31, 1992 included a
charge of $7.0 million relating to the settlement of litigation
and regulatory matters. See Note I and "Liquidity and
Capital Resources."
On January 1, 1994, upon expiration of the then existing
collective bargaining agreement, the local collective bargaining
unit (Local 374 of the Utility Workers Union of America)
representing 212 employees of JWS
commenced a strike against JWS. On March 27, 1994, the membership
of the local collective bargaining unit ratified a new five year
collective bargaining agreement negotiated between JWS and union
officials thereby ending the work stoppage.
In March 1993, the Company's Board of Directors approved the
disposition of the Company's U.S. information services business.
The Board of Directors had previously decided to sell the
Company's overseas information services
business. Accordingly, operating results reflect the information
services business as discontinued operations. See Note E to the
Condensed Consolidated Financial Statements. Revenues of the
information services business were $876.7
million and $1.7 billion in 1993 and 1992, respectively.
Operating income of the information services business in 1993 was
$10.2 million compared to a loss
from operations of $187.9 million in 1992. The loss in 1992
includes charges of $67.3 million which consist of the write-off
of goodwill and other intangible assets related to the U.S.
information services business and costs
attributable to employee severance and facilities consolidation.
The loss also reflects intense competition among personal
computer resellers, decreases in
the prices of personal computers and the rapid introduction of
new technology. The difficulties encountered by the Company in
successfully integrating the back
office operations and accounting systems of Businessland Inc.,
which was acquired in August 1991, with the Company's preexisting
information services back office operations resulted in
additional losses. In 1993, the Company sold
substantially all the assets of its U.S. and international
information services subsidiaries. The transactions did not
result in a material gain or loss to the
Company in 1993. See "Liquidity and Capital Resources" below for
additional information with respect to the disposition of the
U.S. information services subsidiary.
In connection with the plan to dispose of the Company's
overseas information services business and certain of its U.S.
information services units, the Company provided for losses
aggregating $49.5 million in 1992.
These charges primarily represent the estimated losses to be
realized upon the disposition of
such business units in 1993. Such amount is in addition to the
aforementioned loss from operations of $187.9 million and is
included in the accompanying
Consolidated Statement of Operations under the caption "Loss from
disposal of businesses" in Discontinued Operations.
General Corporate and Other Expenses
General corporate and other expenses for the year ended
December 31, 1993 were $26.4 million compared to $48.4 million in
1992. Corporate expenses for the year ended December 31, 1993
include approximately $12.0 million of
expenses related to legal, consulting and other professional fees
arising from the shareholder litigation and the proposed debt
restructuring. The higher
amount of corporate expense for the year ended December 31, 1992
was related primarily to fees paid in 1992 to lending
institutions for extensions, amendments and waivers to the
Company's revolving credit agreement ($4.5
million), the accelerated vesting of deferred compensation as a
result of the termination of employment of certain officers ($5.6
million), employee termination costs ($1.8 million) and
relocation of the corporate headquarters,
primarily the write-off of leasehold improvements and abandonment
of a lease ($4.2 million).
Liquidity and Capital Resources
For the year ended December 31, 1993, the Company's operations used $44.5 million in cash primarily due to operating losses and working capital requirements. From September 1992 to February 1994, the Company had no available lines of credit and experienced significant cash outflow as a result of adverse publicity associated with the restatements of its first and second quarter 1992 financial statements, defaults under its loan agreements, senior management changes and from operating losses. In February 1994, the Company obtained a $35 million debtor-in-possession credit facility ("DIP Loan") from Belmont Capital Partners II, L.P., an affiliate of Fidelity Investments ("Belmont"), which is described in greater detail below.
The Company's consolidated cash balance decreased from $86.8 million at December 31, 1992 to $39.5 million at December 31, 1993. The December 31, 1993 cash balance includes $3.0 million in foreign bank accounts. Such bank accounts are not available to support the Company's domestic mechanical/electrical services business or to pay corporate expenses. The negative operating cash flow reflects continued pressure on accounts payable and other sources in working capital caused by the Company's weakened financial condition, recurring operating losses, restructuring costs and professional fees relating to debt restructuring negotiations and shareholder litigation. Cash deposits made to secure insurance obligations also negatively impacted cash flow.
As a consequence of the Company's financial difficulties, an
asset disposition program was initiated in the third quarter of
1992 with respect to the Company's non-core businesses and
certain other assets to raise cash to
reduce operating cash outflow and to reduce debt. A total of
$139.0 million of net cash proceeds was realized from that
program in 1992 including:
$84.1 million from the sale of five energy and environmental
related businesses, $21.1 million from the sale of the Company's
computer lease portfolio, $18.4 million from the sale of the
Company's interest in a hospital's
central utility plant and $8.8 million from the sale of a rental
equipment business. The cash proceeds from these asset
dispositions in 1992 were used to reduce debt and for
working capital requirements. During 1993, the Company received
net cash proceeds of $43.4 million from the sale of certain
overseas information services business units, other non-core
businesses and other assets. Such
proceeds were used primarily for working capital requirements.
In 1993, the Company's information services business and its Canadian mechanical and electrical services subsidiary made net repayments of $13.1 million and $6.2 million, respectively, of notes payable to various lending institutions.
In February 1994, the Company and substantially all of its subsidiaries entered into an agreement with Belmont in respect to a DIP Loan. The agreement provides a credit facility to the Company of up to $35 million at an interest rate of 12% per annum during the period of the reorganization proceeding. Also, Belmont will receive, as additional interest, a percentage of the securities to issued under the Company's plan of reorganization. The DIP Loan is secured by a first lien on substantially all of the assets of the Company and most of its subsidiaries. As of June 1994, the Company had drawn down $20 million under the DIP Loan.
The Company is in default of certain covenants of the DIP Loan.
Pursuant to written waivers of default, dated April 27, 1994 and
May 6, 1994, the Company has been permitted by Belmont to draw on
its line of credit. Under the
circumstances, any additional borrowings under the DIP Loan will
require further waivers of default.
The DIP Loan is intended to be repaid upon the effective date
of the proposed plan of reorganization. The Company is actively
seeking a working capital facility of approximately $40 million.
The proceeds of this new facility will
be used to refinance the Company's borrowings under the DIP Loan
and to provide working capital to the reorganized Company.
However, there can be no assurance
that the Company will be able to obtain a new working capital
facility or, if so, the amount of any such facility. Obtaining
such a facility is a condition
to the confirmation of the Company's plan of organization.
In August 1993, the Company sold substantially all the assets
of its U.S. information services subsidiary to ENTEX Information
Services, Inc. ("ENTEX"),
a newly organized company owned by a private investor and the
management of the U.S. information services subsidiaries. As part
of the consideration for its sale, the Company received warrants
to buy up to 10% of the purchaser's common
stock for a nominal amount. The Company has ascribed no value to
these warrants. Additionally, ENTEX assumed substantially all the
debt and other liabilities and obligations relating to the
ongoing operations of the U.S.
information services subsidiary; that subsidiary retained certain
lease obligations and certain tax liabilities. The Company was
also released from approximately $210 million of its guarantees
of indebtedness and similar
obligations of the subsidiary. In October 1993, this subsidiary
filed a voluntary petition under Chapter 7 of the U.S. Bankruptcy
Code.
As described in Notes A and C to the Company's Condensed
Consolidated Financial Statements, the Company is in default of
covenants contained in its loan agreements under which
approximately $501.0 million was outstanding at
December 31, 1993 and 1992, including $484.4 million owed to
senior lenders and $16.6 million owed to subordinated note
holders. With respect to the defaulted
senior loan agreements, "standstill arrangements" were negotiated
which covered the period from mid-December of 1992 through April
30, 1993. Under the standstill arrangements, the senior lenders
agreed, in principle, to forebear the receipt of principal and to
accept payment of interest during such periods
at reduced rates ranging from 4% to 6.75%. Since April 30, 1993,
no standstill arrangement has been in place and the Company
ceased making principal and interest payments. However, interest
continued to accrue under the terms of the
respective loan agreements which in certain circumstances include
default rate premiums of an additional 2% and in one case 4%.
Interest ceased to accrue on December 21, 1993, the date on which
an involuntary bankruptcy petition was
filed against the Company. At December 31, 1993, accrued interest
on defaulted debt was $43.3 million. The Company has pledged to
the holders of its senior notes and bank indebtedness the common
stock of five subsidiaries held for sale and certain proceeds
from the sale of one of these subsidiaries. The combined net
book value of these subsidiaries was $23.2 million at December
31, 1993.
The Company has not made scheduled semiannual interest payments since September 1, 1993 with respect to its 73/4% Convertible Subordinated Debentures. All interest payments on such debt were previously made when due. The outstanding principal balance of the debentures at December 31, 1993, in the amount of approximately $7.0 million, has been included in "Debt in default" in the accompanying Condensed Consolidated Balance Sheet.
June 1993, the Company's management developed a business
restructuring plan. The plan contemplates the sale of a number of
domestic mechanical and electrical services business units and
the reorganization of the Company
principally around a smaller international mechanical/electrical
services business which had revenues of approximately $1.9
billion in both 1993 and 1992.
The Company's proposed plan of reorganization contemplates that
the creditors of JWP INC. will exchange approximately $623
million of holding company debt and other liabilities for
approximately $139 million of recourse debt,
approximately $48 million of nonrecourse debt, 100% of the equity
of the Company and warrants to purchase the common stock of the
reorganized Company. All of the new debt, except for $67 million,
is expected to be paid from the
proceeds of asset sales. As indicated previously under the
proposed plan of reorganization, holders of the Company's common
and preferred stock and warrants of participation will receive
warrants to purchase common stock of the
reorganized Company in exchange for their equity interests.
Only JWP INC., the holding company is the subject of the
proceeding under Chapter 11. The Company's mechanical/electrical,
water supply and other
operating subsidiaries are not parties to this proceeding. All
operating subsidiary payments have been made in the ordinary
courses of business.
See "Results of Operations" with respect to the Company's ability to continue as a going concern.
See Note D with respect to the status of certain liabilities of
the Company which were in existence prior to February 14, 1994,
the date that the Company consented to the entry of the order for
relief under Chapter 11 of the U.S.
Bankruptcy Code. See also Note D with respect to the recorded
liabilities as of December 31, 1993 which are subject to
compromise under the Company's plan of
reorganization.
The Company's Canadian subsidiary, Comstock Canada, is
negotiating with a Canadian bank to obtain a Canadian $7.5
million (approximately U.S.$5.6
million) secured demand loan credit facility with interest at the
Canadian prime rate (8% at June 1994) plus 1%. The new credit
facility would be secured
by all the assets of Comstock Canada and would be guaranteed by
the Company.
In June 1994, a number of the Company's U.K. subsidiaries
entered into a demand credit facility with a U.K. bank with an
aggregate credit limit of Pounds 14.1 million (approximately
U.S.$21.7 million). The credit facility
consists of the following components with the individual credit
limits as indicated: an overdraft line of up to Pounds7.0 million
(approximately U.S.$10.7 million), a facility for the issuance of
guarantees, bonds and
indemnities of up to Pounds7.4 million (approximately U.S.$11.4
million) and other credit facilities of up to Pounds0.75 million
(approximately U.S.$1.2
million). The overdraft facility is secured by substantially all
of the assets of the Company's principal U.K. subsidiaries. The
overdraft facility provides
for interest at the U.K. bank reference rate (51/2% as of June
1994) plus 3%.
This credit facility will expire in December 1994.
JWS, a subsidiary of the Company carried in "Net assets held
for sale" in the accompanying Condensed Consolidated Balance
Sheets, had two revolving credit
agreements each of which permitted unsecured borrowings of up to
$10.0 million with interest rates equal to the prime rate (71/4%
at June 30, 1994). Both agreements expired on April 30, 1994 and
the borrowings thereunder have been
permitted by the lenders to remain outstanding. JWS is currently
negotiating new revolving credit agreements. As of December 31,
1993, JWS had equal borrowings under each agreement aggregating
$4.8 million. These borrowings are reflected as current
liabilities in the Condensed Balance Sheet of
"Net assets held for sale" which is presented in Note E to the
Condensed Consolidated Financial Statements.
The Company's mechanical/electrical services business does not require significant commitments for capital expenditures. The Company's water supply business anticipates making capital expenditures of approximately $53 million for the utility plant over the five years ended December 31, 1998 including approximately $9 million in 1994. These capital expenditures are expected to be financed by internally generated funds from the water supply business with any remaining long-term financing requirements during that period obtained from the proceeds of newly issued first mortgage bonds and from bank loans. However, the Company's financial difficulties are making it difficult for the water supply business to finance its capital programs.
On December 22, 1993, JWS, the New York State Consumer
Protection Board, Nassau County, certain other governmental
bodies and a consumer advocate group
executed an agreement that ended the several regulatory and legal
proceedings against JWS which are described above and in Note I
to the Condensed Consolidated Financial Statements. Subsequently,
the agreement was approved by the New York State Public Service
Commission (the "'PSC") on February 2, 1994.
The agreement provides for, among other things, a three year
moratorium on rates charged by JWS, resolution of the economic
issues raised by the PSC arising from its 1992 audit of JWS,
settlement of related litigation and the
dismissal of an action brought against JWS by Nassau County of
the State of New York alleging violations of the Racketeer
Influenced and Corrupt Organizations
Act and common law fraud. JWS also agreed, in consideration of
avoided litigation and other costs associated with the
proceedings, to make payments
over the next three years totalling $11.7 million to customers in
Nassau and Queens Counties in the State of New York. The
agreement also provides that JWS will use its best efforts to
bring about the separation of Jamaica Water
Securities Corp., a subsidiary of the Company which holds
substantially all the common stock of JWS, from the Company.
At December 31, 1993, the Company and a wholly-owned captive
insurance subsidiary ("Defender") had letters of credit
outstanding totalling $36.4 million which in effect secure their
workers' compensation, automobile and
general liability insurance obligations. The letters of credit
were intended to serve as collateral for the obligations of
Defender to reimburse the Company's
unrelated insurance carriers for claims paid in respect of
certain years' insurance programs. A total of $34.9 million of
such letters of credit expire
in December 1994 and $1.5 million in February 1995. Since October
1992, neither the Company nor Defender have been able to obtain
additional letters of credit to secure these type of obligations
and, as a result, have been required to make cash collateral
deposits to a third party insurance company to secure such
obligations. The deposits totalled $21.3 million and $7.7 million
as of December 31, 1993 and 1992, respectively, and are included
under the caption "Miscellaneous" in Other Assets in the
accompanying Condensed Consolidated
Balance Sheets. Such deposits have increased to $29.7 million as
of June 30, 1994. They expect to be required to post additional
cash collateral insurance deposits at least until the Company
completes its reorganization in the Chapter
11 proceedings. The need to provide cash collateral has adversely
affected the Company's cash flow.
The Company's proposed plan of reorganization contemplates that
the letters of credit described above will be drawn upon by the
unrelated insurance carriers and that the Company's obligations
to Defender, which were pledged
collateral to the banks issuing such letters of credit, will be
impaired under the Chapter 11 proceeding as well as any related
Company obligations to those
banks. Beginning in February 1994, Defender ceased making
payments for amounts owed to the unrelated insurance carriers,
which obligations are in effect secured by the letters of credit,
and the Company's unrelated insurance carriers have commenced
partial draw downs against certain of the letters of
credit. Approximately $5 million has been drawn against these
letters of credit through June 1994.
The Company has not paid dividends on its preferred stock since September 1992. Cumulative unpaid dividends through December 31, 1993 aggregate $2.3 million.
The Company has substantial net operating loss carryforwards
("NOL") for U.S. Federal income tax purposes. If the Company
exchanges its existing indebtedness for newly issued equity and
for debt as contemplated by the proposed plan of
reorganization, a significant portion of the NOL may not be
available to reduce future U.S. taxable income. Additionally, due
to recent changes in the U.S.
Federal income tax laws, the timing of any such reorganization
could further impact and reduce the amount of the NOL (See Note
H).
In September 1992, the PSC issued an order that resulted in the
suspension of dividend payments to the Company by JWS for the
last two quarters of 1992 and for the year ended December 31,
1993. Dividends paid by JWS in 1992
amounted to $1.2 million. As a result of the settlement agreement
described above, JWS recommenced payment of dividends in 1994.
Impact of New Accounting Pronouncement
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 112 "Employers' Accounting for
Postemployment Benefits" which will be effective beginning in
1994. The adoption of this standard will not have a material
impact upon the Company's consolidated
financial position or its results of operations.
JWP INC. and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited)
(In thousands)
December 31,
-----------------
1993 1992
ASSETS
Current Assets
Cash and cash equivalents............. $ 39,534 $86,836
Accounts receivable, net.............. 455,944 458,273
Costs and estimated earnings in excess
of billings on uncompleted contracts.. 61,987 67,817
Inventories........................... 5,221 6,618
Prepaid expenses and other............ 13,240 9,746
Net assets held for sale............. 20,454 32,894
-------- -----------
Total Current Assets............. 596,380 662,184
--------- -----------
Net assets held for sale.............. 63,161 85,611
Investments, notes and other long-term
receivables........................ 19,737 22,440
Property, plant and equipment, net.... 39,266 51,087
Other Assets
Excess of cost of acquired businesses
over net assets, less amortization.. 58,973 61,542
Miscellaneous......................... 28,925 24,720
----------- -----------
87,898 86,262
----------- -----------
Total Assets.................... $806,442 $907,584
=========== ===========
LIABILITIES AND SHAREHOLDERS' (DEFICIT)
Current Liabilities
Notes payable.................... $ 172 $6,452
Current maturities of long-term debt
and capital lease obligations....... 2,327 2,634
Debt in default..................... 501,007 501,007
Accounts payable................. 209,867 224,840
Billings in excess of costs and
estimated earnings on uncompleted
contracts............................ 115,179 125,764
Other accrued expenses and liabilities. 220,152 166,398
--------- -----------
Total Current Liabilities..... 1,048,704 1,027,095
---------- -----------
Long-term debt............ 2,538 4,111
Other long-term obligations.... 57,462 52,357
Shareholders' (Deficit)
Preferred Stock, $1 par value,
25,000,000 shares authorized, 425,000
shares of Series A issued and
outstanding........................ 21,250 21,250
Common Stock, $.10 par value,
75,000,000 shares authorized, 40,715,541
and 40,754,051 outstanding,
excluding 727,389 and 591,775 treasury
shares in 1993 and 1992............. 4,072 4,075
Warrants of
Participation........................ 576 576
Capital surplus.................... 204,247 203,505
Cumulative translation adjustments.. (6,068) (3,930)
(Deficit).......................... (526,339) (401,455)
----------- -----------
Total Shareholders' (Deficit)...... (302,262) (175,979)
----------- -----------
Total Liabilities and Shareholders'
(Deficit)............................ $806,442 $907,584
=========== ===========
|
See notes to condensed consolidated financial statements.
JWP INC. and Subsidiaries
Condensed Consolidated Statements of Operations
(unaudited)
(In thousands, except per share data)
Year Ended December 31,
---------------------------
1993 1992
--------------- -----------
Revenues................... $2,194,735 $2,404,577
-------------- -----------
Costs and Expenses Cost
of sales.......... 2,043,558 2,160,723
Selling, general and
administrative................. 216,709 440,725
Restructuring charges...... - 38,741
--------------- -----------
2,260,267 2,640,189
--------------- -----------
Operating (Loss)............ (65,532) (235,612)
Interest expense, net......... (50,187) (44,181)
Net gain (loss) on businesses
sold or held for sale........ 1,028 (76,078)
--------------- -----------
(Loss) Before Income Taxes..... (114,691) (355,871)
(Benefit) provision for income
taxes........................ (700) 7,644
--------------- -----------
(Loss) From Continuing Operations
Before Cumulative Effect of
Accounting Change....... (113,991) (363,515)
--------------- -----------
Discontinued Operations
Income (loss) from operations,
net of income taxes.......... 11,263 (203,739)
(Loss) from disposal of
businesses, net of income
taxes................. (20,350) (49,491)
--------------- -----------
(Loss) from discontinued
operations................... (9,087) (253,230)
--------------- -----------
Cumulative Effect of Change in
Method of Accounting
for Income Taxes.... - 4,315
--------------- -----------
Net (Loss)............ $(123,078) $(612,430)
=============== ===========
(Loss) Per Share
Continuing operations.... $(2.84) $(9.00)
Discontinued operations
Income (loss) from
operations................ 0.28 (5.02)
(Loss) from disposal of
businesses................. (0.50) (1.22)
--------------- -----------
(Loss) from discontinued
operations............... (0.22) (6.24)
--------------- -----------
Cumulative effect of
change in method of
accounting for income taxes. - 0.11
--------------- -----------
Net (loss)........... $(3.06) $(15.13)
=============== ===========
|
See notes to condensed consolidated financial statements.
JWP INC. and Subsidiaries Condensed Consolidated Statements of Cash Flows unaudited) (In thousands)
Year Ended December 31,
-----------------------
1993 1992
- ---------------------------------------------------------------
Net (Loss).............. $(123,078) $(612,430)
Adjustments to Reconcile Net
(Loss) to Net Cash
(Used in) Operating Activities
Depreciation and amortization. 35,246 68,993
Restructuring charges applicable
to continuing operations.... - 38,741
Restructuring charges applicable
to discontinued operations.. - 25,950
Net (gain) loss from
businesses sold or held for sale (1,028) 76,078
Provision for losses on
accounts and other receivables.. 13,663 113,903
Inventory valuation adjustments.. - 59,787
Write-off of deferred debt
issuance cost.................... - 2,876
Write-off of fixed assets and
miscellaneous assets........... - 11,167
Write-off of goodwill and
other intangibles............... - 54,873
Stock compensation............... 727 9,518
Deferred income taxes.......... 4,138 7,136
Loss from disposal of
discontinued operations.... 20,350 49,491
Equity and other losses in
unconsolidated subsidiary....... - 5,690
Cumulative effect of
accounting change for income taxes - (4,315)
Other, net...................... 2,411 21,112
------- -----------
(47,571) (71,429)
Change in Operating Assets and Liabilities Excluding Effect
of Businesses Disposed of and Acquired
Decrease in accounts receivable.... 41,286 73,379
Decrease in inventories
and contracts in progress........ 35,292 123,884
(Decrease) in accounts
payable and accrued expenses.. (73,563) (190,752)
Changes in other assets and
liabilities................... 17 15,335
----------- -----------
Net Cash (Used in) Operations...... .(44,539) (49,583)
----------- -----------
Cash Flows from Financing Activities
Proceeds from long-term debt.. 710 85,302
Payments of long-term debt
and capital lease obligations..... (6,027) (68,514)
Proceeds from issuance of
common stock and exercise
of stock options................ - 1,911
Payment of preferred dividends.... - (1,354)
Redemption of preferred stock
of subsidiary company.......... (500) -
Acquisition of common stock
for the treasury................. - (8,130)
(Decrease) increase in notes
payable, net.................... (19,269) 30,258
----------- -----------
Net Cash (Used in ) Provided by
Financing Activities........... (25,086) 39,473
----------- -----------
Cash Flows from Investment Activities
Proceeds from sale of businesses
and other assets............ 43,400 138,971
Acquisition of businesses, net
of cash acquired.............. - (15,899)
Purchase of property, plant
and equipment.................... (17,329) (36,411)
Purchase of environmental
facilities......................... - (32,044)
Net disbursements for other
investments...................... - (9,695)
Cash balance of businesses held
for sale or sold............. (3,748) (26,241)
Other, net......................... - 1,672
----------- -----------
Net Cash Provided by
Investment Activities.............. 22,323 20,353
--------- -----------
(Decrease) Increase in Cash and
Cash Equivalents............... (47,302) 10,243
Cash and Cash Equivalents at
Beginning of Year................. 86,836 76,593
---------- -----------
Cash and Cash Equivalents at
End of Year....................... $39,534 $86,836
========== ===========
|
See notes to condensed consolidated financial statements.
JWP INC. and Subsidiaries
Condensed Consolidated Statements of Shareholders' Equity (Deficit)
(unaudited)
(In thousands)
Cumulative Retained
Preferred Common Warrants of Capital Translation Earnings Shareholders'
Stock Stock Participation Surplus Adjustments (Deficit) Equity (Deficit)
------- ------- ---------------------- ----------- ----------- ----------------
Balance December 31,
1991 ............... $21,250 $4,018 $576 $212,703 $4,807 $212,782 $456,136
Common stock issued in
connection with
acquisitions....... - 10 - 739 - - 749
Exercise of stock options - 14 - 1,897 - - 1,911
Acquisition of common
stock for the treasury - (57) - (8,073) - - (8,130)
Guaranteed future value of
stock issued to acquire
businesses............... - - - (12,308) - - (12,308)
Deferred compensation and
officer bonus....... - 55 - 9,463 - - 9,518
Foreign currency
translation adjustment.. - - - - (8,737) - (8,737)
Preferred stock dividends. - - - - - (1,807) (1,807)
Other, net................ - 35 - (916) - - (881)
Net loss............. - - - - - (612,430) (612,430)
--------- ------- ---------------------- ----------- ----------- ----------------
Balance December 31,
1992.................... 21,250 4,075 576 203,505 (3,930) (401,455) (175,979)
Deferred compensation.... - 9 - 718 - - 727
Foreign currency
translation adjustment.. - - - - (2,138) - (2,138)
Preferred stock dividends.. - - - - - (1,806) (1,806)
Other, net................ - (12) - 24 - - 12
Net loss............... - - - - - (123,078) (123,078)
--------- ------- ------------- --------- ----------- ----------- ----------------
Balance December 31,
1993.................. $21,250 $4,072 $576 $204,247 $(6,068) $(526,339) $(302,262)
========= ======= ============= ========= =========== =========== ================
|
See notes to condensed consolidated financial statements.
JWP INC. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE A Basis of Presentation
The accompanying financial statements have been prepared
assuming that JWP INC. (the "Company") will continue as a going
concern. The matters discussed below raise substantial doubt
about the Company's ability to continue as a going concern. The
financial statements do not include any adjustments relating
to the recoverability and classification of assets or the amounts
and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern. The
Company's continuation as a going concern is dependent upon its
ability to restructure its indebtedness under its
Chapter 11 proceedings, obtain sufficient bonding to guarantee
its performance on construction contracts, return to
profitability, obtain new credit
facilities and generate sufficient cash flow to meet its
restructured and other obligations on a timely basis.
The Company has a working capital deficit of $452.3 million
after the reclassification of long-term debt in default and a
shareholders' deficit of $302.3 million at December 31, 1993.
Many of the Company's mechanical/electrical services contracts
require surety bonds to guarantee the performance of such
contracts. The Company's surety companies are reviewing bid
and performance bonding requests on a case-by-case basis with
special attention paid to large construction projects and those
with durations of more than two years. In addition, a surety
company that had been the primary source of surety
bonds for certain subsidiaries, which together comprised
approximately 20% of the Company's 1993 revenues of those
mechanical/electrical companies which the Company currently plans
to retain, is no longer engaged in the business of
issuing such bonds. As a result, subsidiaries are currently not
receiving such bonds. However, the absence of available bonding
for these subsidiaries has not resulted in a material reduction
in their backlog. The Company and these
subsidiaries are actively engaged in discussions with another
surety company which has undertaken due diligence for the purpose
of entering into a new surety bonding arrangement. However, there
can be no assurance that such a new surety bonding arrangement
can be obtained.
The Company is focused on returning to profitability and
restructuring its operations primarily around a smaller
international mechanical/electrical services business. The
Company has formulated a business restructuring plan
which includes the sale of its information services business,
water supply business, several non-core businesses and certain
mechanical/electrical services operations and the closing or
downsizing of unprofitable operations
(See Notes D and E). The proceeds from the sale of these
businesses and other assets to date have been used for working
capital and to reduce debt. There is no assurance that the
Company will be able to consummate the remaining sales
and, if consummated, whether the Company will realize the
proceeds contemplated by the plan.
As described in Note C, the Company is in default of covenants contained in its senior note agreements, bank credit agreement, 12% subordinated note agreements and its 73/4% Convertible Subordinated Debentures and is presently in a Chapter 11 proceeding. The outstanding amount of such debt in default at December 31, 1993 is $501.0 million.
On December 21, 1993, three holders of the Company's 73/4%
Convertible Subordinated Debentures filed an involuntary petition
under Chapter 11 of the U.S. Bankruptcy Code against the Company.
The Company on February 14, 1994
consented to the entry of an order for relief under Chapter 11 of
the Bankruptcy Code. At the time, the Company adopted a proposed
plan of reorganization and its subsidiaries continue to operate
in the normal course of business. The proposed plan of
reorganization which, as modified, has the
support of the Official Unsecured Creditors Committee and the
Official Unsecured Junior Creditors and Interest Holders
Committee. The proposed plan of reorganization contemplates that
the Company's creditors will exchange
approximately $623 million of holding company debt and other
liabilities for approximately $139 million of recourse debt,
approximately $48 million of
nonrecourse debt, 100% of the equity of the Company and warrants
to purchase common stock of the reorganized Company. All of the
new debt, except for approximately $67 million, is expected to be
paid from the proceeds of asset sales. The holders of the
Company's common and preferred stock and warrants of
participation will receive warrants to purchase common stock of
the reorganized Company in exchange for their equity interests.
There can be no assurance that the
proposed plan of reorganization will be consummated or, if so,
its timing.
The Company's mechanical/electrical services, water supply and other operating subsidiaries are not parties to this Chapter 11 proceeding. All operating subsidiary payments continue to be paid in the ordinary course of business.
In April 1992, the Company announced its intention to sell its
water supply business. However, in July 1993, the Company's Board
of Directors decided not
to proceed with the divestiture due to uncertainties created by
the then pending rate related matters and litigation which are
described in Note J. In
December 1993, the Company's subsidiary, Jamaica Water Supply
Company ("JWS"),
entered into an agreement with respect to the rate related
proceedings and
litigation thereby eliminating significant uncertainties relating
to the water
supply business. Subsequently, the agreement was approved by the
New York State
Public Service Commission on February 2, 1994. Accordingly, the
Company reinstated its plan of divestiture in the first quarter
of 1994. In March 1993, the Company's Board of Directors approved
the disposition of the Company's U.S. information services
business. The Board of Directors had
previously decided to
sell the Company's overseas information services subsidiaries.
Accordingly, operating results for all periods presented have
been reclassified to reflect
the Company's information services business and water supply
business as discontinued operations (see Note E).
As described above and in Notes E and F, the Company has
developed a business
restructuring plan which contemplates the sale of its information
services business, certain of its mechanical/electrical services
business units, its water supply business and certain other
non-core businesses. As a
result, the net assets of businesses to be sold have been
classified in the Condensed
Consolidated Balance Sheets as of December 31, 1993 and 1992 as
"Net assets held for sale" and carried as either current or
long-term assets on the basis
of their actual or expected disposition dates.
As described in Note I, a consolidated class action lawsuit for
unspecified damages was filed against the Company, certain former
officers and directors,
four current directors, a former subsidiary officer and the
Company's then auditors, Ernst & Young. The complaint alleges
violations of Section 10(b) of
the Securities and Exchange Act of 1934, Rule 10b-5 promulgated
thereunder and common law fraud and deceit on the part of the
Company and other named
defendants. The Company has denied the material allegations
contained in the complaint. The parties are now engaged in the
discovery proceedings. However,
the Company expects that under the terms of its proposed plan of
reorganization, no amounts will be recoverable from the Company
by claimants in
the class action litigation, although they will receive warrants
to purchase the common stock of the reorganized Company.
NOTE B Net (Loss) Per Share
Net loss per common share has been calculated based on the
weighted average number of shares of common stock outstanding and
common stock equivalents
relating to warrants and stock options outstanding when the
effect of such equivalents are dilutive (40,816,783 and
40,583,185 for the years ended
December 31, 1993 and 1992, respectively). Per share amounts of
loss from continuing operations and net loss reflects amounts
paid and accrued on the Company's preferred stock.
NOTE C Debt in Default
Debt in default at December 31, 1993 and 1992 consists of (in thousands):
Notes payable to banks under revolving credit facility at prime plus 3/4% $155,795 Senior notes payable to insurance companies,
9.1% to 10.95%........... 328,572
--------
Total senior debt.......... 484,367
Subordinated notes payable to
insurance companies, 12%................. 9,600
73/4% Convertible Subordinated
Debentures............................... 7,040
--------
$501,007
|
The Company failed to make principal and interest payments and
is in default of various financial covenants contained in its
senior notes and 12% subordinated notes including minimum
tangible net worth and minimum current
ratio. The revolving credit facility contains certain financial
and other covenants, including minimum tangible net worth and
minimum current ratio, under which the Company is also in
default. As a result, the entire amount of such notes and bank
indebtedness has been classified in the accompanying
Condensed Consolidated Balance Sheets as "Debt in default".
Additionally, the Company has not made scheduled semiannual
interest payments since September 1, 1993 with respect to its
73/4% Convertible Subordinated Debentures and,
accordingly, such debentures have been classified as "Debt in
default" in the accompanying Condensed Consolidated Balance
Sheet.
Effective April 1993, the Company ceased making payments of
principal and interest under its revolving credit facility and
its senior and subordinated notes. Interest continued to accrue
in accordance with the provisions of these
loan documents which in certain circumstances included default
rates of an additional 2% and in one case 4%. Interest ceased to
accrue on December 21, 1993, the date on which an involuntary
bankruptcy petition was filed against
the Company. The Company has pledged to the holders of its senior
notes and bank indebtedness the common stock of five subsidiaries
held for sale and certain proceeds of the sale of one of those
subsidiaries which had a combined net book value of $23.3 million
as of December 31, 1993.
Certain of the Company's loan agreements contain covenants which restrict its ability to pay dividends on its common stock. The Company does not meet the financial ratio requirements under such covenants and consequently is restricted from paying dividends on its common stock.
The Company's 73/4% Convertible Subordinated Debentures are
convertible into
common stock at any time on or prior to September 1, 2012 at
$30.11 per share which is subject to change as defined in the
indenture agreement pursuant to which the debentures were issued.
The debentures are redeemable, at the
Company's option, on any date prior to maturity at redemption
prices (expressed as percentages of principal amount) ranging
from 102.325% in 1994 to 100% in 1997 and thereafter, plus
accrued interest. In 1992, the Company purchased $8.7
million of its 7 3/4% debentures and realized a net gain of $1.8
million from early retirement of such debt.
See Note A with respect to the contemplated exchange of the debt in default for new debt and equity securities under the Company's proposed plan of reorganization.
As of June 1994, the estimated fair value of the Company's
obligations under
its revolving credit facility approximates $50 million or
approximately 30% of
the amount of its pre-bankruptcy petition date principal and
accrued interest.
The estimated fair value of the senior notes approximates $122
million or
approximately 34% of the amount of its pre-bankruptcy petition
date principal and accrued interest. Such valuations were based
upon recent private transactions involving the purchase and sale
of a limited number of such debt instruments. However, the
estimated values described above are not necessarily
indicative of their fair market value because these debt
instruments are not
actively traded or exchanged. The estimated fair value of the
defaulted 12% subordinated notes and 73/4% Convertible
Subordinated Debentures is nominal.
Such valuations were based upon comparison with similarly rated
securities and are not necessarily indicative of the current
market value.
NOTE D Pre-Consent Date Bankruptcy Claims Subject to Compromise
As described in Note A, on February 14, 1994, the Company
consented to the
entry of an order for relief under Chapter 11 of the U.S.
Bankruptcy Code.
Under Chapter 11, certain claims against the Company in existence
prior to the date that an involuntary petition was filed against
the Company, December 21,
1993, are stayed while the Company continues business as a
debtor-in-possession. These claims which total approximately $623
million are subject to compromise under the Company's proposed
reorganization plan.
As detailed in the following table, the Company's Condensed
Consolidated Balance Sheet as of December 31, 1993 includes
certain liabilities which are
subject to compromise under the Company's reorganization plan.
Other Accrued Other Long-
Accounts Debt in Expenses and term
Payable Default Liabilities Obligations Total
-------- -------- ------------- ----------- --------
(In Thousands)
Debt in default (Note C)....... $- $501,007 $- $- $501,007
Accrued interest (Note C)...... - - 43,315 - 43,315
Amount due to JWP
Information Services, Inc.
(Note E)........................ - - 24,933 - 24,933
Foreign debt guarantees......... - - 6,037 - 6,037
Stock price guarantees............ - - 5,118 - 5,118
Preferred dividends in arrears.. - - 2,257 - 2,257
Unexpired leases................ - - - 1,718 1,718
Unfunded directors' retirement
benefits..... - - - 975 975
Insurance reserves (Note G)........ - - 9,600 26,800 36,400
Other impaired claims............ 400 - 699 - 1,099
-------- -------- ------------- ----------- --------
$400 $501,007 $91,959 $29,493 $622,859
======== ======== ============= =========== ========
|
The Bankruptcy Court established April 8, 1994 as the bar date for filing of claims and certain claims have been filed against the Company which are contingent or in dispute. Additional claims may arise subsequent to the petition date resulting from rejection by the Company of executory contracts, including leases, and from determination by the Court or agreed to by the parties at interest of allowed claims for contingent or disputed amounts.
The Company has received approval from the Bankruptcy Court to
pay or otherwise honor certain of its pre-consent date bankruptcy
obligations including employee wages and benefits, amounts due
under its property, casualty, workers' compensation and other
insurance programs, and amounts
payable under a JWP employee stay bonus and severance pay plan.
NOTE E Discontinued Operations
Discontinued operations includes the Company's information services business and water supply business.
In March 1993, the Company's Board of Directors approved the
disposition of the Company's U.S. information services business.
The Board of Directors had previously decided to sell the
Company's overseas information services
business. Accordingly, operating results of the information
services business have been classified as discontinued
operations. In August 1993, the Company
sold substantially all of the assets of its U.S. information
services business.
The Company did not realize a material gain or loss from the sale
in 1993. The assets of the U.S. information services business
consisted primarily of inventory held for resale and accounts
receivable. Under the terms of the
agreement, the purchaser assumed the debt and other liabilities
relating to the ongoing operations of the business. The Company
received warrants to buy up to
10% of the purchaser's common stock for a nominal amount.
In October 1993, the Company's U.S. information services
subsidiary filed a voluntary petition under Chapter 7 of the U.S.
Bankruptcy Code. In connection
with the bankruptcy filing, the Company recorded a loss of $8.1
million. Such amount is included in "Loss from disposal of
businesses" in the accompanying
Condensed Consolidated Statement of Operations. At December 31,
1993, the Company owed its bankrupt U.S. information services
subsidiary $24.9 million.
Such amount is included in "Other accrued expenses and
liabilities" in the accompanying Condensed Consolidated Balance
Sheet.
As described in Note A, in March 1994, the Company reinstated
its plan of divestiture in respect to its water supply business.
As a result, the Company recorded a loss of $7.4 million in the
fourth quarter of 1993 to record the net
assets of the water supply business at their estimated net
realizable value.
Additionally, the Company recorded a loss of $1.5 million to
further writedown the estimated realizable value of one of its
information services businesses to
its estimated net realizable value based upon current market
conditions. Also, the Company sold substantially all of the
assets of its international
information services businesses in 1993. The sale of such
businesses results in a loss of $3.3 million in 1993. Such
amounts are included as "Loss from
disposal of businesses" in the accompanying Condensed
Consolidated Statement of Operations.
Note I discusses the status of a proceeding initiated in 1988 by the City of New York to acquire by condemnation all of the water distribution system of JWS that is located in New York City.
Combined operating results of discontinued operations including both the information services and water supply business are as follows:
Year Ended
December 31,
---------------------
1993 1992
--------- -----------
(In thousands)
Revenues.............................. $943,455 $1,752,171
Costs and expenses.................... 917,872 1,935,349
--------- -----------
Operating income (loss).............. 25,583 (184,178)
Interest expense..................... (14,320) (18,944)
--------- -----------
Income (loss) before taxes.......... 11,263 (202,122)
Provision for income taxes......... - 1,617
--------- -----------
Income (loss) from
discontinued operations.. $11,263 $(203,739)
========= ===========
|
NOTE F Other Businesses Sold and Net Assets Held For Sale
In May 1993, the Company completed the sale of Software House,
Inc., a manufacturer of security systems, for cash proceeds of
$12.6 million and realized a net gain of approximately $2.7
million. In addition to Software
House and the U.S. information services business, the Company
sold a number of non-core businesses and other assets in 1993 for
cash proceeds of approximately
$43.4 million. Additionally, the Company received notes and other
assets with an aggregate carrying value of $10.9 million. The
Company did not realize a
material gain or loss from these divestitures in 1993. The
Company's Board of Directors has approved a plan for the sale of
the Company's remaining energy
and environmental related businesses, other non-core businesses
and certain mechanical/electrical services operations. In
connection with this asset
disposition plan, a loss of $88.1 million was provided for in
1992. The
operating results of these businesses are included in the
determination of the (loss) from continuing operations.
Revenues and operating (loss) of other businesses sold and held for sale for the years ended December 31, 1993 and 1992 are as follows:
1993 1992
--------- ---------
(In thousands)
Revenues.......... $257,910 $526,894
Operating (loss).. (11,802) (41,151)
|
The assets of the water supply business consists primarily of
utility plant
and equipment which are located in Nassau and Queens Counties in
the State of New York. The net assets of the water supply
business, which aggregate $63.2
million and $57.2 million as of December 31, 1993 and 1992,
respectively, are classified as long-term assets in the
accompanying Consolidated Balance Sheet
under the caption "Net assets held for sale" because the
disposition of the water supply business is expected to take
place after 1994.
A condensed balance sheet relating to discontinued operations and other net assets held for sale at December 31, 1993 is as follows (in thousands):
Cash.................................. $17,617
Accounts receivable, net.............. 59,869
Costs and estimated earnings in excess
of billings........................... 4,889
Inventories........................... 13,089
Other current assets.................. 2,597
--------
98,061
Property, plant and equipment, net.... 154,836
Other assets.......................... 12,653
--------
$265,550
========
Current maturities of long-term debt
and capital lease obligations....... $9,783
Accounts payable.................... 13,610
Billings in excess of costs and
estimated earnings.................. 9,200
Other accrued expenses.............. 72,696
--------
105,289
Long-term debt...................... 36,945
Other long-term liabilities......... 39,701
Net assets held for sale-current.... 20,454
Net assets held for sale-long-term.. 63,161
--------
|
NOTE G Insurance Reserves
The Company is primarily insured with an indirect wholly-owned
captive insurance subsidiary ("Defender") for its workers'
compensation, automobile and general liability insurance. The
insurance liability is determined actuarially
based on claims filed and an estimate of claims incurred but not
yet reported.
The present value of such claims was determined as of December
31, 1993 and 1992 using a 4% discount rate. The estimated current
portion of the insurance liability was $17.7 million and $16.5
million at December 31, 1993 and 1992,
respectively. Such amounts are included in "Other accrued
expenses and liabilities" in the accompanying Consolidated
Balance Sheets. The noncurrent
portion of the insurance liability was $41.0 million and $33.1
million at December 31, 1993 and 1992, respectively. Such amounts
are included in "Other
long-term obligations". The undiscounted liability was
approximately $65.2 million and $54.0 million at December 31,
1993 and 1992, respectively.
At December 31, 1993, the Company and Defender had letters of
credit outstanding totalling $36.4 million which in effect secure
their insurance obligations. Such letters of credit expire in
December 1994 ($34.9 million) and
in February 1995 ($1.5 million). The letters of credit were
intended to serve as collateral for the obligations of Defender
to reimburse the Company's
unrelated insurance carriers for claims paid in respect of
certain years'
insurance programs. Since October 1992, neither the Company nor
Defender have been able to obtain additional letters of credit to
secure their insurance
obligations and as a result has been required to make cash
collateral deposits to a third party insurance company to secure
such obligations. The deposits
totalled $21.3 million and $7.7 million as of December 31, 1993
and 1992, respectively, and are classified as a long-term asset
in the accompanying Condensed Consolidated Balance Sheets under
the caption "Miscellaneous" in
Other Assets. Such deposits have increased to $29.7 million as of
June 30, 1994.
The Company's proposed plan of reorganization contemplates that
the letters of credit described above will be drawn upon by the
unrelated insurance carriers and that the Company's obligations
to Defender, which were pledged as
collateral to the banks issuing such letters of credit, will be
impaired under the Chapter 11 proceeding as well as any related
Company obligations to those banks. Beginning in February 1994,
Defender ceased making payments of amounts
owed to the unrelated insurance carriers, which obligations are
in effect secured by the letters of credit, and the Company's
unrelated insurance carriers have commenced partial draw downs
against certain of the letters of
credit. Approximately $5 million has been drawn against certain
of the letters of credit through June 1994.
NOTE H Income Taxes
The Company files a consolidated federal income tax return
including all U.S. subsidiaries. At December 31, 1993, the
Company has a net operating loss
carry-forward ("NOL") for U.S. income tax purposes expiring
in years through 2008 which approximates $500 million. The
Company has provided a valuation allowance for the full amount of
such NOLs. As described in Note A, the Company is contemplating a
restructuring of its indebtedness with certain
of its creditors on the basis of an exchange of newly issued
equity and debt securities for debt. If the Company is able to
restructure its debt on such
basis, a substantial portion of the NOL may not be available to
reduce future U.S. taxable income. Additionally, due to recent
changes in the U.S. Federal income tax laws, the timing of any
such debt restructuring could further impact
and reduce the amount of NOL.
At December 31, 1993 and 1992 (after having given effect to the adoption of SFAS No. 109), the valuation allowance recorded against the deferred tax assets were $170.1 million and $138.3 million, respectively. These amounts relate to certain deferred tax assets for which realization requires taxable income in the subsidiary which gave rise to the deferred tax asset.
NOTE I Legal Proceedings
Since August 1992, nineteen purported class action lawsuits
have been filed against the Company arising out of the
restatement of earnings, write-offs and
losses announced by the Company on August 4, 1992 and October 2,
1992. Pursuant to Stipulation and Court Order on January 15,
1993, a single consolidated amended class action complaint (the
"Complaint") was filed. The Complaint names
as defendants the Company, certain former officers and directors,
four current directors, a former subsidiary officer and the
Company's then outside auditor, Ernst & Young.
The Complaint alleges violations of Section 10(b) of the
Securities and Exchange Act of 1934, Rule 10b-5 promulgated
thereunder and common law fraud
and deceit on the part of the Company and certain other
defendants.
Among other things, the Company is alleged to have intentionally
and materially overstated its inventory, accounts receivable and
earnings in various public disseminations during the purported
class period May 1, 1991 through October 2,
1992. The Complaint seeks an unspecified amount of damages. The
Company denies the material allegations in the Complaint. The
parties are now engaged in
discovery proceedings. However, the Company expects that under
the terms of its proposed Chapter 11 plan of reorganization, no
damages will be recoverable from
the Company by claimants in the class action litigation, although
they will receive warrants to purchase the common stock of the
reorganized Company.
The Company has been informed by the Securities and Exchange
Commission (the "SEC") that it was conducting a private
investigation to determine whether
there have been violations of certain provisions of the federal
securities laws and/or the rules and regulations of the SEC in
connection with the Company's
financial records, reports and public disclosures. The Company
has been cooperating with the SEC's staff and has voluntarily
produced requested documents and information. On April 12, 1994,
the SEC's staff informed the
Company of its intention to recommend that the SEC file a civil
injunction action against the Company. The Company is currently
engaged in discussions with the SEC's staff concerning a possible
consensual resolution of the matter.
On December 22, 1993, JWS, a subsidiary of the Company, and
representatives from New York State, New York City, Nassau County
and a consumer advocate group executed an agreement that ended
the several regulatory and legal proceedings
against JWS. Subsequently, the agreement was approved by the New
York State Public Service Commission (the "PSC") on February 2,
1994. The agreement provides for, among other things, a three
year general rate moratorium,
resolution of the economic issues raised by the PSC arising from
its 1992 audit of JWS, settlement of related litigation and the
dismissal of an action brought against JWS by Nassau County in
the State of New York alleging violations of
the Racketeer Influenced and Corrupt Organization Act and common
law fraud. JWS agreed, in consideration of avoided litigation and
other costs associated with the proceedings, to make payments
over the next three years totalling $11.7
million to customers in Nassau and Queens Counties in the State
of New York. In connection with this settlement, the Company
provided a pre-tax charge of $7.0
million in 1992. The agreement also provides that JWS will use
its best efforts to bring about the separation of Jamaica Water
Securities Corp., a subsidiary
of the Company which holds substantially all the common stock of
JWS, from the Company.
In 1986, the State of New York enacted a statute requiring the
City of New York (the "City") to acquire by condemnation all of
the JWS property constituting or relating to its water
distribution system located
in the City only if a Supreme Court of the State of New York (the
"Supreme Court") decides that the amount of compensation to be
paid for the system is determined solely
by the income capitalization method of valuation. If the Court
determines compensation by a method other than the income
capitalization method or the award is for more than the rate base
of the condemned assets, the statute
permits the City to withdraw the proceeding without prejudice or
costs. In 1988, the City instituted a proceeding pursuant to the
statute to acquire the system which constitutes approximately 75%
of JWS' water utility plant. JWS
argued at trial that the judicially recognized method for valuing
public utility property is by the method known as "Reproduction
Cost New, Less
Depreciation". JWS also sought consequential and severance
damages that would result from separating the JWS Nassau County
water supply system from that in
the City. The aggregate compensation sought by JWS as of December
31, 1987 was approximately $924 million. The City submitted its
income capitalization valuation, as of December 31, 1987, at
approximately $63 million.
In June 1993, the Supreme Court dismissed the City's petition. The Supreme Court concluded, among other things, that the statute is unconstitutional because it directs the Court to render an advisory opinion.
In February 1994, the New York Court of Appeals held
constitutional a nearly-identical statute dealing with another
water utility. In April 1994,
upon a request for reconsideration by the City, the Supreme Court
stated that it would reconsider its prior decision in light of
the February decision of the Court of Appeals.
The Company cannot predict when or if the Supreme Court will
conduct further proceedings under the statute nor is it possible
to predict what the decision
of the Supreme Court might be if it decides to value the JWS
property or the effect of the pending litigation on the proposed
sale of JWS.
In 1993, the Company's French and Belgian information services
subsidiaries filed petitions in their respective countries
seeking relief from their
creditors. The French and Belgian subsidiaries have outstanding
unsecured credit facilities which are guaranteed by the Company
aggregating approximately $5.9 million. Such amount was provided
for as a loss in 1992.
As described in Note D, in August 1993 the Company sold its
U.S. information services business. In October 1993, the
subsidiary formerly carrying on this
business filed a voluntary petition under Chapter 7 of the U.S.
Bankruptcy Code.
In connection with an investigation of the plumbing industry
being conducted
by the New York County District Attorney's office, two related
subsidiaries of
the Company engaged in the plumbing business in New York City
have received subpoenas for certain of their books and records.
The subsidiaries have complied with those subpoenas.
Additionally, certain employees of these
subsidiaries have been subpoenaed to testify as witnesses before
a grand jury and those employees have complied with the
subpoenas.
The Company is subject to other legal proceedings and claims
which have arisen in the ordinary course of business and have not
been adjudicated. The Company cannot predict the outcome of such
litigation or the impact that an
adverse result in such litigation will have upon the Company's
financial position or results of operations.
NOTE J Other
JWS is subject to a PSC order which requires that dividend payments by JWS not exceed 50% of JWS's net income available to common shareholders for the preceding twelve month period and subject further to a debt/equity ratio restriction. Under such PSC order, approximately $2.5 million of JWS's retained earnings were available for the payment of dividends and $44.7 million of JWS's retained earnings were restricted as of December 31, 1993.
In September 1992, the PSC issued an order requiring additional subjective certifications before the payment by JWS of cash dividends on its common stock. This resulted in the suspension of dividend payments to the Company by JWS for the last two quarters of 1992 and all of 1993. Dividends paid by JWS in 1992 and 1991 amounted to $1.2 million and $2.0 million, respectively. As a result of the settlement agreement described in Note I, JWS recommenced dividend payments in 1994.
NOTE K Adoption of New Accounting Pronouncement
Effective January 1, 1993, the Company adopted the provisions
of Statement of Financial Accounting Standards No. 106,
"Accounting For Postretirement Benefits Other Than Pensions"
(SFAS 106). The estimated present value of the accumulated
postretirement benefit obligations under SFAS 106 approximated
$7.0 million at January 1, 1993. Such amount relates to the
Company's water supply business.
The net assets of the water supply business are included in "Net
assets held for sale" in the accompanying Condensed Consolidated
Balance Sheets. The adoption of SFAS 106 did not have a material
impact upon the Company's consolidated results of operations.
The financial Accounting Standards Board issued Statement of Financial Accounting No. 112 "Employers' Accounting for Postemployment Benefits" which will be effective in 1994. This standard will not have a material impact upon the Company's consolidated financial position or its results of operations.
JWP INC. and Subsidiaries
Condensed Consolidated Balance Sheet (unaudited)
(In thousands)
March 31,
1994
----------
ASSETS
Current Assets
Cash and cash equivalents................... $ 42,027
Accounts receivable, net................ 434,879
Costs and estimated earnings in excess
of billings on uncompleted contracts........ 66,294
Inventories........................... .... 7,638
Prepaid expenses and other................. 9,247
Net assets held for sale................... 15,819
----------
Total Current Assets........................ 575,904
----------
Net assets held for sale............. 60,520
Investments, notes and other long-term
receivables................................. 19,387
Property, plant and equipment, net.......... 38,382
Other Assets
Excess of cost of acquired businesses
over net assets, less amortization........ 58,591
Miscellaneous.............................. 31,819
----------
90,410
----------
Total Assets............................... $784,603
==========
LIABILITIES AND SHAREHOLDERS' (DEFICIT)
Current Liabilities
Notes payable by foreign subsidiaries ..... $ 2,915
Debtor-in-possession note payable...... 1,000
Current maturities of long-term debt and
capital lease obligations.................. 2,243
Accounts payable........................... 179,270
Billings in excess of costs and
estimated earnings on uncompleted contracts.. 109,398
Other accrued expenses and liabilities..... 142,024
----------
Total Current Liabilities................ 450,850
----------
Long-term debt............................ 2,497
Other long-term obligations........... .. 17,869
Pre-consent date bankruptcy claims subject to
compromise............................... 622,859
Shareholders' (Deficit)
Preferred Stock, $1 par value,
25,000,000 shares authorized,425,000
shares of Series A issued and outstanding. 21,250
Common Stock, $.10 par value, 75,000,000
shares authorized, 40,715,541
shares outstanding, excluding
727,389 treasury shares ................ 4,072
Warrants of Participation................ 576
Capital surplus.......................... 204,247
Cumulative translation adjustments..... (7,004)
(Deficit)..................................532,613)
----------
Total Shareholders' (Deficit)..... (309,472)
--------
Total Liabilities and Shareholders'
(Deficit)................................$ 784,603
==========
|
See notes to condensed consolidated financial statements.
JWP INC. and Subsidiaries
Condensed Consolidated Statement of Operations (unaudited)
(In thousands, except per share data)
Three Months
Ended
March 31, 1994
--------------
Revenues..................................... $435,554
--------------
Costs and Expenses
Cost of sales................................ 393,257
Selling, general and administrative.......... 45,689
Reorganization charges....................... 3,600
--------------
442,546
--------------
Operating (Loss)............................. (6,992)
Interest expense, net........................ (176)
--------------
(Loss) Before Income Taxes................... (7,168)
Provision for income taxes................... 250
--------------
(Loss) From Continuing Operations............ (7,418)
--------------
Discontinued Operations
Income from operations, net of income taxes.. 1,144
--------------
Net (Loss)................................... $(6,274)
==============
(Loss) Per Share
Continuing operations........................ $(0.18)
Discontinued operations...................... 0.03
--------------
Net (loss)................................... $(0.15)
==============
|
See notes to condensed consolidated financial statements
JWP INC. and Subsidiaries Condensed Consolidated Statement of Cash
Flows (unaudited) (In thousands)
Three Months
Ended
March 31, 1994
-------------
Net (Loss)..................... $(6,274)
Adjustments to Reconcile Net (Loss)
to Net Cash (Used in) Operating Activities
Depreciation and amortization......... 5,665
Change in operating assets and liabilities....(16,553)
--------------
Net Cash (Used in) Operations........ (17,162)
--------------
Cash Flows from Financing Activities
Proceeds from debtor-in-possession financing 15,000
Payments of long-term debt and capital lease
obligations................... (745)
Increase in notes payable, net of
European and Canadian subsidiaries....... 2,779
--------------
Net Cash Provided by Financing
Activities.................................. 17,034
--------------
Cash Flows from Investment Activities
Proceeds from sale of businesses and other
assets.......................... 2,990
Purchase of property, plant and equipment,
primarily water utility assets.. (2,846)
Decrease in cash balances of businesses
held for sale or sold.............. 4,899
Purchase of investment held for sale....... (2,422)
--------------
Net Cash Provided by Investment
Activities............................... 2,621
--------------
Increase in Cash and Cash Equivalents.... 2,493
Cash and Cash Equivalents at December 31,
1993............................. 39,534
--------------
Cash and Cash Equivalents at March 31,
1994................................ $42,027
=============
|
See notes to condensed consolidated financial statements.
JWP INC. and Subsidiaries
Condensed Consolidated Statement of Shareholders' (Deficit)
(unaudited)
(In thousands)
Cumulative
For the Three Months Ended Preferred Common Warrants of Capital Translation Shareholders'
March 31, 1994 Stock Stock Participation Surplus Adjustments (Deficit) (Deficit)
- ---------------------------- --------- ------ ------------- -------- ----------- ----------- -------------
Balance December 31, 1993... $21,250 $4,072 $576 $204,247 $(6,068) $(526,339) $(302,262)
Foreign currency translation
adjustments................ - - - - (936) - (936)
Net loss.................... - - - - - (6,274) (6,274)
--------- ------ --------------------- ----------- ----------- -------------
Balance March 31, 1994...... $21,250 $4,072 $576 $204,247 $(7,004) $(532,613) $(309,472)
========= ====== ============= ======== =========== =========== =============
|
See notes to condensed consolidated financial statements.
NOTE A Basis of Presentation
On February 14, 1994, JWP (the "Company") became a
debtor-in-possession under
Chapter 11 of the U.S. Bankruptcy Code. The accompanying
financial statements have been prepared on the basis of the
principles prescribed by the American
Institute of Certified Public Accountants' Statement of Position
90-7, "Financial Reporting by Entities in Reorganization Under
the Bankruptcy Code".
As a result, liabilities of the Company that are expected to be
compromised as a result of the bankruptcy proceeding have been
reclassified to the caption
"Pre-consent date bankruptcy claims subject to compromise" in the
accompanying Condensed Consolidated Balance Sheet. See Note B
with respect to the Company's petition for relief under Chapter
11 and its proposed plan of reorganization.
During the reorganization process, the Company has continued to
expense the various legal and other professional fees incurred.
These fees are reflected in the accompanying Condensed
Consolidated Statement of Operations under the
caption "Reorganization charges". Additionally, effective
December 21, 1993, the Company ceased to accrue interest on its
defaulted debt. See Note D with respect to debt in default.
The accompanying financial statements have been prepared
assuming that JWP INC. (the "Company") will continue as a going
concern. The matters discussed in
these Notes to Condensed Consolidated Financial Statements raise
substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any
adjustments relating to the
recoverability and classification of assets or the amounts and
classification of liabilities that
might be necessary should the Company be unable to continue as a
going concern.
The Company's continuation as a going concern is dependent upon
its ability to restructure its indebtedness in connection with
its reorganization under
Chapter 11 of the U.S. Bankruptcy Code, obtain sufficient bonding
to guarantee its performance on construction contracts, return to
profitability, obtain credit facilities and generate sufficient
cash flow to meet its restructured and other obligations on a
timely basis.
Many of the Company's mechanical/electrical services' contracts
require surety bonds to guarantee the performance of such
contracts. The Company's surety companies are reviewing bid and
performance bonding requests on a
case-by-case basis with special attention paid to large
construction projects and those with durations of more than two
years. In addition, a surety company that had been the primary
source of surety bonds for certain subsidiaries,
which together comprised approximately 20% of the Company's 1993
revenues of those mechanical/electric subsidiaries which the
Company currently plans to
retain, is no longer engaged in the business of issuing such
bonds. As a result, these subsidiaries are currently not
receiving such bonds. However, the
absence of available bonding for these subsidiaries has not
resulted in a material reduction in their backlog. The Company
and these subsidiaries are actively engaged in discussions with
another surety company which has
undertaken due diligence for the purpose of entering into a new
surety bonding arrangement. However, there can be no assurance
that such a new surety bonding arrangement can be obtained.
The Company is focused on returning to profitability and
restructuring its operations primarily around a smaller
international mechanical/electrical
services business. In 1992, the Company formulated a business
restructuring plan which included the sale of its information
services business, water supply
business, several non-core businesses and certain
mechanical/electrical services operations and the closing or
downsizing of unprofitable operations.
The proceeds from the sale of these businesses and other assets
has been used for working capital and to reduce debt. There is no
assurance that the Company will be able to consummate the
remaining sales and, if consummated, whether the
Company will realize the proceeds contemplated by the plan.
In April 1992, the Company announced its intention to sell its
water supply business. However, in July 1993, the Company's Board
of Directors decided not to proceed with the divestiture due to
uncertainties created by a then pending
rate-related proceeding with the New York State Public Service
Commission (the JWP INC. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)
"PSC") and litigation which are described in Note I. In December
1993, the Company's subsidiary Jamaica Water Supply Company
("JWS"), executed an agreement with respect to the rate
proceeding and litigation thereby
eliminating significant uncertainties relating to the water
supply business. Subsequently, this agreement was approved by the
PSC on February 2, 1994.
Accordingly, the Company reinstated its plan of divestiture in
the first quarter of 1994. As a result, the water supply business
is presented as a discontinued operation in the accompanying
Condensed Consolidated Financial Statements.
NOTE B Chapter 11 Bankruptcy Proceeding
On December 21, 1993, three holders of the Company's 73/4%
Convertible Subordinated Debentures filed an involuntary petition
under Chapter 11 of the U.S. Bankruptcy Code against the Company.
The Company on February 14, 1994
consented to the entry of an order for relief under Chapter 11 of
the Bankruptcy Code. At that time, the Company adopted a proposed
plan of reorganization and its subsidiaries continue to operate
in the normal course of business. The proposed plan of
reorganization, as modified, has the support of
the Official Unsecured Creditors Committee and the Official
Unsecured Junior Creditors and Interest Holders Committee. The
plan of reorganization contemplates that the Company's creditors
will exchange approximately $623
million of holding company debt and other liabilities for
approximately $139 million of recourse debt, approximately $48
million of nonrecourse debt, 100%
of the equity of the Company and warrants to purchase common
stock of the reorganized Company. All of the new debt, except for
approximately $67 million,
is expected to be paid from the proceeds of asset sales. The
holders of the Company's common and preferred stock and warrants
of participation will receive warrants to purchase common stock
of the reorganized Company in exchange for
their equity interests. However, there can be no assurance that
the proposed plan of reorganization will be consummated or, if
so, its timing.
Under Chapter 11, certain claims against the Company in
existence prior to the date that an involuntary petition was
filed against the Company, December
21, 1993, are stayed while the Company continues business as a
debtor-in-possession. The pre-consent date bankruptcy claims
reflected in the Company's Condensed Consolidated Balance Sheet
as of March 31, 1994 total
approximately $623 million as detailed in the following table.
Other Accrued Other Long-
Accounts Debt in Expenses and term
Payable Default Liabilities Obligations Total
-------- -------- ------------- ----------- --------
(In Thousands)
Debt in default (Note D.......... $- $501,007 $- $- $501,007
Accrued interest (Note D)..... - - 43,315 - 43,315
Amount due to JWP Information
Services, Inc.
(Note I)......................... - - 24,933 - 24,933
Foreign debt guarantees.......... - - 6,037 - 6,037
Stock price guarantees............ - - 5,118 - 5,118
Preferred dividends in arrears.. - - 2,257 - 2,257
Unexpired leases................ - - - 1,718 1,718
Unfunded directors' retirement benefits. - - - 975 975
Insurance reserves (Note G)............ - - 9,600 26,800 36,400
Other impaired claims.............. 400 - 699 - 1,099
-------- --------------------- ----------- --------
$400 $501,007 $91,959 $29,493 $622,859
======== ===================== =========== ========
|
The Bankruptcy Court established April 8, 1994 as the bar date for filing of claims and certain claims have been filed against the Company which are contingent or in dispute. Further, additional claims may arise subsequent to the petition date resulting from rejection by the Company of executory contracts, including leases, and from determination by the Court, or agreed to by the parties at interest, of allowed claims for contingent or disputed amounts.
The Company has received approval from the Bankruptcy Court to
pay or otherwise honor certain of its pre-consent date bankruptcy
obligations including employee wages and benefits, amounts due
under its property, casualty, workers' compensation and other
insurance programs, and amounts
payable under a JWP employee stay bonus and severance pay plan.
The Company's mechanical/electrical services, water supply and other operating subsidiaries are not parties to the Chapter 11 proceeding. All operating subsidiary payments continue to be paid in the ordinary course of business.
NOTE C Debtor-in-Possession Financing ("DIP Loan")
In February 1994, the Company and substantially all of its
subsidiaries entered into an agreement with Belmont Capital
Partners II, L.P., an affiliate
of Fidelity Investments ("Belmont") to provide for a DIP Loan.
The agreement provides to the Company a credit facility of up to
$35 million at an interest rate of 12% per annum during the
period of the reorganization proceeding. Also,
Belmont will receive, as additional interest, a percentage of the
securities to be issued under the Company's plan of
reorganization. The DIP Loan is secured
by a first lien on substantially all of the assets of the Company
and most of its subsidiaries. As of June 1994, the Company had
drawn down $20 million under the DIP Loan of which $15 million
was outstanding as of March 31, 1994.
The Company is in default of certain covenants of the DIP Loan. Pursuant to written waivers of default, dated April 27, 1994 and May 6, 1994, the Company has been permitted by Belmont to draw on its line of credit. Under the circumstances, any additional borrowings under the DIP Loan will require further waivers of default.
The DIP Loan is intended to be repaid upon the effective date
of the proposed plan of reorganization. The Company is actively
seeking a working capital facility of approximately $40 million.
The proceeds of this new facility will
be used to refinance the Company's borrowings under the DIP Loan
and to provide working capital to the reorganized Company. There
can be no assurance that the Company will be able to obtain a new
working capital facility or, if so, the
amount of any such facility. Obtaining such a facility is a
condition to the confirmation of the Company's plan of
reorganization.
NOTE D Debt in Default
Debt in default consists of the following as of March 31, 1994
(in thousands):
Notes payable to banks under revolving
credit facility at prime plus 3/4% $155,795
Senior notes payable to insurance
companies, 9.1% to 10.95%............. 328,572
--------
Total senior debt ...................... 484,367
Subordinated notes payable to insurance
companies, 12%.................. 9,600
73/4% Convertible Subordinated
Debentures............................... 7,040
--------
$501,007
|
Total accrued interest on the above described debt was $43.3 million as of March 31, 1994. Interest, including penalty interest in certain circumstances, ceased accruing on December 21, 1993, the date on which an involuntary bankruptcy petition was filed against the Company.
See Note B in respect to the contemplated exchange of the debt in default for new debt and equity securities under the Company's proposed plan of reorganization.
As of June 1994, the estimated fair value of the Company's
obligations under its revolving credit facility approximates $50
million or approximately 30% of
the amount of its pre-bankruptcy petition date principal
and accrued interest. The estimated fair value of the senior
notes approximates
$122 million or approximately 34% of the amount of its
pre-bankruptcy petition
date principal and accrued interest. Such valuations were based
upon recent private transactions involving the purchase and sale
of a limited number of such debt instruments. However, the
estimated values described above are not
necessarily indicative of their fair market value because these
debt instruments are not actively traded or exchanged. The
estimated fair market value of the defaulted subordinated notes
and 73/4% Convertible Subordinated Debentures is nominal. Such
valuations were based upon comparison with
similarly rated securities and are not necessarily indicative of
their current market value.
NOTE E Net Assets Held For Sale
In 1992, the Company developed a business restructuring plan
which contemplated the sale of its information services business,
certain of its mechanical/electrical services business units, its
water supply business and
certain non-core businesses. The business restructuring plan has
been incorporated into the Company's proposed plan of
reorganization. As a result,
businesses to be sold have been classified in the accompanying
Condensed Consolidated Balance Sheet as "Net assets held for
sale".
For the three months ended March 31, 1994, businesses sold or held for sale generated revenues of $42.0 million and operating loss of $2.8 million.
The assets of the water supply business consists primarily of
utility plant
and equipment which are located in Nassau and Queens Counties in
the State of New York. The net assets of the water supply
business, which aggregate $60.5
million and $63.2 million as of March 31, 1994 and December 31,
1993, respectively, are classified as long-term assets in the
accompanying Condensed
Consolidated Balance Sheet under the caption "Net assets held for
sale" because the disposition of the water supply business is
expected to take place after 1994.
A Condensed Balance Sheet relating to net assets held for sale including discontinued operations at March 31, 1994 is as follows (in thousands):
Cash.................................. $10,282
Accounts receivable, net.............. 45,220
Costs and estimated earnings in excess
of billings........................... 3,347
Inventories........................... 11,856
Other current assets.................. 2,574
--------
73,279
Property, plant and equipment, net.... 153,048
Other assets.......................... 15,577
--------
$241,904
========
Notes payable............................ $111
Current maturities of long-term debt
and capital lease obligations............ 9,626
Accounts payable......................... 11,520
Billings in excess of costs and estimated
earnings................................. 6,070
Other accrued expenses................... 61,208
--------
88,535
Long-term debt........................... 36,806
Other long-term liabilities.............. 40,224
Net assets held for sale-current......... 15,819
Net assets held for sale-long-term....... 60,520
--------
$241,904
========
|
NOTE F Discontinued Operations
As described in Note A, the Company's water supply business is
reflected in the accompanying condensed consolidated financial
statements as a discontinued
operation. See Note I in respect to the status of a proceeding
initiated in 1988 by the City of New York to acquire by
condemnation all of the water
distribution system of JWS that is located in New York City.
For the three months ended March 31, 1994, the water supply business had revenues of $14.4 million and operating income of $2.1 million.
NOTE G Insurance Reserves
The Company is primarily insured with an indirect wholly-owned captive insurance subsidiary ("Defender") for workers' compensation, automobile and general liability insurance. At March 31, 1994, they had letters of credit outstanding totalling $36.4 million which in effect secure their insurance obligations. Such letters of credit expire in December 1994 ($34.9 million) and in February 1995 ($1.5 million). The letters of credit were intended to serve as collateral for the obligations of Defender to reimburse the Company's unrelated insurance carriers for claims paid in respect of certain years' insurance programs. Since October 1992, neither the Company nor Defender have been able to obtain additional letters of credit to secure their insurance obligations and, as a result, have been required to make cash collateral deposits to a third party insurance company to secure those type of obligations. The deposits totalled $29.7 million as of June 30, 1994 and are classified as a long-term asset in the accompanying Condensed Consolidated Balance Sheet under the caption "Miscellaneous" in Other Assets.
The Company's proposed plan of reorganization contemplates the
letters of credit described above will be drawn upon by the
unrelated insurance carriers and that the Company's obligations
to Defender, which were pledged collateral
to the banks issuing such letters of credit, will be impaired
under the Chapter 11 proceeding as well as related Company
obligations to those banks. Beginning
in February 1994, Defender ceased making payments of amounts owed
to the unrelated insurance carriers, which obligations are in
effect secured by the letters of credit, and the Company's
unrelated insurance carriers have
commenced partial draw downs against the letters of credit.
Approximately $5 million has been drawn against certain of the
letters of credit through June 1994.
The Company anticipates that all of the letters of credit
described above will be drawn upon and the Company's obligations
to reimburse the banks issuing such letters of credit will be
impaired under the Chapter 11 proceeding. As a
result, the Company has reclassified $36.4 million of its
insurance reserves to
the caption "Pre-consent date bankruptcy claims subject to
compromise" in the accompanying Condensed Consolidated Balance
Sheet.
NOTE H Income Taxes
The Company has a net operating loss carry-forward ("NOL") for
U.S. income tax purposes expiring in years through 2008 which
approximates $500 million.
The Company has provided a valuation allowance for the full
amount of such NOLs. As described in Notes A and B, the Company
is contemplating a restructuring of its indebtedness with certain
of its creditors on the basis of
an exchange of newly issued equity and debt securities for debt.
If the Company is able to restructure its debt on such basis, a
substantial portion of the NOL may not be available to reduce
future U.S. taxable income.
Additionally, due to recent changes in the U.S. Federal income
tax laws, the timing of any such debt restructuring could further
impact and reduce the amount of NOL.
NOTE I Legal Proceedings
Since August 1992, nineteen purported class action lawsuits
have been filed against the Company arising out of the
restatement of earnings, write-offs and
losses announced by the Company on August 4, 1992 and October 2,
1992. Pursuant to Stipulation and Court Order on January 15,
1993, a single consolidated amended class action complaint (the
"Complaint") was filed. The Complaint names
as defendants the Company, certain former officers and directors,
four current directors, a former subsidiary officer and the
Company's then outside auditor, Ernst & Young.
The Complaint alleges violations of Section 10(b) of the
Securities and Exchange Act of 1934, Rule 10b-5 promulgated
thereunder and common law fraud
and deceit on the part of the Company and certain other
defendants. Among other things, the Company is alleged to have
intentionally and materially overstated
its inventory, accounts receivable and earnings in various public
disseminations during the purported class
period May 1, 1991 through October 2, 1992. The Complaint seeks
an unspecified amount of damages. The Company denies the material
allegations in the Complaint. The parties are now engaged in
discovery proceedings. However, the
Company expects that under the terms of its proposed Chapter 11
plan of reorganization, no damages will be recoverable from the
Company by claimants in
the class action litigation, although they will receive warrants
to purchase the common stock of the reorganized Company.
The Company has been informed by the Securities and Exchange
Commission (the "SEC") that it was conducting a private
investigation to determine whether
there have been violations of certain provisions of the federal
securities laws and/or the rules and regulations of the SEC in
connection with the Company's
financial records, reports and public disclosures. The Company
has been cooperating with the SEC's staff and has voluntarily
produced requested
documents and information. On April 12, 1994, the SEC's staff
informed the Company of its intention to recommend that the SEC
file a civil injunction action against the Company. The Company
is currently engaged in discussions
with the SEC's staff concerning a possible consensual resolution
of the matter.
On December 22, 1993, JWS, the New York State Consumer
Protection Board, Nassau County, certain other governmental
bodies and a consumer advocate group
executed an agreement that ended the several regulatory and legal
proceedings against JWS. Subsequently, the agreement was approved
by the PSC on February 2, 1994. The agreement provides for, among
other things, a three year moratorium
on rates charged by JWS, resolution of the economic issues raised
by the PSC arising from its 1992 audit of JWS, settlement of
related litigation and the
dismissal of an action brought against JWS by Nassau County in
the State of New York alleging violations of the Racketeer
Influenced and Corrupt Organizations
Act and common law fraud. JWS agreed, in consideration of avoided
litigation and other costs associated with the proceedings, to
make payments over the next
three years totalling $11.7 million to customers in Nassau and
Queens Counties in the State of New York. In connection with this
settlement, the Company provided a pre-tax charge of $7.0 million
in 1992. The agreement also provides
that JWS will use its best efforts to bring about the separation
of Jamaica Water Securities Corp., a subsidiary of the Company
which holds substantially all the common stock of JWS, from the
Company.
In 1986, the State of New York enacted a statute requiring the
City of New York (the "City") to acquire by condemnation all of
the JWS property constituting or relating to its water
distribution system located in the City
only if a Supreme Court of the State of New York (the "Supreme
Court") decides that the amount of compensation to be paid for
the system is determined solely
by the income capitalization method of valuation. If the Court
determines compensation by a method other than the income
capitalization method or the
award is for more than the rate base of the condemned assets, the
statute permits the City to withdraw the proceeding without
prejudice or costs. In
1988, the City instituted a proceeding pursuant to the statute to
acquire the system which constitutes approximately 75% of JWS'
water utility plant. JWS
argued at trial that the judicially recognized method for valuing
public utility property is by the method known as "Reproduction
Cost New, Less Depreciation". JWS also sought consequential and
severance damages that would
result from separating the JWS Nassau County water supply system
from that in the City. The aggregate compensation sought by JWS
as of December 31, 1987 was
approximately $924 million. The City submitted its income
capitalization valuation, as of December 31, 1987, at
approximately $63 million.
In June 1993, the Supreme Court dismissed the City's petition. The Supreme Court concluded, among other things, that the statute is unconstitutional because it directs the Court to render an advisory opinion.
In February 1994, the New York Court of Appeals held
constitutional a nearly-identical statute dealing with another
water utility. In April 1994,
upon a request for reconsideration by the City, the Supreme Court
stated that it would reconsider its prior decision in light of
the February decision of the Court of Appeals.
The Company cannot predict when or if the Supreme Court will conduct further proceedings under the statute nor is it possible to predict what the decision of the Supreme Court might be if it decides to value the JWS property or the effect of the pending litigation on the proposed sale of JWS.
In 1993, the Company's French and Belgian information services
subsidiaries filed petitions in their respective countries
seeking relief from their
creditors. The French and Belgian subsidiaries have outstanding
unsecured credit facilities which are guaranteed by the Company
aggregating approximately $5.9 million. Such amount was provided
for as a loss in 1992.
In August 1993, the Company sold its U.S. information services business. In October 1993, the subsidiary formerly carrying on this business filed a voluntary petition under Chapter 7 of the U.S. Bankruptcy Code. The Company owes $24.9 million to this subsidiary.
In connection with an investigation of the plumbing industry
being conducted by the New York County District Attorney's
office, two related subsidiaries of
the Company engaged in the plumbing business in New York City
have received subpoenas for certain of their books and records.
The subsidiaries have
complied with those subpoenas. Additionally, certain employees of
these subsidiaries have been subpoenaed to testify as witnesses
before a grand jury and those employees have complied with the
subpoenas.
The Company is subject to other legal proceedings and claims
which have arisen in the ordinary course of business and have not
been adjudicated. The Company cannot predict the outcome of such
litigation or the impact that an
adverse result in such litigation will have upon the Company's
financial position or results of operations.
NOTE J Net Loss Per Share
Net loss per share for the three months ended March 31, 1994
has been calculated based upon the weighted average number of
shares of common stock outstanding and common stock equivalents
relating to warrants and
stock options outstanding when the effect of such equivalents are
dilutive (40,715,541 shares). Because of the filing of a petition
for relief under Chapter 11 of the
U.S. Bankruptcy Code, the Company ceased accruing dividends on
its preferred stock, accordingly no preferred stock dividends
were utilized in the calculation of loss per share.
As described in Note B, under the Company's proposed plan of reorganization, holders of the Company's preferred and common stock and warrants of participation will receive warrants to purchase common stock of the reorganized Company in exchange for their equity interests.
NOTE K Impact of New Accounting Pronouncement
The Financial Accounting Standards Board has issued Statement
of Financial Accounting Standards No. 112 "Employers' Accounting
for Postemployment Benefits" (SFAS 112), which was effective
January 1, 1994. The Company is in
process of developing the data necessary to adopt SFAS 112.
Accordingly, the accompanying condensed consolidated financial
statements do not include any
effects of the adoption of SFAS 112. The Company does not
anticipate that the adoption of SFAS 112 will have a material
effect upon the Company's financial position or its results of
operations.
Exhibit 5
LIQUIDATION ANALYSIS
Most Likely Scenario. Set forth below is a liquidation analysis
for JWP and its Nondebtor Subsidiaries, which was prepared by the
Debtor with the assistance of Lazard Freres & Co. assuming a
hypothetical Chapter 7 liquidation
in which a Court-appointed trustee would liquidate the assets of
JWP. There are a number of complex factors to consider when
preparing a liquidation analysis
of JWP and its Nondebtor Subsidiaries. Chief among them is the
reaction of management, employees, customers and bonding
companies to the liquidation
process. Keeping these diverse constituencies together during a
liquidation would be extremely difficult. Since the specialty
contracting business is service oriented and depends upon the
financial credibility of its businesses
and its management's relationships, the assumptions regarding the
values that can be obtained in a liquidation are highly
speculative.
The ability of the Nondebtor Subsidiaries to carry on their
normal operations during a liquidation would be problematic, at
best. JWP believes that the most likely scenario resulting from a
failure of JWP to reorganize pursuant to
Chapter 11-and the resulting need to liquidate the company,
whether pursuant to
Chapter 7 or Chapter 11-would be to precipitate a Chapter 11 or a
Chapter 7 filing by each of the operating subsidiaries. These
subsidiary filings would be
forced by a liquidity crisis at the subsidiaries due to the
collapse of the JWP
cash management/funding system and would be necessary to protect
the value of whatever assets could be gleaned from these
businesses. Accompanying the bankruptcy filings of the
subsidiaries would likely be a substantial exodus of
key management personnel (few of whom are contractually tied to
JWP or the subsidiaries). As a result of these bankruptcy
filings, the bonding companies
would cease to issue new bonds, would take over jobs wherever
claims arose and would attempt to withdraw from bid bonds already
written but not yet awarded. New contract awards would be scarce
(in fact, JWP's subsidiaries, once in
bankruptcy, may no longer be qualified for a substantial amount
of, if not all, public work), suppliers would put the
subsidiaries on a cash-on-demand basis
with the requirement to bring current any outstanding balance,
and receivable collections (which are essentially progress
payments for jobs in process) would
be substantially slowed, even beyond what JWP has already
experienced as customers hold payments to assure job completion
if the subsidiary defaults.
If the subsidiaries which have filed for bankruptcy cannot be
sold as going concerns, then in JWP's opinion, the liquidation of
the domestic U.S. mechanical and electrical companies would
produce no value at all for the
estate of the Debtor, since the bonding companies would arrange
to complete the unfinished projects and would be entitled to the
related contract receivables.
Other JWP operations-the Water Supply companies, the Canadian
and the United Kingdom MES Companies (which currently have
separate banking and bonding
facilities), non-MES companies that do not require bonding, and
certain corporate assets, such as notes and receivables-would
still have a liquidation value of approximately $100 million.
A substantial additional dilutive factor in a liquidation
scenario from the perspective of JWP's unsecured creditors would
be the substantial new claims
against JWP resulting from the bonding companies pursuant to
their respective JWP indemnification agreements.
These proceeds would be used to satisfy the following secured or subsidiary claims in full:
Recovery:
Net Proceeds Available for
Distribution to Creditors $100,000,000
Less: Priority Claims (5,600,000) 100.0%
Less: Subsidiary Secured Debt
(UK and Canada).......... (2,900,000) 100.0%
Less: Capitalized Leases and other
Miscellaneous Debt.. (4,300,000) 100.0%
-------------
|
Proceeds Available to JWP INC Claimants $ 87,200,000
The remaining proceeds would be distributed to JWP INC. creditors as follows:
Recovery: Proceeds Available to JWP INC. Claimants... $ 87,200,000 Less: Proceeds to General Unsecured Senior Claims..... (87,200,000) 14.0% Less: Proceeds to 12.00% Subordinated Notes due 1996.. 0 0.0% Less: Proceeds to Neeco 7.75% Convertible Sub Debt.... 0 0.0% Total Proceeds to Equity Holders.......... $ 0 |
Alternative Liquidation Scenario
As an alternative to the scenario described above, the bonding
companies could give time to JWP and the Nondebtor Subsidiary
managements to sell each of
the individual businesses as going concerns. In the interim, new
bonding capacity would be limited, and the subsidiaries' backlog
would deteriorate significantly during the liquidation process,
further reducing the "on-going"
value of the subsidiaries. Quantifying the value of the
individual businesses becomes difficult at best and must be made
based upon a series of static
assumptions. Changes in any of these underlying assumptions, or
individual company operations or management would likely result
in substantially lower valuations.
The Debtor, with the assistance of Lazard, has estimated that a
Chapter 7 trustee would receive $154,900,000 of net proceeds from
the sale of the Nondebtor Subsidiaries' businesses as going
concerns (after taking into account
costs of disposition-the trustee at 5% of gross receipts and
other fees at 2% of gross receipts-and income taxes related to
the gains on the sales plus cash flow generated prior to the
sales) to satisfy claims. These proceeds would be
used to satisfy the following secured [or subsidiary] claims in
full:
Recovery: Net Proceeds Available for Distribution to Creditors... $154,900,000 Less: Priority Claims................... (5,600,000) 100.0% Less: Subsidiary Secured Debt (UK and Canada)......... (2,900,000) 100.0% Less: Capitalised Leases and other Miscellaneous Debt.. (4,300,000) 100.0% Proceeds Available to JWP INC Claimants $142,100,000 |
The remaining proceeds would be distributed to JWP INC. creditors as follows:
Recovery: Proceeds Available to JWP INC. Claimants.... $142,100,000 Less: Proceeds to General Unsecured Senior Claims..... (142,100,000) 22.8% Less: Proceeds to 12.00% Subordinated Notes due 1996.. 0 0.0% Less: Proceeds to Neeco 7.75% Convertible Sub Debt.. 0 0.0% Total Proceeds to Equity Holders................. $ 0 |
As can be seen, the recoveries under a Most Likely Chapter 7 liquidation are far below those expected to be realized under the Plan-even in the Alternative Liquidation Scenario.
There can be no assurance that the values estimated in this liquidation analysis would be realized if the entities were in fact liquidated. Actual liquidation proceeds could be materially lower, or higher, than the amounts set forth above and no representation or warranty can be or is being made with respect to the actual proceeds that would be received in a Chapter 7 liquidation.
EXHIBIT 2(b)
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ------------------------------x
In re : Chapter 11
:
JWP INC., : Case No.
: 93 B 46404 (JHG)
|
Debtor. :
- ------------------------------x
DEBTOR'S MODIFICATION TO THIRD
AMENDED JOINT PLAN OF REORGANIZATION
OF THE DEBTOR AND SELLCO CORPORATION
JWP INC., debtor and debtor in possession, pursuant to section 1127 of title 11 of the United States Code and Rule 3019 of the Federal Rules of Bankruptcy Procedure, hereby amends the Third Amended Joint Plan of Reorganization of the Debtor and SellCo Corporation, dated August 9, 1994 (the "Plan"), as follows (all capitalized terms used herein and defined in the Plan shall be used herein as so defined):
a. Schedule 1 to the Plan shall be amended to include Bank of Montreal as a creditor to be unimpaired under the Plan and to include "Guarantee" as the basis for Bank of Montreal's claim.
b. The footnote in Schedule 1 to the Plan shall be amended by deleting the words "section H of Article IV" and inserting in their place "section H of Article III."
c. Section A(50) of Article I is amended and restated to read in its entirety as follows: "50. Working Capital Lien means a first lien on the capital stock of Jamaica Water Securities Corp. or the net proceeds from the sale thereof, securing up to $15,000,000 of the obligations of Reorganized JWP or MES under a working capital facility; provided, however, that the application of any such proceeds to repay all or a portion of the balance of such working capital facility shall permanently reduce the availability under such facility by the amount applied."
d. Notwithstanding anything in the Plan to the contrary (a) classes 2, 3 and 4B shall be treated for all purposes as three separate classes, including, without limitation, for purposes of distributions pursuant to the Plan and voting, and (b) classes 6 through 11 shall not be entitled to receive any distributions pursuant to the Plan unless each of classes 2, 3 and 4B have voted separately to accept the Plan.
e. Section G of Article III is amended and restated to read in its entirety as follows: "G. Allowance of Claims in Class 2, 3 and 4B. The aggregate allowed claims in class 2 shall be $358,165,112. The aggregate allowed claims in class 3 shall be $167,577,088. Credit Suisse shall have an allowed class 4B claim in the amount of $22,900,000."
f. Section I of Article IV shall be amended by deleting the words "2, 3 and 6, the holders of" in the third line of the first sentence thereof and inserting in their place the following words: "2, 3, 4B, 6, the holders of other".
g. Section G of Article VI shall be amended by adding "4B" after the words "classes 2, 3," in the first line of the first sentence thereof.
h. Section F(1) of Article IV shall be amended by inserting the following sentence after the second sentence thereof: "The Certificate of Incorporation may provide for the change of the corporate name of Reorganized JWP from 'JWP INC.' to a name to be selected by the board of directors of Reorganized JWP."
i. Section A of Article II shall be amended by deleting subpart (e) of the first sentence thereof and inserting the following in its place: "(e) be guaranteed by MES subject to the repayment in full of any working capital or revolving credit financing obtained by JWP or MES."
j. Section B of Article II shall be amended by deleting subpart (e) of the first sentence thereof and inserting the following in its place: "(e) be guaranteed by MES subject to the repayment in full of any working capital or revolving credit financing obtained by JWP or MES and the Series A Secured Notes."
Dated: September 29, 1994
New York, New York
STROOCK & STROOCK & LAVAN
Attorneys for JWP INC.,
Debtor and Debtor in Possession
By:
Lawrence M. Handelsman (LH-6957)
Seven Hanover Square
New York, New York 10004-2696
(212) 806-5400
EXHIBIT 2(c)
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ------------------------------x
In re : Chapter 11
:
JWP INC., : Case No.
: 93 B 46404 (JHG)
|
Debtor. :
- ------------------------------x
DEBTOR'S SECOND MODIFICATION TO THIRD
AMENDED JOINT PLAN OF REORGANIZATION
OF THE DEBTOR AND SELLCO CORPORATION
JWP INC., debtor and debtor in possession, pursuant to section 1127 of title 11 of the United States Code and Rule 3019 of the Federal Rules of Bankruptcy Procedure, hereby amends the Third Amended Joint Plan of Reorganization of the Debtor and SellCo Corporation, dated August 9, 1994, as modified by the Debtor's Modification to Third Amended Joint Plan of Reorganization of the Debtor and SellCo Corporation (the "Plan"), as follows (all capitalized terms used herein and defined in the Plan shall be used herein as so defined):
a. Section G of Article III is amended and restated to read in its entirety as follows: "G. Allowance of Claims in Class 2, 3 and 4B. The aggregate allowed claims in class 2 shall be $358,165,112. The aggregate allowed claims in class 3 shall be $167,577,088. The allowed claim of Credit Suisse in class 4B shall be $22,900,000. The allowed claim of Bayerische Vereinsbank AG, New York Branch, in class 4B shall be $17,975,907."
b. Section A(14) of Article I is amended by deleting the words "classes 2, 3 and 4B" in the third line thereof and inserting in their place the following words: "classes 2, 3, 4B and 4C."
c. Subpart 2 of section A of Article V is amended by inserting the words "and 4C" after the words "class 4B" in the third line of the first sentence thereof.
Dated: September 30, 1994
New York, New York
STROOCK & STROOCK & LAVAN
Attorneys for JWP INC.,
Debtor and Debtor in Possession
By:
Lawrence M. Handelsman (LH-6957)
Seven Hanover Square
New York, New York 10004-2696
(212) 806-5400
EXHIBIT 2(d)
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ------------------------------x
In re : Chapter 11
:
JWP INC., : Case No. 93-B-46404 (JHG)
:
|
Debtor. :
- ------------------------------x
ORDER CONFIRMING THIRD AMENDED JOINT
PLAN OF REORGANIZATION OF THE DEBTOR
AND SELLCO CORPORATION, AS MODIFIED
JWP INC. ("JWP" or the "Debtor"), debtor and debtor in
possession, and SellCo Corporation ("SellCo"), an affiliate of
the Debtor, having jointly filed the Third Amended Joint Plan of
Reorganization of the Debtor and SellCo Corporation, dated
August 9, 1994 (the "Plan"), in accordance with section 1121 of
title 11 of the United States Code (the "Bankruptcy Code") (all
capitalized terms not otherwise defined in this Order shall have
the respective meanings assigned to them in the Plan); and the
Debtor having filed its Third Amended Disclosure Statement with
respect to the Plan, dated August 9, 1994 (the "Disclosure
Statement"), pursuant to section 1125 of the Bankruptcy Code; and
this Court having approved the adequacy of the information
contained in the Disclosure Statement by order dated August 22,
1994 (the "Disclosure Statement Order"); and the Disclosure
Statement Order, the Disclosure Statement (with a copy of the
Plan annexed thereto), a ballot or a notification of non-voting
status, as appropriate, and related materials having been
transmitted to all creditors and equity interest holders, as
required by the Disclosure Statement Order, with the exception of
all known entities that were beneficial holders as of July 21,
1994 of equity interests evidenced by all the Debtor's issued and
outstanding Old Preferred Stock and, as of that date, held
beneficial interests in such securities (the "Preferred
Shareholders"), which entities, pursuant to letters dated
September 27 and September 28, 1994, have waived the notice
period of thirty days for voting and have consented to shortened
notice; and the solicitation of acceptances from holders of
claims and equity interests in this chapter 11 case having been
made in the manner required by the Disclosure Statement Order,
except as to the Preferred Shareholders, as noted above; and
objections to confirmation of the Plan (the "Objections") having
been filed by (i) the members of the plaintiff class in the
consolidated class action captioned In re JWP INC. Securities
Litigation, 92 Civ. 5815 (CLB) (S.D.N.Y.), (ii) 35 Fadem Inc.,
(iii) John J. Fitzsimons and Diane Fitzsimons, (iv) Bayerische
Vereinsbank, New York Branch, (v) Credit Suisse, and (vi) Edward
W. Jowett, and the Objections having been overruled or withdrawn;
and a full evidentiary hearing (the "Confirmation Hearing") to
consider confirmation of the Plan, the Objections and other
matters relating to confirmation having been held before this
Court on September 28 and September 29, 1994, upon such notice as
required by the Disclosure Statement Order; and affidavits of
service and publication having been filed; and upon the
certification of Donlin, Recano & Company, Inc., regarding the
tabulation of the ballots in favor of and in opposition to the
Plan; and upon the entire record of this chapter 11 case and the
record of the aforementioned hearings; and upon all proceedings
heretofore had herein; and after due deliberation and sufficient
cause appearing therefor,
this Court hereby FINDS that:
A. Findings and Conclusions. Findings of fact shall be construed as conclusions of law and conclusions of law shall be construed as findings of fact when necessary and appropriate.
B. Plan Compliance with Code (Section 1129(a)(1) of the Bankruptcy Code). The Plan complies with the applicable provisions of chapter 11 of the Bankruptcy Code.
C. Proper Classification (Section 1123(a)(1) of the Bankruptcy Code). The classification of claims and interests under the Plan is consistent with section 1122 of the Bankruptcy Code.
D. Specified Treatment of Unimpaired Classes (Section 1123(a)(2) of the Bankruptcy Code). The Plan specifies that Class 1 (Priority Claims), Class 4A (General Unsecured Claims - Convenience Class) and Class 5 (Unimpaired Contingent Claims) are not impaired under the Plan.
E. Specified Treatment of Impaired Classes (Section 1123(a)(3) of the Bankruptcy Code). The Plan (i) specifies that Class 2 (Old Note Claims), Class 3 (Old Credit Agreement Claims), Class 4B (General Unsecured Claims - Other Borrowed Money Class 4 Claims), Class 4C (General Unsecured Claims - All Other Class 4 Claims), Class 6 (Subordinated Debt Claims), Class 7 (Contingent and Statutory Subordinated Claims), Class 8 (Equity Interests - Old Preferred Stock), Class 9 (Equity Interests - Old Common Stock), Class 10 (Equity Interest Claims - Class Action Plaintiffs) and Class 11 (Equity Interests - Warrants of Participation) are impaired under the Plan and (ii) specifies the treatment of claims and interests in such classes.
F. No Discrimination (Section 1123(a)(4) of the Bankruptcy Code). The Plan provides the same treatment for each claim or interest of each particular class.
G. Implementation of the Plan (Section 1123(a)(5) of the Bankruptcy Code). The Plan provides adequate means for the Plan's implementation.
H. Non-Voting Equity Securities (Section 1123(a)(6) of the Bankruptcy Code). The Plan provides for the inclusion in the new certificate of incorporation of Reorganized JWP and the certificates of incorporation of MES and SellCo of provisions prohibiting the issuance of nonvoting equity securities.
I. Selection of Officers and Directors (Section 1123(a)(7) of the Bankruptcy Code). The Plan provides for the selection of the seven members of the board of directors of Reorganized JWP, and the Debtor has disclosed the names of the individuals proposed to serve as directors and officers of Reorganized JWP after the Effective Date. The Plan provides that the members of the board of directors of MES and SellCo shall be selected by the board of directors of Reorganized JWP, the sole shareholder of such entities. The manner of selection of officers and directors of Reorganized JWP, SellCo and MES is consistent with the interests of the creditors and equity security holders in this chapter 11 case, and with public policy.
J. Debtor's Compliance with the Bankruptcy Code (Section 1129(a)(2) of the Bankruptcy Code). The Debtor and SellCo, as proponents of the Plan, have complied with all applicable provisions of the Bankruptcy Code.
K. Plan Proposed in Good Faith (Section 1129(a)(3) of the Bankruptcy Code). The Plan has been proposed in good faith and not by any means forbidden by law.
L. Payments of Costs and Expenses (Section 1129(a)(4) of the Bankruptcy Code). Any payment made or promised by the Debtor or SellCo for services or for costs and expenses in or in connection with this chapter 11 case, or in connection with the Plan and incident to this chapter 11 case, has been approved by, or is subject to the approval of, this Court as being reasonable.
M. Directors and Officers (Section 1129(a)(5) of the Bankruptcy Code). The Debtor and SellCo have disclosed the identity and affiliations of the individuals proposed to serve, after confirmation of the Plan, as directors and officers of the Debtor and of SellCo, and the appointment to, or continuance in, such offices of such individuals is consistent with the interests of creditors of and equity security holders in the Debtor and with public policy. The Debtor and SellCo have disclosed the identity of insiders that will be employed or retained by Reorganized JWP, and the nature of the compensation to be paid to such insiders.
N. No Rate Change (Section 1129(a)(6) of the Bankruptcy Code). No regulatory commission has jurisdiction over the rates of the Debtor. Section 1129(a)(6) of the Bankruptcy Code, therefore, is inapplicable.
O. Best Interests of Creditors (Section 1129(a)(7) of the Bankruptcy Code). With respect to each impaired class of claims or interests, each holder of a claim or interest of such class has accepted the Plan or will receive or retain under the Plan on account of such claim or interest property of a value, as of the Effective Date, that is not less than the amount that such holder would receive or retain if the Debtor were liquidated under chapter 7 of the Bankruptcy Code on such date.
P. Plan Acceptance (Section 1129(a)(8) of the Bankruptcy Code). With respect to each impaired class of claims specified in the Plan, ballots accepting the Plan have been timely received from creditors that hold at least two-thirds in dollar amount and more than one-half in number of the allowed claims of such class held by creditors that have accepted or rejected the Plan, and with respect to each class of interests specified in the Plan, ballots accepting the Plan have been timely received (except for the Preferred Shareholders whose ballots are deemed timely received) from holders of such interest that hold at least two-thirds in amount of the allowed interests of such class held by holders of such interests that have accepted or rejected the Plan, except class 11, with respect to which, as found in paragraph V hereof, the Plan satisfies the "cram down" provisions set forth in section 1129(b) of the Bankruptcy Code.
Q. Plan Treatment of Administrative Expenses and Priority Claims (Section 1129(a)(9) of the Bankruptcy Code). The treatment under the Plan of claims of the types specified in sections 507(a)(1) through 507(a)(7) of the Bankruptcy Code complies with the provisions of section 1129(a)(9) of the Bankruptcy Code, except to the extent that the holder of a particular claim has agreed to a different treatment (i) each holder of an allowed claim of a kind specified in section 507(a)(1) or 507(a)(2) of the Bankruptcy Code, on the Effective Date, will receive cash equal to the allowed amount of such claim, as specified in section 1129(a)(9)(A) of the Bankruptcy Code, (ii) each holder of an allowed claim of a kind specified in section 507(a)(3), 507(a)(4), 507(a)(5) or 507(a)(6) of the Bankruptcy Code, on the Effective Date, will receive cash equal to the allowed amount of such claim, as specified in section 1129(a)(9)(B) of the Bankruptcy Code and (iii) each holder of an allowed claim of a governmental unit of a kind specified in section 507(a)(7) of the Bankruptcy Code shall receive, in the sole discretion of the Debtor, either cash on the Effective Date or deferred cash payments, over a period not exceeding six years after the date of assessment of such claim, of a value, as of the Effective Date, equal to the allowed amount of such claim, as specified in section 1129(a)(9)(C) of the Bankruptcy Code.
R. At Least One Impaired Class Accepted Plan (Section 1129(a)(10) of the Bankruptcy Code). Classes 2, 3, 4B, 4C, 6, 7, 8, 9 and 10, which are impaired under the Plan, have accepted the Plan (without including any acceptance of the Plan by any insider); therefore, at least one impaired class of claims or interests has accepted the Plan, which acceptance has been determined without including any acceptance of the Plan by any insider.
S. Feasibility (Section 1129(a)(11) of the Bankruptcy Code). Confirmation of the Plan is not likely to be followed by the liquidation or the need for further financial reorganization of the Debtor.
T. Certain Fees (Section 1129(a)(12) of the Bankruptcy Code). All fees payable under 28 U.S.C. section 1930 have been paid or will be paid on or before the Effective Date.
U. Retiree Benefits (Section 1129(a)(13) of the Bankruptcy Code). The Debtor is not obligated to continue to pay retiree benefits after confirmation of the Plan. Section 1129(a)(13) of the Bankruptcy Code, therefore, is inapplicable.
V. Plan is Fair and Equitable and Does Not Unfairly Discriminate (Section 1129(b) of the Bankruptcy Code). The Plan does not unfairly discriminate against class 11, as the distribution of property under the Plan to class 11, vis-a-vis the other classes in the Plan, is rationally based upon the differences in priority of the claims and interests of such classes, and the Plan is fair and equitable with respect to class 11, pursuant to section 1129(b)(2)(C) of the Bankruptcy Code, because no holder of an interest that is junior to the interests in class 11 will receive or retain any property under the Plan.
W. No Other Plan (Section 1129(c) of the Bankruptcy Code). The Plan is the only plan of reorganization pending before this Court, or any other court, with respect to the Debtor.
X. No Avoidance of Taxes or Application of Securities Laws (Section 1129(d) of the Bankruptcy Code). The primary purpose of the Plan is not the avoidance of taxes or the avoidance of the requirements of section 5 of the Securities Act of 1933.
Finding that the Plan is confirmable for all of the foregoing reasons, this Court hereby ORDERS, ADJUDGES AND DECREES that:
1. Confirmation. The Plan (a copy of which is annexed hereto as Exhibit 1), as modified to the limited extent set forth in section 2 hereof, is hereby confirmed.
2. Technical Modifications to Plan. The Plan is hereby deemed modified as follows:
a. Schedule 1 to the Plan shall be amended to include Bank of Montreal as a creditor to be unimpaired under the Plan and to include "Guarantee" as the basis for Bank of Montreal's claim.
b. The footnote in Schedule 1 to the Plan shall be amended by deleting the words "section H of Article IV" and inserting in their place "section H of Article III."
c. Section A(50) of Article I is amended and restated to read in its entirety as follows: "50. Working Capital Lien means a first lien on the capital stock of Jamaica Water Securities Corp. or the net proceeds from the sale thereof, securing up to $15,000,000 of the obligations of Reorganized JWP or MES under a working capital facility; provided, however, that the application of any such proceeds to repay all or a portion of the balance of such working capital facility shall permanently reduce the availability under such facility by the amount applied."
d. Notwithstanding anything in the Plan to the contrary (a) classes 2, 3 and 4B shall be treated for all purposes as three separate classes, including, without limitation, for purposes of distributions pursuant to the Plan and voting, and (b) classes 6 through 11 shall not be entitled to receive any distributions pursuant to the Plan unless each of classes 2, 3 and 4B have voted separately to accept the Plan.
e. Section G of Article III is amended and restated to read in its entirety as follows: "G. Allowance of Claims in Class 2, 3 and 4B. The aggregate allowed claims in class 2 shall be $358,165,112. The aggregate allowed claims in class 3 shall be $167,577,088. Credit Suisse shall have an allowed class 4B claim in the amount of $22,900,000."
f. Section I of Article IV shall be amended by deleting the words "2, 3 and 6, the holders of" in the third line of the first sentence thereof and inserting in their place the following words: "2, 3, 4B, 6, the holders of other".
g. Section G of Article VI shall be amended by adding "4B" after the words "classes 2, 3," in the first line of the first sentence thereof.
h. Section F(1) of Article IV shall be amended by inserting the following sentence after the second sentence thereof: "The Certificate of Incorporation may provide for the change of the corporate name of Reorganized JWP from 'JWP INC.' to a name to be selected by the board of directors of Reorganized JWP."
i. Section A of Article II shall be amended by deleting subpart (e) of the first sentence thereof and inserting the following in its place: "(e) be guaranteed by MES subject to the repayment in full of any working capital or revolving credit financing obtained by JWP or MES."
j. Section B of Article II shall be amended by deleting subpart (e) of the first sentence thereof and inserting the following in its place: "(e) be guaranteed by MES subject to the repayment in full of any working capital or revolving credit financing obtained by JWP or MES and the Series A Secured Notes."
The above modifications do not adversely affect the treatment of the claim of any creditor or the interest of any equity security holder.
3. Implementation of Plan and Order. The Debtor and Reorganized JWP, and their directors, officers and agents, and all other parties, are hereby authorized to enter into, execute, deliver and/or implement the documents contained in Exhibits A through L and N through R to the Plan, including: the Series A Secured Note Indenture; the Series B Secured Note Indenture; the Series C Note Indenture; the SellCo Subordinated Contingent Payment Note Indenture; the Bylaws of Reorganized JWP; the Certificate of Incorporation of Reorganized JWP; the Certificate of Incorporation of MES; the Certificate of Incorporation of SellCo; the Bylaws of MES; the Bylaws of SellCo; the Claims Reduction Agreement; the JWP Management Incentive Stock Option Plan; the Disbursement Agreement; the New Series X Warrant Agreement; the New Series Y Warrant Agreement; the JWP Supplemental SellCo Note; the New Series Z Warrant Agreement (collectively, the "Plan Exhibit Documents"), and other documents and instruments and any amendments to such Plan Exhibit Documents as therein provided, and to take such other steps and perform such other acts as may be necessary to implement and effectuate the Plan, all other related instruments and documents and this Order, and to satisfy all other conditions precedent to the implementation and effectiveness of the Plan. No further action by the directors or equity security holders of the Debtor or Reorganized JWP shall be required to authorize the consummation of the Plan, the adoption of the new certificate of incorporation or any other action contemplated to be taken by the Debtor or Reorganized JWP pursuant to the Plan or this Order. The record date for purposes of determining holders of the Debtor or Reorganized JWP that are entitled to distributions under the Plan is the date of entry of this Order.
4. Transfer of Nondebtor Subsidiaries. Pursuant to section 1123(a)(5)(B) of the Bankruptcy Code, the Debtor is hereby authorized to transfer or cause its Nondebtor Subsidiaries to make the transfers necessary to implement the provisions of the Plan, including, but not limited to, transferring or causing its Nondebtor Subsidiaries as appropriate, to transfer (i) the Nondebtor Subsidiaries listed on Schedule 5 to the Plan to SellCo and (ii) all other Nondebtor Subsidiaries to MES (other than the Nondebtor Subsidiaries listed on Schedule 4 to the Plan, DYN Specialty Contracting, Inc. (and its affiliates B&B Contracting & Supply Company, Dynalectric Company, Dynalectric Company of Nevada, Inc., Contra Costa Electric, Inc., and JWP Systems/Kirkwood Electric Company, Inc.) and Sea Cliff, which shall be owned directly by Reorganized JWP). JWP or Reorganized JWP, as the case may be, shall transfer Sea Cliff to Jamaica Water Securities Corp. as soon as practicable after the date of the entry of this Order, if not done prior to such time.
5. Board of Directors of Reorganized JWP and SellCo.
(a) Frank T. MacInnis, Bart A. Brown, Jr., David A.B. Brown,
Richard F. Hamm, Jr., Malcom T. Hopkins, Stephen N. Wertheimer
and Todd Cunningham are hereby approved as members of the board
of directors of Reorganized JWP. Such directors shall remain in
office until their successors are duly elected and qualified, or
until their earlier resignation, removal or death, subject to the
terms of Reorganized JWP's new certificate of incorporation and
by-laws, and the corporate law of the State of Delaware.
(b) Frank T. MacInnis is hereby approved as the sole member of the board of directors of SellCo. Mr. MacInnis shall remain in office until his successor is duly elected and qualified, or until his earlier resignation, removal or death, subject to the terms of SellCo's certificate of incorporation and by-laws, and the corporate law of the State of Delaware.
6. Binding Plan and Order. The provisions of the Plan and this Order shall be binding upon the Debtor, Reorganized JWP, SellCo and any holder of a claim against or interest in the Debtor, including holders of secured claims, administrative expense claims and priority claims, and any other party in interest in this chapter 11 case, and their respective successors and assigns, whether or not the claim or interest of such creditor or equity security holder or obligation of any party in interest is impaired under the Plan, whether or not such creditor, equity security holder or party in interest has accepted the Plan and whether or not such creditor, equity security holder or other party in interest has filed a proof of claim.
7. Discharge. Other than with respect to the claims in class 5, entry of this Order acts as a discharge of all debts of, claims against, liens on, and interests in each of JWP, its assets, or properties, which debts, claims, liens, and interests arose at any time before the entry of this Order. Other than with respect to the claims in class 5, the discharge of JWP shall be effective as to each claim, regardless of whether a proof of claim therefor was filed, whether the claim is an allowed claim, or whether the holder thereof votes to accept the Plan. On the date that this Court enters this Order, as to every discharged claim and equity interest, any holder of such claim or equity interest shall be precluded from asserting against JWP or Reorganized JWP, or their assets or properties, or any successors of JWP or Reorganized JWP, or their assets or properties, any other or further claim or equity interest based upon any document, instrument, act, omission, transaction, or other activity of any kind or nature that occurred before the date that the Court enters this Order.
8. No Discharge of Insurance Coverage. The Plan shall not discharge any insurance carrier of the Debtor with respect to any claim asserted against the Debtor or any such carrier that otherwise would be covered by such insurance.
9. Injunction. In accordance with section 524 of the Bankruptcy Code, the discharge provided by section 7 hereof, section A of Article VI of the Plan and section 1141(d) of the Bankruptcy Code, inter alia, acts as an injunction against the commencement or continuation of any action, employment of process, or act to collect, offset, or recover the claims or equity interests so discharged. As of the Effective Date, except to the extent otherwise expressly provided in the Plan, all entities, as defined in the Bankruptcy Code, including, but not limited to the Debtor, its creditors, employees, shareholders, and their respective representatives, successors or assigns shall be permanently restrained and enjoined on and after the date hereof (i) from commencing or continuing, in any manner, any action or other proceeding of any kind with respect to any claim or interest against the Debtor or Reorganized JWP, or their property, (ii) from creating, perfecting or enforcing any encumbrance of any kind against the Debtor or Reorganized JWP, or their property, (iii) from asserting any setoff, right of subrogation or recoupment of any kind against any obligation due to the Debtor, and (iv) from performing any act, in any manner, in any place whatsoever, that does not conform to or comply with the provisions of the Plan.
10. Releases. As of the Effective Date, JWP, and each
creditor of or interest holder in JWP, Reorganized JWP, and/or
any Nondebtor Subsidiary, hereby waive, release and discharge the
Seaboard Surety Company, each of the holders of claims in classes
2, 3, 4 and 6 (except as set forth below in this paragraph 10),
and all officers, directors, employees, or agents (including
professionals retained by such holder) of such holder, from any
and all claims arising prior to the Effective Date that could be
brought by, through, or on behalf of JWP or its estate; provided,
however, that claims that are waived, released, or discharged
shall not include (i) claims of the Debtor, Reorganized JWP or
any Nondebtor Subsidiary arising out of continuing obligations
owing to such entities by the holder of a claim in classes 2, 3,
4 or 6, or the officers, directors, employees, or agents
(including professionals retained by such holder) of such holder,
if any, (ii) claims of any Nondebtor Subsidiary for services
rendered or goods sold to the holder of a claim in class 2, 3, 4
or 6, or the officers, directors, employees, or agents (including
professionals retained by such holder) of such holder, if any
(iii) rights of the Debtor, Reorganized JWP or any Nondebtor
Subsidiary to assert defenses, to counterclaim, to crossclaim, to
setoff, to recoup, or to seek indemnification, contribution or
subrogation or (iv) defenses of a Nondebtor Subsidiary to any
claim asserted by the Seaboard Surety Company (or other bonding
company) solely in respect of such Nondebtor Subsidiary's
liabilities or obligations on a bond; and provided, further, that
nothing contained in this paragraph shall affect the releases to
Seaboard Surety Company provided for in the agreement attached to
the Plan as Exhibit K. Such waiver, release, and discharge shall
also act as an injunction against any person or entity commencing
or continuing any action, employment of process, or act to
collect, offset, or recover any such waived, released, and
discharged claim. In accordance with section 1123(b)(3) of the
Bankruptcy Code, all other claims, rights, and causes of action
held by JWP shall be retained by Reorganized JWP.
11. Vesting of Property. On the Effective Date, pursuant to section 1141(b) and (c) of the Bankruptcy Code, the estate of JWP shall revest in Reorganized JWP. After the Effective Date, Reorganized JWP may operate its businesses, and may use, acquire, and dispose of property free of any restrictions of the Bankruptcy Code or the Bankruptcy Rules. As of the Effective Date, the estate of JWP shall be free and clear of all claims, security interests, liens, and equity interests, except as specifically provided in the Plan or this Order.
12. Objections to Claims. All objections to claims against the Debtor shall be filed and served upon the applicable claimant by 120 days after the Effective Date or 120 days after a claim is filed, whichever is later. After the date of the entry of this Order, only JWP or Reorganized JWP shall have the authority to file, settle, compromise, withdraw, or litigate to judgment objections to claims. After the date of the entry of this Order, JWP or Reorganized JWP may settle or compromise any disputed claim in accordance with Rule 9019 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules").
13. Disallowance of Certain Co-Debtor Claims. Any claim for reimbursement, indemnification, contribution or subrogation of an entity that is liable with the Debtor on, or that has secured, the claim of a creditor not heretofore disallowed by order of the Bankruptcy Court, shall be disallowed to the extent that (a) such creditor's claim against the Debtor is disallowed, (b) such claim for reimbursement, indemnification, contribution or subrogation is contingent as of the date of the entry of this Order, or (c) such entity asserts a right of subrogation to the rights of such creditor under section 509 of the Bankruptcy Code, except as otherwise specifically provided herein.
14. Executory Contracts and Unexpired Leases - Assumed if not Rejected. As of the Effective Date, all executory contracts and unexpired leases that exist between JWP and any person are specifically assumed, except for any executory contracts or unexpired leases that have been rejected by the Debtor or that are the subject of a motion to reject that has been filed on or before the date of the entry of this Order. The entry of this Order shall constitute approval of such assumptions pursuant to section 365(a) of the Bankruptcy Code.
15. Bar to Rejection Damages. Claims created by the rejection of executory contracts or unexpired leases must be filed with this Court no later than twenty (20) days after the entry of an order authorizing such rejection. Any claims not filed within such time will be forever barred from assertion against JWP or Reorganized JWP.
16. Cancellation of Existing Securities and
Agreements. On the Effective Date (i) the Old Notes, (ii) the
Old Note Agreement, (iii) the Old Credit Agreement, (iv) the
pledge agreements, if any, executed prior to the Petition Date in
respect of the stock of any of the Nondebtor Subsidiaries listed
on Schedule 4 to the Plan, (v) the pledge agreements, if any,
executed prior to the Petition Date in respect of any portion of
the Series B Substitute Collateral, (vi) the subordinated notes
and debentures governed by the agreements identified in class 6
of the Plan, (vii) all agreements or instruments evidencing
claims in classes 2, 3, 4, and 5 of the Plan, (viii) the Old
Common Stock, (ix) except as otherwise provided in the Plan, any
options, warrants, or rights, contractual or otherwise, to
acquire such shares of Old Common Stock (including, but not
limited to, the incentive stock options, no-qualified stock
options, and stock appreciation rights to acquire 1,125,000
shares of Old Common Stock pursuant to the 1986 Incentive Stock
Option Plan and the options for key personnel to acquire
2,500,000 and 1,000,000 shares of Old Common Stock, respectively,
pursuant to the 1991 and 1992 Stock Option Plans of JWP), (x) any
interest represented by the 1,152,649 warrants of participation
issued to the holders of Old Common Stock in 1969, which may
entitle such holders to receive shares of Old Common Stock on
certain events with respect to the Jamaica Water Supply Company,
(xi) all shares of preferred stock of JWP issued or authorized on
or prior to the Petition Date and (x) the Intercreditor Agreement
shall be canceled.
17. JWP Liabilities. Notwithstanding any provisions of the Plan or this Order to the contrary, Reorganized JWP shall remain liable with respect to the following: (i) the claims of creditors listed in Schedule 1 to the Plan; (ii) obligations arising after the entry of this Order pursuant to contracts, leases and other agreements assumed by JWP under the Plan; (iii) liabilities based upon the indemnification of Mr. Edward F. Kosnik in respect of any claim (whether contingent or fixed, asserted or unasserted, or liquidated or unliquidated) against Mr. Kosnik by reason of his signing certain management representation letters regarding JWP to (a) Ernst & Young with respect to the 1990, 1991 and 1992 financial years and (b) Deloitte & Touche with respect to the 1993 financial year, to the extent and as provided in the Order Authorizing JWP to Provide Former Chief Executive Officer with Indemnification for Acts to be Taken on Behalf of Debtor, entered by this Court on or about July 14, 1994; and (iv) liabilities against JWP arising under the General Agreement of Indemnity executed by and between the Debtor and Seaboard Surety Company as of February 18, 1994, to the extent and as provided in the Final Order Under 11 U.S.C. section 364(c)(1) and Bankruptcy Rule 4001(c) Authorizing Debtor to Execute, Deliver and Perform General Agreement of Indemnity in Favor of Seaboard Surety Company, entered by this Court on or about March 4, 1994.
18. Professionals' Fees. Professionals' fees, and expenses incurred in connection therewith, after the date of the entry of this Order shall be paid by JWP or Reorganized JWP, as the case may be, in the ordinary course of business and without further approval by this Court. This Court, however, shall retain jurisdiction to hear and settle disputes arising in connection with the assertion of claims for such professionals' fees and expenses.
19. Satisfaction of Obligations Under Share Issuance Agreement. The obligations of JWP under the Share Issuance Agreement, dated August 6, 1993, by and between JWP and ENTEX Information Services, Inc., shall be deemed fulfilled by Reorganized JWP by its performance in accordance with the terms of the Plan.
20. Approvals and Consents. (a) Pursuant to the Plan, and in accordance with section 1123(a)(5)(I) of the Bankruptcy Code, the Debtor is authorized hereby to take such corporate action as may be necessary and appropriate to implement and effectuate the consummation of the Plan and this Order. This Order shall constitute all approvals and consents, if any, required by the General Corporation Law of the State of Delaware with respect to the implementation and consummation of the Plan.
(b) On the Effective Date, the issuance of securities, the election or appointment, as the case may be, of directors and officers, and the other matters provided the Plan involving the corporate structure of JWP or Reorganized JWP, or corporate action by JWP or Reorganized JWP, shall be deemed to have occurred and shall be in effect from and after the Effective Date pursuant to section 303 of the Delaware General Corporation Law without any requirement of further action by the stockholders or directors of JWP or Reorganized JWP.
21. Retention of Jurisdiction. Up to and following the date that a final decree closing this chapter 11 case has been entered, this Court shall have exclusive jurisdiction of all matters arising out of, and related to, this chapter 11 case and the Plan, pursuant to, and for the purposes of, sections 105(a) and 1142 of the Bankruptcy Code, and for, among other things, the following purposes:
a. To hear and determine pending applications for the assumption or rejection of executory contracts or unexpired leases, if any are pending, and the allowance of claims resulting therefrom;
b. To hear and determine any and all pending adversary proceedings, applications, and contested matters;
c. To ensure that distributions, if any, to holders of allowed claims are accomplished as provided herein;
d. To resolve disputes as to the ownership of a claim or equity interest;
e. To hear and determine any timely objections to claims for administrative expenses or to proofs of claims and proofs of equity interest filed, both before and after the date that this Court enters this Order, including any objections to the classification of any claim or equity interest, and to allow or disallow any disputed claim for administrative expenses, disputed claim, or disputed equity interest, in whole or in part;
f. To enter and implement such orders as may be appropriate in the event that this Order is for any reason stayed, revoked, modified or vacated;
g. To issue such orders in aid of execution of the Plan, to the extent authorized by section 1142 of the Bankruptcy Code;
h. To consider any modifications of the Plan, to cure any defect or omission, or reconcile any inconsistency in any order of this Court, including, without limitation, this Order;
i. To hear and determine controversies, suits, actions and disputes affecting the assets of the Debtor;
j. To resolve disputes concerning nondebtor releases and injunctions contained in the Plan or in this Order;
k. To hear and determine all applications for compensation and reimbursement of expenses of professionals under sections 330, 331, and 503(b) of the Bankruptcy Code;
l. To hear and determine disputes arising in connection with the interpretation, implementation, or enforcement of the Plan;
m. To hear and determine matters concerning local, state and federal taxes in accordance with sections 346, 505 and 1146 of the Bankruptcy Code;
n. To hear any other matter not inconsistent with the Bankruptcy Code; and
o. To enter a final decree closing this chapter 11 case.
22. Exemption from Securities Laws. Pursuant to section 1145 of the Bankruptcy Code and the provisions of the Securities Act of 1933, as amended (and the regulations pertaining thereto), regarding the issuance, distribution, offer, sale or registration of securities pursuant to the Plan, JWP and Reorganized JWP and their respective agents are exempt from the registration requirements of the Securities Act of 1933 with respect to the issuance of debt and equity securities pursuant to the Plan.
23. Exculpation. Reorganized JWP, the holders of claims in classes 2, 3, 4 and 6, the statutory committee of unsecured creditors (the "Creditors' Committee"), the official committee of junior creditors and interest holders (the "Junior Committee"), the Seaboard Surety Company, and their respective members, officers, directors, employees, or agents (including any professionals retained by such persons) shall have no liability to any holder of a claim or equity interest for any act or omission in connection with, or arising out of, the pursuit of approval of the Disclosure Statement with respect to the Plan or the solicitation of votes for or confirmation of the Plan, the consummation of the Plan, or the administration of the Plan or the property to be distributed under the Plan, except for willful misconduct or gross negligence, and in all respects, shall be entitled to rely upon the advice of counsel with respect to their duties and responsibilities under the Plan.
24. Dissolution of Committee. On the Effective Date, the Creditors' Committee and the Junior Committee shall be dissolved and the members of the such committees shall thereupon be released and discharged of and from all further authority, duties, responsibilities and obligations related to, arising from and in connection with this chapter 11 case, except as otherwise ordered by this Court.
25. Condition to Distribution of Property. As a condition to receiving any distribution of property under the Plan, the holders of claims in classes 2, 3, 8, 9 and 11 shall be required to surrender the securities that form the basis of their claims to Reorganized JWP or its designee.
26. Distribution to Classes 9, 10 and 11. The Debtor is hereby authorized to make the distributions specified in the Plan to classes 9, 10 and 11, notwithstanding the rejection of the Plan by class 11, as provided in section D of Article III of the Plan.
27. Exemption From Transfer Taxes. Pursuant to section 1146(c) of the Bankruptcy Code, the issuance, transfer, or exchange of notes or equity securities under the Plan, the creation of any mortgage, deed of trust, or other security interest, the making or assignment of any lease or sublease, or the making or delivery of any deed or other instrument of transfer under, in furtherance of, or in connection with the Plan, including any deeds, bills of sale, or assignments executed in connection with any of the transactions contemplated under the Plan shall not be subject to any stamp, real estate transfer, mortgage recording, or other similar tax.
28. Notice of Confirmation Order. The Debtor's publication of notice of entry of this Order, in substantially the form annexed hereto as Exhibit 2, printed in a typeface no smaller than eight point, once in The New York Times and The Wall Street Journal, national editions, and mailing same to all parties in interest appearing at the Confirmation Hearing and all parties who have filed notices of appearance pursuant to Bankruptcy Rule 2002 in this chapter 11 case, shall be deemed good and sufficient notice of the entry of this Order.
Dated: New York, New York
September , 1994
UNITED STATES BANKRUPTCY JUDGE
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- -----------------------------------X
:
In re : CHAPTER 11
:
JWP INC., : Case No.
: 93-B-46404 (JHG)
|
Debtor. :
- -----------------------------------X
APPLICATION FOR AMENDMENT OF
ORDER CONFIRMING THIRD AMENDED
JOINT PLAN OF REORGANIZATION
TO THE HONORABLE JEFFRY H. GALLET,
UNITED STATES BANKRUPTCY COURT:
The application of JWP INC. ("JWP") for an order amending the order of this Court dated September 30, 1994 (the "Confirmation Order") confirming the Third Amended Joint Plan of Reorganization of the Debtor and SellCo Corporation, as modified ("Plan"), by its attorneys, Stroock & Stroock & Lavan, respectfully represents:
1. In preparation for the occurrence of the Effective Date (as defined in the Plan, i.e., fulfillment of four conditions precedent), including the closing of an exit financing loan and the consequent consummation of the Plan, JWP has identified a need for an amendment of the Confirmation Order which, as proposed herein, (i) will reflect a recent change in the board of directors of Reorganized JWP and (ii) will enable the required transactions on the Effective Date to be accomplished more efficiently. JWP is making every effort to cause the Effective Date to occur on Friday, December 9, 1994.
2. Specifically, in the sequence in which they occur in the Confirmation Order, the following amendments in the form set forth in the proposed order prefixed hereto, are sought:
A. Decretal Paragraph 2(h) of the Confirmation Order currently constitutes an amendment to Section F(1) of Article IV of Plan, providing that the "Certificate of Incorporation may provide for the change of the corporate name of Reorganized JWP from 'JWP INC.' to a name to be selected by the board of directors of Reorganized JWP. JWP believes that a change of corporate name will be a major contribution to the rehabilitation afforded by the Plan and desires to effect such a change immediately.
If the name change can be effected immediately, it will preclude confusion in the marketplace on and after the Effective Date. The documents bearing the new name of Reorganized JWP will be in effect for many years after the Effective Date. These include the distributions to creditors (common stock, warrants and notes), the indentures covering the four series of notes to be issued and the security interests created thereunder and the loan documents for the exit financing. All documents issued and executed on the Effective Date should bear the new corporate name to ensure that creditors, shareholders, lenders, new vendors, regulatory authorities and the general public do not, in the future, have to cope with the complications of a subsequent name change. Indeed, aside from the confusion that would be engendered, the expense of substituting documents bearing the new name for documents bearing the JWP name would be monumental.
Accordingly, JWP seeks to amend the Confirmation Order
to permit a change in its corporate name to a name to be
selected by either the existing board of directors of JWP
or the board of directors of Reorganized JWP. Since, under
Section F(2) of Article IV of the Plan, the new board of
directors of Reorganized JWP does not assume its
responsibilities until and after the Effective Date, the
amendment sought herein is necessary in the interests of
economy and efficiency.
B. Decretal Paragraph 5 of the Confirmation Order sets forth the names of and approves the members of the new board of directors of Reorganized JWP. Since entry of the Confirmation Order, it has developed that three of the new members will not so serve. JWP, in conjunction with the Creditors' Committee, has conducted a search and has settled on three new members to serve in the place and stead of the previous three members.
The three new proposed members and their principal affiliations are:
Stephen W. Bershad Chairman, Venitron Corp.
Albert Fried, Jr. Managing Partner, Albert
Fried & Company
and
Managing Partner, Buttonwood
Specialists, L.P.
Kevin Toner Managing Director, UBS
Securities, Inc.
|
Accordingly, JWP seeks an amendment of the first sentence of Decretal Paragraph 5 of the Confirmation Order setting forth the names of and approving the members of the new board of directors of Reorganized JWP as follows:
Frank T. MacInnis
Stephen W. Bershad
Bart A. Brown, Jr.
David A. B. Brown
Albert Fried, Jr.
Malcolm T. Hopkins
Kevin Toner
C. Decretal Paragraph 26 of the Confirmation Order provides that, as a condition to receiving any distribution of property under the Plan, the holders of claims and interests in classes 2, 3, 8, 9 and 11 shall be required to surrender to Reorganized JWP or its designee the securities that form the basis of their claims or interests. Holders of the subordinated debt who constitute class 6 under the Plan were inadvertently omitted from the surrender requirement. It is essential that Reorganized JWP be in a position to distribute the New Series X and Y Warrants to the proper parties. On information and belief, there has been trading in these claims since the record date. It is therefore appropriate that Reorganized JWP be assured that the distribution be as correct as possible and, to that effect, that the holders of Class 6 claims be held to the same requirements as all other classes receiving New Securities and, by amendment to the Confirmation Order, be included in the classes named in Decretal Paragraph 26.
3. JWP submits that the Confirmation Order amendments proposed herein are all in aid of the process of consummating the Plan and do not have any substantive effects on the rights of creditors, interest holders or other parties in interest.
4. As there is no novel issue of law presented, it is respectfully requested that the requirement of a memorandum of law under Rule 13(b) of the Local Bankruptcy Rules be waived.
5. No previous request has been made for the relief sought herein.
WHEREFORE, JWP respectfully requests that the Court enter the proposed order prefixed hereto amending the Confirmation Order as set forth above and grant such other and further relief as the Court shall deem just and proper.
Dated: New York, New York
November 30, 1994
STROOCK & STROOCK & LAVAN
Attorneys for JWP INC.
|
By:
Lawrence M. Handelsman
(LMH-6957)
Seven Hanover Square
New York, New York 10004
212-806-5400
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- -----------------------------------X
:
In re : CHAPTER 11
:
JWP INC., : Case No.
: 93-B-46404 (JHG)
|
Debtor. :
- -----------------------------------X
ORDER AMENDING DECRETAL PARAGRAPHS
2(h), 5 AND 26 OF THE ORDER DATED SEPTEMBER 30, 1994 CONFIRMING THE THIRD AMENDED JOINT PLAN OF REORGANIZATION OF THE DEBTOR AND SELLCO CORPORATION, AS MODIFIED
Upon the application of JWP INC. dated November 30, 1994, and upon sufficient notice duly given to the Statutory Committee of Creditors, the Official Committee of Junior Creditors and Interest Holders, the United States Trustee, the Securities and Exchange Commission and all other parties who have requested notice, and a hearing having been held on December 8, 1994 and no objection to the relief requested having been made, and upon the record made at such hearing, and due deliberation having been had and sufficient cause appearing; it is
FOUND that the proposed amendments to the order of this Court dated September 30, 1994 ("Confirmation Order") confirming the Third Amended Joint Plan of Reorganization of the Debtor and SellCo Corporation, as modified ("Plan"), are in aid of consummation of the Plan and do not have any substantive effect on the rights under the Plan of creditors, interest holders or other parties in interest; and it is
ORDERED, that the Confirmation Order be amended as follows:
1. Decretal Paragraph 2(h) is hereby amended by adding to the words appearing within quotation marks: "or, in the alternative, the existing board of directors is hereby authorized to change the corporate name of JWP INC. prior to the Effective Date."
2. Decretal Paragraph 5 is hereby amended by
deleting the first sentence thereof and inserting in its place:
Frank T. MacInnis, Stephen W. Bershad, Bart A. Brown, Jr., David
A.B. Brown, Albert Fried, Jr., Malcolm T. Hopkins and Kevin
Toner are hereby approved as members of the board of directors
of Reorganized JWP."
3. Decretal Paragraph 26 is hereby amended by deleting the words "classes 2, 3, 8, 9 and 11" and inserting in their place: "classes 2, 3, 6, 8, 9 and 11;" and it is further
ORDERED, that in all other respects the Confirmation is unmodified and remains in full force and effect.
Dated: New York, New York
December , 1994
UNITED STATES BANKRUPTCY JUDGE
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- -----------------------------------X
:
In re : CHAPTER 11
:
JWP INC., : Case No.
: 93-B-46404 (JHG)
|
Debtor. :
- -----------------------------------X
ORDER TO SHOW CAUSE
Upon the application of JWP INC. ("JWP") annexed hereto and sufficient cause appearing for shortening the time for a hearing thereon;
LET any party in interest SHOW CAUSE at a hearing to be held on the day of December, 1994 at .m. or as soon thereafter as counsel can be heard before the undersigned United States Bankruptcy Judge in Room 523 of the Alexander Hamilton Custom House, One Bowling Green, New York, New York 10004 why the application of JWP INC. for an order amending the order of this Court dated September 30, 1994 confirming the Third Amended Joint Plan of Reorganization of the Debtor and SellCo Corporation, as modified and for such other and further relief as shall be just and proper should not be entered; and it is
ORDERED, that service of a conformed copy of this Order to Show Cause, together with the aforesaid application and proposed order annexed hereto by overnight mail or other courier on November 30, 1994 upon the Statutory Committee of Creditors, the Official Committee of Junior Creditors and Interest Holders, the Securities and Exchange Commission, the United States Trustee and all other parties who have requested notice shall be deemed good and sufficient notice of the hearing herein scheduled; and it is further
ORDERED, that objections, if any, to the relief sought in the aforesaid application shall be in writing, shall state with particularity the reasons therefor and shall be delivered to the Chambers of the Honorable Jeffry H. Gallet, Room 528, Alexander Hamilton Custom House, One Bowling Green, New York, New York 10004, with copies of such objections to be delivered to Stroock & Stroock & Lavan, Seven Hanover Square, New York, New York 10004, Attention: Lawrence M. Handelsman; Weil Gotshal & Manges, 767 Fifth Avenue, New York, New York 10153, Attention: Michael F. Walsh; Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York 10019, Attention: Chaim L. Fortgang and Tenzer Greenblatt Fallon & Kaplan, 405 Lexington Avenue, New York, New York 10174, Attention: James D. Glass so as to be received before 4:00 p.m. on December , 1994.
Dated: New York, New York
November , 1994
UNITED STATES BANKRUPTCY JUDGE
EXHIBIT 2(f)
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- -----------------------------------X
:
In re : CHAPTER 11
:
JWP INC., : Case No.
: 93-B-46404 (JHG)
|
Debtor. :
- -----------------------------------X
MOTION, PURSUANT TO 11 U.S.C. section 1127(b), TO
MODIFY SECTIONS E(1) AND (2) OF ARTICLE III
AND SECTION Q OF ARTICLE IV OF THE THIRD AMENDED JOINT PLAN OF REORGANIZATION OF THE DEBTOR AND SELLCO CORPORATION, AS MODIFIED
JWP INC., ("JWP" or the "Debtor"), by its attorneys Stroock & Stroock & Lavan, moves the Court, pursuant to 11 U.S.C. section 1127(b) for an order approving post-confirmation modifications to two sections of the Third Amended Joint Plan of Reorganization of the Debtor and SellCo Corporation, as modified ("Plan"); which Plan was confirmed by the Court on September 30, 1994, as set forth below.
1. By this motion, JWP seeks the Court's approval of modifications to each of (1) Section E of Article III of the Plan and (2) Section Q of Article IV of the Plan. Copies of such sections, as confirmed, are annexed hereto as Exhibit A. Copies of the proposed modifications, marked to show changes, are annexed hereto as Exhibit B.
2. The proposed modifications correct an inadvertent drafting error discovered only as a result of JWP's being able to sell assets prior to the Effective Date of the Plan and therefore having more cash than anticipated available for prepayment of the secured debt to be issued to senior creditors under the Plan on the Effective Date.
3. It has always been the intent of the Debtor and its senior creditors that the source of payments for the secured debt of Reorganized JWP will be the net cash proceeds from the sales of JWP businesses and assets that are not necessary for Reorganized JWP's remaining core business. Liens on the businesses and assets to be sold secure the two series of senior secured notes to be issued and, for purposes of the Plan, are divided into two major categories.
4. The Series A Secured Notes are secured by, among other things, a first priority interest in those businesses listed on Schedule 5 to the Plan (the "SellCo Assets").
5. The Series B Secured Notes are secured by, among other things, a first priority interest in those businesses listed on Schedule 4 to the Plan (the "Software House Collateral").
6. Since no one could predict with any certainty the ultimate sales proceeds that would be derived from JWP's sales of the subsidiaries destined to be sold, holders of the Series A Secured Notes were given a second priority interest in the Software House Collateral, and holders of the Series B Secured Notes were given a second priority interest in the SellCo Assets.
7. It was also intended that asset sales proceeds on hand on the Effective Date would be used to prepay the senior secured notes. Initially, such sales proceeds of SellCo Assets were designated "Series A Cash Collateral," and such sales proceeds of Software House Collateral were designated "Series B Cash Collateral."
8. JWP has sold some SellCo Assets. However, the use of the cash proceeds of those SellCo Assets, which would have been Series A Cash Collateral, was essential for JWP's working capital needs and was consumed during the Chapter 11 case. Thus, the origin of the JWP Supplemental SellCo Note in the Plan, which recognized the intent that creditors receive the SellCo Assets proceeds generated before the Effective Date, but also recognized the need to defer such payment to a time when Reorganized JWP's cash flow could cover such payment. The definition and concept of Series A Cash Collateral was then deleted from earlier versions of the Plan and replaced by the JWP Supplemental SellCo Note; an intercompany note payable by JWP to SellCo and, ultimately, to creditors holding SellCo Subordinated Contingent Payment Notes.
9. During the pendency of the Chapter 11 case, certain of the Software House Collateral generated sales proceeds of approximately $16,000,000; an amount sufficient to prepay the entire principal amount of Series B Secured Notes to be issued under the Plan and leave a remaining balance of Series B Cash Collateral of approximately $4,500,000. This circumstance sent the parties back to the Plan and accompanying disclosure statement ("Disclosure Statement") to confirm the disposition of the excess Series B Cash Collateral.
10. It was discovered that Section Q of Article IV of the Plan requires the principal amount of the JWP Supplemental SellCo Note to equal the sum of (i) the net cash proceeds of SellCo Assets (less $1,000,000) and (ii) any excess Series B Cash Collateral not required to prepay the Series B Secured Notes.
11. However, the Disclosure Statement, inconsistent with the Plan, but consistent with the intent set forth above, correctly describes (at page 50) the JWP Supplemental SellCo Note only as representing the net cash proceeds of sales of businesses which would have been, under the Plan, subsidiaries of SellCo. It is this inconsistency between the intent of the parties and the governing document that JWP seeks to correct.
12. As further evidence of the intent of the parties, JWP refers to the recent application made to this Court for authority to sell its subsidiary, JWP Telecom, Inc., wherein it was stated:
The Plan calls for the proceeds generated from the sale of the Software House companies to be utilized to pay down the Senior Secured Series B Notes (the "Series B Notes") to be issued to the Lenders under the Plan. To the extent there are additional proceeds from the sale of the Software House companies after the Series B Notes have been paid in full, such proceeds are to be utilized to pay the Senior Secured Series A Notes (the "Series A Notes") to be issued under the Plan.
13. Accordingly, the proposed modifications set forth in Exhibit B hereto will accomplish the following:
a. The modifications to Section E of Article III will direct the Disbursing Agent to pay to Belmont Capital Partners II, L.P., in cash, its Additional Interest in respect of Series B Secured Notes and to pay over to the indenture trustee for the Series B Secured Notes a sum sufficient to prepay the Series B Secured Notes in full (holding only a sum in respect of disputed claims, if any). The Disbursing Agent will then be directed to pay over to the indenture trustee for the Series A Secured Notes the remaining balance of the Series B Cash Collateral to be applied as a mandatory prepayment of the Series A Secured Notes, again holding back the sum, if any, in respect of disputed claims. Currently, Section E does not provide for the Series B Cash Collateral as a prepayment of the Series A Secured Notes.
b. The modifications to Section Q of Article IV will accomplish the intent of the parties as set forth in the Disclosure Statement by deleting all reference to Series B Cash Collateral. The JWP Supplemental SellCo Note will then represent only the net cash proceeds of SellCo Assets sold prior to the Effective Date.
14. JWP submits that the modifications sought herein do not affect the rights of any party under the Plan, except the holders of Series A Secured Notes (Classes 2, 4B and 4C) who will thereby receive the benefit of a $4,500,000 prepayment for which the Plan does not now provide. There are no adverse consequences.
15. Based on the foregoing, JWP further submits that under 11 U.S.C. section 1127 notice of the proposed modifications to the statutory Committee of Creditors ("Creditors' Committee"), the Official Committee of Junior Creditors and Interest Holders ("Junior Committee"), the Securities and Exchange Commission, the United States Trustee and all other parties who have requested notice is sufficient.
16. While Section 1127 provides stringent protections where a plan is to be modified either pre- or post-confirmation, including compliance with disclosure requirements and an opportunity for holders to change a previous acceptance or rejection,the legislative history reflects the drafters' recognition that: "Of course, if the modification were sufficiently minor, the court might determine that additional disclosure was not required under the circumstances." H.R. Rep. No.595, 95th Cong., 1st Sess. 411 (1977). Collier, too, addresses the view that a modification proponent need not solicit acceptances and will only have to comply with Sections 1127(c) and (d) if a solicitation is deemed necessary. 5 Collier section 1127.02(2) (15th ed).
17. Section 1127(b) provides that the "plan as modified under this subsection becomes the plan only if circumstances warrant such modification and the court, after notice and a hearing, confirms such plan under section 1129 of this title." The circumstances described above not only warrant the modifications requested herein, they require these modifications if JWP and its senior creditors are to execute the original design and understanding of the parties.
18. Collier further supports the proposition that the procedure proposed herein by JWP is warranted. "`Notice and a hearing' does not require notice to all parties in interest of the proposed modification nor does it require notice of a specific duration." 5 Collier, section 1127.02(3) (15th ed.).
19. Accordingly, JWP has requested limited and shortened notice of the proposed modifications to enable it to meet an extremely tight closing schedule. JWP is proceeding by order to show cause because all parties are endeavoring to accomplish the closing of JWP's exit financing and to cause the occurrence of the Effective Date of the Plan on or prior to December 15, 1994, if at all possible, in order to avoid an additional cost of approximately $1,000,000 which will be incurred for payment of Additional Interest to Belmont Capital Partners II, L.P. under its debtor-in-possession financing agreement with JWP.
20. Because this motion does not present a novel issue of law and the statutory authority upon which it relies is set forth herein, JWP respectfully requests that the requirement of a separate memorandum of law under Rule 13(b) of the Local Bankruptcy Rules be waived.
21. No previous request has been made for the relief sought herein.
WHEREFORE, JWP respectfully requests that the Court enter the proposed order annexed hereto as Exhibit C (1) approving the modifications of Section E of Article III and Section Q of Article IV of the Plan proposed herein, (2) confirming the Plan, as modified, pursuant to 11 U.S.C. section 1129 and (3) granting such other and further relief as the Court shall deem just and proper.
Dated: New York, New York
December , 1994
STROOCK & STROOCK & LAVAN
Attorneys for JWP INC.
By:
Lawrence M. Handelsman
(LMH-6957)
A Member of the Firm
Seven Hanover Square
New York, New York 10004
212-806-5400
|
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- -----------------------------------X
:
In re : CHAPTER 11
:
JWP INC., : Case No.
: 93-B-46404 (JHG)
|
Debtor. :
- -----------------------------------X
ORDER TO SHOW CAUSE
Upon the motion of JWP INC. ("JWP") dated December 7, 1994 ("Motion") and sufficient cause appearing for shortening the time and limiting the notice for a hearing on the said motion,
LET any party in interest SHOW CAUSE at a hearing to be held before the Honorable Jeffry H. Gallet on the day of December, 1994 at .m. or as soon thereafter as counsel may be heard in Room 523 of the Alexander Hamilton Custom House, One Bowling Green, New York, New York 10004 why the Court should not enter an order granting the Motion to modify Section E of Article III and Section Q of Article IV of the Third Amended Joint Plan of Reorganization of the Debtor and SellCo Corporation, as modified ("Plan"), which Plan was confirmed by this Court on September 30, 1994, and granting such other and further relief as shall be just and proper; and it is
ORDERED that service of a conformed copy of this Order To Show Cause, together with the Motion by overnight mail, FedEx or other courier on December , 1994 upon the statutory Committee of Creditors, the Official Committee of Junior Creditors and Interest Holders, the Securities and Exchange Commission, the United States Trustee and all other parties who have requested notice shall be good and sufficient notice; and it is further
ORDERED, that objections, if any, to the relief requested shall be in writing, shall state with particularity the reasons therefor and shall be delivered to the Chambers of the Honorable Jeffry H. Gallet, Room 528, Alexander Hamilton Custom House, One Bowling Green, New York, New York 10004, with copies of such objections to be delivered to Stroock & Stroock & Lavan, Seven Hanover Square, New York, New York 10004, Attention: Lawrence M. Handelsman; Weil Gotshal & Manges, 767 Fifth Avenue, New York, New York 10153, Attention: Michael F. Walsh; Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York 10019, Attention: Chaim L. Fortgang and Tenzer Greenblatt Fallon & Kaplan, 405 Lexington Avenue, New York, New York 10174, Attention: James D. Glass so as to be received before 4:00 p.m. on December , 1994.
Dated: New York, New York
December , 1994
UNITED STATES BANKRUPTCY JUDGE
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- -----------------------------------X
:
In re : CHAPTER 11
:
JWP INC., : Case No.
: 93-B-46404 (JHG)
|
Debtor. :
- -----------------------------------X
ORDER (1) GRANTING MOTION TO MODIFY
SECTION E OF ARTICLE III AND SECTION Q
OF ARTICLE IV OF THE THIRD AMENDED JOINT
PLAN OF REORGANIZATION OF THE DEBTOR AND
SELLCO CORPORATION, AS MODIFIED AND (2)
CONFIRMING SUCH PLAN AS SO FURTHER MODIFIED
Upon the motion of JWP INC. ("JWP") dated December 7, 1994 ("Motion") seeking post-confirmation modifications to the Third Amended Joint Plan of Reorganization of the Debtor and SellCo Corporation, as modified ("Plan") pursuant to 11 U.S.C. section 1127(b) and upon sufficient notice duly given and a hearing having been held before me on the day of December 1994, and upon the record made at such hearing and after due deliberation, it is
FOUND that, under 11 U.S.C. section 1127(b) circumstances warrant the modifications to the Plan sought in the Motion, and it is
ORDERED, that the modifications to Section E of Article III and Section Q of Article IV of the Plan as set forth in full in Exhibit A hereto be and they hereby are approved in their entirety, and it is further,
ORDERED, that the Plan, as so modified, be and it hereby is confirmed pursuant to 11 U.S.C. section 1129 for the reasons set forth in the Motion and upon the record made at the confirmation hearing held before me on September 28 and 29, 1994 and in accordance with and upon the terms of the order of this Court dated September 30, 1994 confirming the Plan which is hereby incorporated herein by reference.
Dated: New York, New York
December , 1994
UNITED STATES BANKRUPTCY JUDGE
EXHIBIT 3(a-5)
RESTATED
CERTIFICATE OF INCORPORATION
OF
JWP INC.
The undersigned, being the President and Chief Executive Officer of JWP INC., a Delaware Corporation (the "Corporation"), originally incorporated in the State of Delaware on March 31, 1987, for the purpose of amending and restating the Certificate of Incorporation, hereby certifies that the following amended and restated certificate of incorporation has been duly adopted in accordance with the provisions of Sections 245 and 303 of the General Corporation Law of the State of Delaware:
FIRST: The name of this Corporation (hereinafter called the "Corporation") shall henceforth be EMCOR Group, Inc.
SECOND: The address, including street, number, city and county, of the registered office of the Corporation in the State of Delaware is 32 Loockerman Square, Suite L-100, Dover, Delaware 19904; and the name of the registered agent of the Corporation in the State of Delaware at such address is The Prentice-Hall Corporation System, Inc.
THIRD: The nature of the business and of the purposes to be conducted and promoted by the Corporation are to conduct any lawful business, to promote any lawful purpose, and to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.
FOURTH: The total number of all classes of stock which the Corporation shall have authority to issue is Thirteen Million Seven Hundred Thousand (13,700,000) shares of Common Stock of a par value of $.01 per share (hereinafter called "Common Stock").
A. 1. Each share of Common Stock shall have one vote and, except (a) as otherwise provided in this Article Fourth or (b) as may be otherwise provided by the laws of the State of Delaware, the exclusive voting power for all purposes shall be fixed in the holders of the Common Stock.
2. The holders of record of the Common Stock shall be entitled to receive, when, if and as declared by the Board of Directors, but only out of funds legally available for the payment of dividends, such dividends of cash or in property, including securities of the Corporation, as the Board of Directors shall from time to time declare.
3. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of the Common Stock shall be entitled to share ratably (i.e., an equal amount of assets for each share of Common Stock) in the remaining assets of the Corporation.
B. Subject to the provisions of the laws of the State
of Delaware, the Corporation may issue its Common Stock
from time to time for such consideration (not less than
the par value thereof) as may be fixed by the Board of
Directors, which is expressly authorized to fix the
same at its discretion. Shares so issued for which the
consideration has been paid or delivered to the
Corporation shall be deemed fully paid stock and shall
not be liable to any further call or assessment
thereon, and the holders of such shares shall not be
liable for any further payments in respect of such
shares. Notwithstanding anything to the contrary set
forth in this Article Fourth, the Corporation shall not
issue any non-voting equity securities; provided,
however, that this provision, included in this Amended
and Restated Certificate of Incorporation in compliance
with Section 1123(a)(6) of the United States Bankruptcy
Code of 1978, as amended (the "Bankruptcy Code"), shall
have no force and effect beyond that required by
Section 1123(a)(6) of the Bankruptcy Code and shall be
effective only for so long as Section 1123(a)(6) of the
Bankruptcy Code is in effect and applicable to the
Corporation.
C. Upon the filing in the Office of the Secretary of State of the State of Delaware of the Amended and Restated Certificate of Incorporation, the shares of Common Stock, par value ten cents ($.10) per share ("Old Common Stock"), of the Corporation issued and outstanding immediately prior to the time when this certificate becomes effective are hereby automatically canceled and extinguished. Upon the filing in the Office of the Secretary of State of the State of Delaware of the Amended and Restated Certificate of Incorporation, each certificate which prior to such filing evidenced Old Common Stock shall be deemed canceled and extinguished.
D. Upon the filing in the Office of the Secretary of State of the State of Delaware of the Amended and Restated Certificate of Incorporation, the shares of the preferred stock of the Corporation ("Series Preferred") outstanding immediately prior to the time when this certificate becomes effective are hereby automatically canceled and extinguished, and all powers, preferences, privileges, voting and other special or relative rights and qualifications of the Series Preferred hereunder, including priorities with respect to dividends and liquidation and rights in respect of accumulated dividends existing on the date hereof, shall terminate and be of no further force and effect. Upon the filing in the Office of the Secretary of State of the State of Delaware of the Amended and Restated Certificate of Incorporation, each certificate which prior to such filing evidenced shares of Series Preferred, shall be deemed canceled or extinguished.
FIFTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders, of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three- fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders, of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation.
SIXTH: The Board of Directors of the Corporation shall consist of seven members.
SEVENTH: Action shall be taken by stockholders of the Corporation only at a duly called annual or special meeting of stockholders of the Corporation and stockholders may not act by written consent.
EIGHTH: The following provisions are inserted for the regulation and conduct of the affairs of the Corporation, and it is expressly provided that they are intended to be in furtherance and not in limitation or exclusion of the powers elsewhere conferred herein or conferred in the By-Laws or conferred by law:
1. In furtherance and not in limitation of the powers conferred under the General Corporation Law of the State of Delaware, the Board of Directors of the Corporation is expressly authorized to make, alter or repeal By-Laws not inconsistent with law or with this Amended and Restated Certificate of Incorporation.
2. Election of Directors need not be by written ballot, unless the By-Laws of the Corporation so provide.
NINTH: To the fullest extent that the General Corporation Law of the State of Delaware, as it exists on the date hereof or as it may hereafter be amended, permits the limitation or elimination of the liability of directors, no director of this Corporation shall be personally liable to this Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Notwithstanding the foregoing, a director shall be liable to the extent provided by applicable law (1) for any breach of the directors' duty of loyalty to the Corporation or its stockholders, (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (3) under Section 174 of the General Corporation Law of the State of Delaware, or (4) for any transaction from which the director derived any improper personal benefit. Neither the amendment or repeal of this Article, nor the adoption of any provision of this Amended and Restated Certificate of Incorporation inconsistent with this Article shall adversely affect any right or protection of a director of the Corporation existing at the time of such amendment or repeal.
TENTH: The Corporation shall, to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented, or by any successor thereto, indemnify any and all persons whom it shall have power to indemnify under said section from and against any and all of the expenses, liabilities or other matters referred to in or covered by said section. The Corporation shall advance expenses to the fullest extent permitted by said section.
Such right to indemnification and advancement of expenses shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. The indemnification and advancement of expenses provided for herein shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any By-Law, agreement, vote of stockholders or disinterested directors or otherwise.
ELEVENTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Amended and Restated Certificate of Incorporation, and any other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner now or hereafter provided herein or by statute, and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to this Amended and Restated Certificate of Incorporation in its present form or as amended are granted subject to the rights reserved in this Article ELEVENTH.
Executed at Norwalk, Connecticut on December __, 1994.
EXHIBIT 3(b)
AMENDED AND RESTATED
BY-LAWS
OF
EMCOR GROUP, INC.
(A Delaware Corporation)
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK.
(a) Every holder of stock in the Corporation shall be entitled to have a certificate signed by, or in the name of, the Corporation by the Chairman or Vice-Chairman of the Board of Directors, if any, or by the President or a Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Corporation representing the number of shares owned by such person in the Corporation. If such certificate is countersigned by a transfer agent other than the Corporation or its employee or by a registrar other than the Corporation or its employee, any other signature on the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue.
(b) Whenever the Corporation shall be authorized to issue more than one class of stock or more than one series of any class of stock, and whenever the Corporation shall issue any shares of its stock as partly paid stock, the certificates representing shares of any such class or series or of any such partly paid stock shall set forth thereon the statements prescribed by the General Corporation Law. Any restrictions on the transfer or registration of transfer of any shares of stock of any class or series shall be noted conspicuously on the certificate representing such shares.
(c) The Corporation may issue a new certificate of stock in place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Board of Directors may require the owner of any lost, stolen or destroyed certificate, or such person's legal representative, to give the Corporation a bond sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate.
2. FRACTIONAL SHARE INTERESTS.
The Corporation may, but shall not be required to, issue fractions of a share.
3. STOCK TRANSFERS.
Upon compliance with provisions restricting the transfer or registration of transfer of shares of stock, if any, transfers or registration of transfer of shares of stock of the Corporation shall be made only on the stock ledger of the Corporation by the registered holder thereof, or by such person's attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation or with a transfer agent or a registrar, if any, and on surrender of the certificate or certificates for such shares of stock properly endorsed and the payment of all taxes due thereon.
4. RECORD DATE FOR STOCKHOLDERS.
(a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty nor less than ten days before the date of such meeting. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting
is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action. If no record date has been fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
5. MEANING OF CERTAIN TERMS.
As used herein in respect of the right to notice of a meeting of stockholders or a waiver thereof or to participate or vote thereat or to consent or dissent in writing in lieu of a meeting, as the case may be, the term "share" or "shares" or "share of stock" or "shares of stock" or "stockholder" or "stockholders" refers to an outstanding share or shares of stock and to a holder or holders of record of outstanding shares of stock when the Corporation is authorized to issue only one class of shares of stock, and said reference is also intended to include any outstanding share or shares of stock and any holder or holders of record of outstanding shares of stock of any class upon which or upon whom the Amended and Restated Certificate of Incorporation confers such rights where there are two or more classes or series of shares of stock or upon which or upon whom the General Corporation Law confers such rights notwithstanding that the Amended and Restated Certificate of Incorporation may provide for more than one class or series of shares of stock, one or more of which are limited or denied such rights thereunder; provided, however, that no such right shall vest in the event of an increase or a decrease in the authorized number of shares of stock of any class or series which is otherwise denied voting rights under the provisions of the Amended and Restated Certificate of Incorporation, including any preferred stock which is denied voting rights under the provisions of the resolution or resolutions adopted by the Board of Directors with respect to the issuance thereof.
6. STOCKHOLDER MEETINGS.
(a) TIME. The annual meeting shall be held on the date and at the time fixed, from time to time, by the Board of Directors. A special meeting shall be held on the date and at the time fixed by the Board of Directors.
(b) PLACE. Annual meetings and special meetings shall be held at such place, within or without the State of Delaware, as the Board of Directors may, from time to time, fix. Whenever the Board of Directors shall fail to fix such place, the meeting shall be held at the registered office of the Corporation in the State of Delaware.
(c) CALL. Annual meetings and special meetings may be called by the Board of Directors or by any officer instructed by the Board of Directors to call the meeting.
(d) NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be given, stating the place, date and hour of the meeting. The notice of an annual meeting shall state that the meeting is called for the election of Directors and for the transaction of other business which may properly come before the meeting, and shall (if any other action which could be taken at a special meeting is to be taken at such annual meeting) state such other action or actions as are known at the time of such notice. The notice of a special meeting shall in all instances state the purpose or purposes for which the meeting is called. If any action is proposed to be taken which would, if taken, entitle stockholders to receive payment for their shares of stock, the notice shall include a statement of that purpose and to that effect. Except as otherwise provided by the General Corporation Law, a copy of the notice of any meeting shall be given, personally or by mail, not less than ten days nor more than sixty days before the date of the meeting, unless the lapse of the prescribed period of time shall have been waived, and directed to each stockholder at such person's address as it appears on the records of the Corporation. Notice by mail shall be deemed to be given when deposited, with postage thereon prepaid, in the United States mail. If a meeting is adjourned to another time, not more than thirty days hence, and/or to another place, and if an announcement of the adjourned time and place is made at the meeting, it shall not be necessary to give notice of the adjourned meeting unless the Board of Directors, after adjournment, fixes a new record date for the adjourned meeting. Notice need not be given to any stockholder who submits a written waiver of notice before or after the time stated therein. Attendance of a person at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice.
(e) STOCKHOLDER LIST. There shall be prepared and made, at least ten days before every meeting of stockholders, a complete list of the stockholders, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the Corporation, or to vote at any meeting of stockholders.
(f) CONDUCT OF MEETING. Meetings of the stockholders shall be presided over by one of the following officers in the order of seniority and if present and acting: the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, the President, a Vice President, a chairman for the meeting chosen by the Board of Directors or, if none of the foregoing is in office and present and acting, by a chairman to be chosen by the stockholders. The Secretary of the Corporation or, in such person's absence, an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present the chairman for the meeting shall appoint a secretary of the meeting.
(g) PROXY REPRESENTATION. Every stockholder may authorize another person or persons to act for such stockholder by proxy in all matters in which a stockholder is entitled to participate, whether by waiving notice of any meeting, voting or participating at a meeting, or expressing consent or dissent without a meeting. Every proxy must be signed by the stockholder or by such person's attorney-in-fact. No proxy shall be voted or acted upon after three years from its date unless such proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and, if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the Corporation generally.
(h) INSPECTORS AND JUDGES. The Board of Directors, in advance of any meeting, may, but need not, appoint one or more inspectors of election or judges of the vote, as the case may be, to act at the meeting or any adjournment thereof. If an inspector or inspectors or judge or judges are not appointed by the Board of Directors, the person presiding at the meeting may, but need not, appoint one or more inspectors or judges. In case any person who may be appointed as an inspector or judge fails to appear or act, the vacancy may be filled by appointment made by the person presiding thereat. Each inspector or judge, if any, before entering upon the discharge of such person's duties, shall take and sign an oath faithfully to execute the duties of inspector or judge at such meeting with strict impartiality and according to the best of his ability. The inspectors or judges, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum and the validity and effect of proxies, receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such other acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting, the inspector or inspectors or judge or judges, if any, shall make a report in writing of any challenge, question or matter determined by such person or persons and execute a certificate of any fact so found.
(i) QUORUM. Except as the General Corporation Law or these Amended and Restated By-Laws may otherwise provide, the holders of a majority of the outstanding shares of stock entitled to vote shall constitute a quorum at a meeting of stockholders for the transaction of any business. The stockholders present may adjourn the meeting despite the absence of a quorum. When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any stockholders.
(j) VOTING. Each stockholder entitled to vote in accordance with the terms of the Amended and Restated Certificate of Incorporation and of these Amended and Restated By-Laws, or, with respect to the issuance of preferred stock, in accordance with the terms of a resolution or resolutions of the Board of Directors, shall be entitled to one vote, in person or by proxy, for each share of stock entitled to vote held by such stockholder. In the election of Directors, a plurality of the votes present at the meeting shall elect. Any other action shall be authorized by a majority of the votes cast except where the Amended and Restated Certificate of Incorporation or the General Corporation Law prescribes a different percentage of votes and/or a different exercise of voting power. Voting by ballot shall not be required for corporate action except as otherwise provided by the General Corporation Law.
ARTICLE II
DIRECTORS
1. FUNCTIONS AND DEFINITION.
The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors of the Corporation. The use of the phrase "whole Board" herein refers to the total number of Directors which the Corporation would have if there were no vacancies.
2. QUALIFICATIONS AND NUMBER.
A Director need not be a stockholder, a citizen of the United States, or a resident of the State of Delaware. The Board of Directors at the time of the adoption of these Amended and Restated By-Laws and at all times thereafter shall be the number of Directors fixed in the Amended and Restated Certificate of Incorporation as amended from time to time. If at any time the number of Directors is not so fixed in the Amended and Restated Certificate of Incorporation, the number of Directors constituting the whole board shall be at least one and, subject to the foregoing limitation, such number may be fixed from time to time and thereafter may be increased or decreased by action of the stockholders or of the Board of Directors, or, if the number is not so fixed, the number shall be three.
3. ELECTION AND TERM.
The Board of Directors at the time of the adoption of these Amended and Restated By-Laws shall hold office until the first annual meeting of stockholders following the adoption of these Amended and Restated By-Laws and until their successors have been elected and qualified or until their earlier resignation or removal. Any Director may resign at any time upon written notice to the Corporation. Thereafter, Directors who are elected at an annual meeting of stockholders, and Directors who are elected in the interim to fill vacancies and newly created Directorships, shall hold office until the next annual meeting of stockholders and until their successors have been elected and qualified or until their earlier resignation or removal. In the interim between annual meetings of stockholders or of special meetings of stockholders called for the election of Directors and/or for the removal of one or more Directors and for the filling of any vacancies in the Board of Directors, including vacancies resulting from the removal of Directors for cause or without cause, any vacancy in the Board of Directors may be filled by the vote of a majority of the remaining Directors then in office, although less than a quorum, or by the sole remaining Director.
4. MEETINGS.
(a) TIME. Regular meetings shall be held at such time as the Board shall fix. Special meetings may be called upon notice.
(b) FIRST MEETING. The first meeting of each newly elected Board may be held immediately after each annual meeting of the stockholders at the same place at which the meeting is held, and no notice of such meeting shall be necessary to call the meeting, provided a quorum shall be present. In the event such first meeting is not so held immediately after the annual meeting of the stockholders, it may be held at such time and place as shall be specified in the notice given as provided for special meetings of the Board of Directors, or at such time and place as shall be fixed by the consent in writing of all of the Directors.
(c) PLACE. Meetings, both regular and special, shall be held at such place within or without the State of Delaware as shall be fixed by the Board.
(d) CALL. No call shall be required for regular meetings for which the time and place have been fixed. Special meetings may be called by or at the direction of the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, or the President, or of a majority of the Directors.
(e) NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required for regular meetings for which the time and place have been fixed. Written, oral or any other mode of notice of the time and place shall be given for special meetings at least twenty-four hours prior to the meeting; notice may be given by telephone or telefax (in which case it is effective when given) or by mail (in which case it is effective seventy-two hours after mailing by prepaid first class mail). The notice of any meeting need not specify the purpose of the meeting. Any requirement of furnishing a notice shall be waived by any Director who signs a written waiver of such notice before or after the time stated therein. Attendance of a Director at a meeting of the Board shall constitute a waiver of notice of such meeting, except when the Director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.
(f) QUORUM AND ACTION. A majority of the whole Board shall constitute a quorum except when a vacancy or vacancies prevents such majority, whereupon a majority of the Directors in office shall constitute a quorum, provided that such majority shall constitute at least one-third (1/3) of the whole Board. Any Director may participate in a meeting of the Board by means of a conference telephone or similar communications equipment by means of which all Directors participating in the meeting can hear each other, and such participation in a meeting of the Board shall constitute presence in person at such meeting. A majority of the Directors present, whether or not a quorum is present, may adjourn a meeting to another time and place. Except as herein otherwise provided, and except as otherwise provided by the General Corporation Law, the act of the Board shall be the act by vote of a majority of the Directors present at a meeting, a quorum being present. The quorum and voting provisions herein stated shall not be construed as conflicting with any provisions of the General Corporation Law and these Amended and Restated By-Laws which govern a meeting of Directors held to fill vacancies and newly created Directorships in the Board.
(g) CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if present and acting, shall preside at all meetings. Otherwise, the Vice-Chairman of the Board, if any and if present and acting, or the President, if present and acting, or any other Director chosen by the Board, shall preside.
5. REMOVAL OF DIRECTORS.
Any or all of the Directors may be removed for cause or without cause by the stockholders.
6. COMMITTEES.
The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the Directors of the Corporation. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. In the absence or disqualification of any member of any such committee or committees, the members thereof present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.
7. ACTION IN WRITING.
Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee.
ARTICLE III
OFFICERS
1. EXECUTIVE OFFICERS.
The Board of Directors may elect or appoint a Chairman of the Board of Directors, a President, one or more Vice Presidents (which may be denominated with additional descriptive titles), a Secretary, one or more Assistant Secretaries, a Treasurer, one or more Assistant Treasurers and such other officers as it may determine. Any number of offices may be held by the same person.
2. TERM OF OFFICE: REMOVAL.
Unless otherwise provided in the resolution of election or appointment, each officer shall hold office until the meeting of the Board of Directors following the next annual meeting of stockholders and until such officer's successor has been elected and qualified or until the earlier resignation or removal of such officer. The Board of Directors may remove any officer for cause or without cause.
3. AUTHORITY AND DUTIES.
All officers, as between themselves and the Corporation, shall have such authority and perform such duties in the management of the Corporation as may be provided in these Amended and Restated By-Laws, or, to the extent not so provided, by the Board of Directors.
4. THE CHAIRMAN OF THE BOARD OF DIRECTORS.
The Chairman of the Board of Directors, if present and acting, shall preside at all meetings of the Board of Directors, otherwise, the President, if present, shall preside, or if the President does not so preside, any other Director chosen by the Board shall preside.
5. THE PRESIDENT.
The President shall be the chief executive officer of the Corporation unless otherwise determined by a resolution adopted by the Board of Directors.
6. VICE PRESIDENTS.
Any Vice President that may have been appointed, in the absence or disability of the President, shall perform the duties and exercise the powers of the President, in the order of their seniority, and shall perform such other duties as the Board of Directors shall prescribe.
7. THE SECRETARY.
The Secretary shall keep in safe custody the seal of the Corporation and affix it to any instrument when authorized by the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors. The Secretary (or in such officer's absence, an Assistant Secretary, but if neither is present another person selected by the Chairman for the meeting) shall have the duty to record the proceedings of the meetings of the stockholders and Directors in a book to be kept for that purpose.
8. THE TREASURER.
The Treasurer shall have the care and custody of the corporate funds, and other valuable effects, including securities, and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation, and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors and shall perform such other functions as might be given to him by the President of the Corporation.
ARTICLE IV
CORPORATE SEAL
AND
CORPORATE BOOKS
The corporate seal shall be in such form as the Board of Directors shall prescribe. The books of the Corporation may be kept within or without the State of Delaware, at such place or places as the Board of Directors may, from time to time, determine.
ARTICLE V
FISCAL YEAR
The fiscal year of the Corporation shall be fixed, and shall be subject to change, by the Board of Directors.
ARTICLE VI
INDEMNITY
(a) Any person who was or is a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he or she is or was a Director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including employee benefit plans) (hereinafter an "indemnitee"), shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification than permitted prior thereto), against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such indemnitee in connection with such action, suit or proceeding, if the indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe such conduct was unlawful. The termination of the proceeding, whether by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, had reasonable cause to believe such conduct was unlawful.
(b) Any indemnitee shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification than permitted prior thereto), against expenses (including attorneys' fees) actually and reasonably incurred by such indemnitee in connection with the defense or settlement of such action, suit or proceeding if such indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court in which such suit, action or proceeding was brought, shall determine, upon application, that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper.
(c) All reasonable expenses incurred by or on behalf of the indemnitee in connection with any suit, action or proceeding, may be advanced to the indemnitee by the Corporation.
(d) The rights to indemnification and to advancement of expenses conferred in this article shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, the Amended and Restated Certificate of Incorporation, a By-Law of the Corporation, agreement, vote of stockholders or disinterested Directors or otherwise.
(e) The indemnification and advancement of expenses provided by this article shall continue as to a person who has ceased to be a Director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person.
ARTICLE VII
AMENDMENTS
The Amended and Restated By-Laws may be amended, added to, rescinded or repealed at any meeting of the Board of Directors or of the stockholders, provided that notice of the proposed change was given in the notice of the meeting.
EXHIBIT 4.15
EMCOR GROUP, INC.
(Formerly Known as JWP INC.),
as Issuer,
MES HOLDINGS CORPORATION
and
SELLCO CORPORATION,
as Guarantors
and
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
INDENTURE
Dated as of December 15, 1994
Up to $71,000,000
7% Senior Secured Notes, Series A, Due 1997
CROSS-REFERENCE TABLE*
Trust Indenture Act Section Indenture Section 310(a)(1). . . . . . . . . . . . . . . . . 7.10 (a)(2) . . . . . . . . . . . . . . . . . 7.10 (a)(3) . . . . . . . . . . . . . . . . . N.A. (a)(4) . . . . . . . . . . . . . . . . . N.A. (a)(5) . . . . . . . . . . . . . . . . . 7.10 (b). . . . . . . . . . . . . . . . . . . 7.08; 7.10; 12.02 (c). . . . . . . . . . . . . . . . . . . N.A. 311(a) . . . . . . . . . . . . . . . . . . 7.11 (b). . . . . . . . . . . . . . . . . . . 7.11 (c). . . . . . . . . . . . . . . . . . . N.A. 312(a) . . . . . . . . . . . . . . . . . . 2.05 (b). . . . . . . . . . . . . . . . . . . 12.03 (c). . . . . . . . . . . . . . . . . . . 12.03 313(a) . . . . . . . . . . . . . . . . . . 7.06 (b)(1) . . . . . . . . . . . . . . . . . 7.06 (b)(2) . . . . . . . . . . . . . . . . . 7.06 (c). . . . . . . . . . . . . . . . . . . 7.06; 12.02 (d). . . . . . . . . . . . . . . . . . . 7.06 314(a) . . . . . . . . . . . . . . . . . . 4.03; 4.04; 12.02 (b). . . . . . . . . . . . . . . . . . . 10.02 (c)(1) . . . . . . . . . . . . . . . . . 12.04 (c)(2) . . . . . . . . . . . . . . . . . 12.04 (c)(3) . . . . . . . . . . . . . . . . . N.A. (d). . . . . . . . . . . . . . . . . . . 10.02 (e). . . . . . . . . . . . . . . . . . . 12.05 (f). . . . . . . . . . . . . . . . . . . N.A. 315(a) . . . . . . . . . . . . . . . . . . 7.01 (b). . . . . . . . . . . . . . . . . . . 7.05; 12.02 (c). . . . . . . . . . . . . . . . . . . 7.01 (d). . . . . . . . . . . . . . . . . . . 7.01 (e). . . . . . . . . . . . . . . . . . . 6.11 316(a)(last sentence). . . . . . . . . . . 2.09 (a)(1)(A). . . . . . . . . . . . . . . . 6.05 (a)(1)(B). . . . . . . . . . . . . . . . 6.04 (a)(2) . . . . . . . . . . . . . . . . . N.A. (b). . . . . . . . . . . . . . . . . . . 6.07 (c). . . . . . . . . . . . . . . . . . . 6.05 317(a)(1). . . . . . . . . . . . . . . . . 6.08 (a)(2) . . . . . . . . . . . . . . . . . 6.09 (b). . . . . . . . . . . . . . . . . . . 2.04 318(a) . . . . . . . . . . . . . . . . . . 12.01 |
N.A. means not applicable.
*This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture.
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions . . . . . . . . . . . . . . . . . .1
Section 1.02.Incorporation by Reference of Trust Indenture Act.20
Section 1.03. Rules of Construction . . . . . . . . . . . 21
ARTICLE 2
THE SECURITIES
Section 2.01. Form and Dating . . . . . . . . . . . . . . . 21
Section 2.02. Execution and Authentication. . .. . . . . . 22
Section 2.03. Registrar and Paying Agent. . . . . . . . . . . 22
Section 2.04. Paying Agent to Hold Money in Trust . . . . . . 23
Section 2.05. Holder Lists. . . . . . . . . . . . . . . . . 23
Section 2.06. Transfer and Exchange . . . . . . . . . . . . 24
Section 2.07. Replacement Securities . . . . . . . . . . . 24
Section 2.08. Outstanding Securities. . . . . . . . . . . . 25
Section 2.09. Treasury Securities . . . . . . . . . . . . . 25
Section 2.10. Temporary Securities. . . . . . . . . . . . . 26
Section 2.11. Cancellation. . . . . . . . . . . . . . . . . 26
Section 2.12. Defaulted Interest. . . . . . . . . . . . . . 26
Section 2.13. CUSIP Numbers . . . . . . . . . . . . . . . . 27
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee. . . . . . . . . . . . . . 27
Section 3.02. Selection of Securities to Be Redeemed. . . . 27
Section 3.03. Notice of Redemption. . . . . . . . . . . . . 28
Section 3.04. Effect of Notice of Redemption. . . . . . . . 29
Section 3.05. Deposit of Redemption Price . . . . . . . . . 29
Section 3.06. Securities Redeemed in Part . . . . . . . . . 29
Section 3.07. Optional Redemption . . . . . . . . . . . . . 29
Section 3.08. Mandatory Redemption. . . . . . . . . . . . . 30
ARTICLE 4
COVENANTS
Section 4.01. Payment of Securities . . . . . . . . . . . . 32
Section 4.02. Maintenance of Office or Agency . . . . . . . 32
Section 4.03. SEC Reports; Reports to Securityholders . . . 33
Section 4.04. Compliance Certificate. . . . . . . . . . . . 33
Section 4.05. Stay, Extension and Usury Laws. . . . . . . . 34
Section 4.06. Limitation on Restricted Payments . . . . . . 34
Section 4.07. Limitations on Transactions with Affiliates . 35
Section 4.08. Limitation on Liens . . . . . . . . . . . . . 35
Section 4.09. Limitation on Additional Indebtedness and Capital
Stock . . . . . . . . . . . . . . . . . 37
Section 4.10. Limitation on New Subsidiaries. . . . . . . . 41
Section 4.11. Limitation on Sales of Assets . . . . . . . . 41
Section 4.12. Limitation on Certain Transfers of Assets . . 42
Section 4.13. No Material Changes in the Nature of the
Business . . . . . . . . . . . . . . . . . . 42
Section 4.14. Limitation on Investments and Advances. . . . 42
Section 4.15. Maintenance of Coverage Ratios. . . . . . . . 43
Section 4.16. Capital Expenditures. . . . . . . . . . . . . 44
Section 4.17. Corporate Existence . . . . . . . . . . . . . 45
Section 4.18. Change of Control . . . . . . . . . . . . . . 45
Section 4.19. Maintenance of Properties . . . . . . . . . . 47
Section 4.20. Payment of Taxes and Other Claims . . . . . . 47
Section 4.21. Maintenance of Insurance. . . . . . . . . . . 47
Section 4.22. Compliance With Law . . . . . . . . . . . . . 48
Section 4.23. Books and Records . . . . . . . . . . . . . . 48
Section 4.24. Employee Benefit Plans; ERISA . . . . . . . . 48
Section 4.25. Modification of Material Contractual
Obligations. . . . . . . . . . . . . . . . .48
Section 4.26. Security Interests. . . . . . . . . . . . . . 49
Section 4.27. Lease Obligations . . . . . . . . . . . . . . 49
Section 4.28. Maintenance of Consolidated Tangible Net Worth50
Section 4.29. Performance Guaranties. . . . . . . . . . . . 50
ARTICLE 5
MERGERS AND ACQUISITIONS
Section 5.01. Mergers, Acquisitions, Etc. . . . . . . . . . 50
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default . . . . . . . . . . . . . . 51
Section 6.02. Acceleration. . . . . . . . . . . . . . . . . 54
Section 6.03. Other Remedies. . . . . . . . . . . . . . . . 55
Section 6.04. Waiver of Past Defaults . . . . . . . . . . . 55
Section 6.05. Control by Majority . . . . . . . . . . . . . 55
Section 6.06. Limitation on Suits . . . . . . . . . . . . . 56
Section 6.07. Rights of Holders to Receive Payment. . . . . 56
Section 6.08. Collection Suit by Trustee. . . . . . . . . . 56
Section 6.09. Trustee May File Proofs of Claim. . . . . . . 57
Section 6.10. Priorities. . . . . . . . . . . . . . . . . . 57
Section 6.11. Undertaking for Costs . . . . . . . . . . . . 58
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee . . . . . . . . . . . . . . 58
Section 7.02. Rights of Trustee . . . . . . . . . . . . . . 59
Section 7.03. Individual Rights of Trustee. . . . . . . . . 60
Section 7.04. Trustee's Disclaimer. . . . . . . . . . . . . 60
Section 7.05. Notice of Defaults. . . . . . . . . . . . . . 60
Section 7.06. Reports by Trustee to Holders . . . . . . . . 60
Section 7.07. Compensation and Indemnity. . . . . . . . . . 61
Section 7.08. Replacement of Trustee. . . . . . . . . . . . 61
Section 7.09. Successor Trustee by Merger, Etc. . . . . . . 62
Section 7.10. Eligibility; Disqualification . . . . . . . . 63
Section 7.11. Preferential Collection of Claims Against
Company . . . . . . . . . . . . . . . . . . 63
ARTICLE 8
DISCHARGE OF INDENTURE
Section 8.01. Termination of Company's Obligations. . . . . 64
Section 8.02. Application of Trust Money. . . . . . . . . . 66
Section 8.03. Repayment to Company. . . . . . . . . . . . . 66
Section 8.04. Reinstatement . . . . . . . . . . . . . . . . 66
ARTICLE 9
AMENDMENTS
Section 9.01. Without Consent of Holders. . . . . . . . . . 67
Section 9.02. With Consent of Holders . . . . . . . . . . . 67
Section 9.03. Compliance with Trust Indenture Act . . . . . 68
Section 9.04. Revocation and Effect of Consents . . . . . . 69
Section 9.05. Notation on or Exchange of Securities . . . . 69
Section 9.06. Trustee to Sign Amendments, Etc.. . . . . . . 69
ARTICLE 10
COLLATERAL
Section 10.01. Pledge of Collateral . . . . . . . . . . . . 69
Section 10.02. Recording, Etc.. . . . . . . . . . . . . . . 71
Section 10.03. Suits to Protect the Collateral. . . . . . . 72
Section 10.04. Authorization of Receipt of Funds by the
Trustee Under the Collateral Documents and
the Intercreditor Agreement. . . . . . . . . 73
ARTICLE 11
GUARANTY OF SECURITIES
Section 11.01 Guaranty. . . . . . . . . . . . . . . . . . . 73
Section 11.02 Obligations of the Guarantors Unconditional . 74
Section 11.03 Execution and Delivery of Guaranties. . . . . 74
Section 11.04 Limitation of Guaranties. . . . . . . . . . . 75
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls . . . . . . . . 75
Section 12.02. Notices. . . . . . . . . . . . . . . . . . . 75
Section 12.03. Communication by Holders with Other Holders. 76
Section 12.04. Certificate and Opinion as to Conditions
Precedent . . . . . . . . . . . . . . . . 77
Section 12.05. Statements Required in Certificate or Opinion77
Section 12.06. Rules by Trustee and Agents. . . . . . . . . 78
Section 12.07. Legal Holidays . . . . . . . . . . . . . . . 78
Section 12.08. Duplicate Originals. . . . . . . . . . . . . 78
Section 12.09. Governing Law. . . . . . . . . . . . . . . . 78
Section 12.10. No Adverse Interpretation of Other Agreements78
Section 12.11. Successors . . . . . . . . . . . . . . . . . 78
Section 12.12. Severability . . . . . . . . . . . . . . . . 78
Section 12.13. Counterpart Originals. . . . . . . . . . . . 78
Section 12.14. Variable Provisions. . . . . . . . . . . . . 79
Section 12.15. Table of Contents, Headings, Etc.. . . . . . 79
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . 80
Exhibit A Form of Securities
Exhibit B-1Form of Series A Senior Pledge Agreement
Exhibit B-2Form of Series A Subordinated Pledge Agreement
Exhibit B-3Form of Series A SellCo Pledge Agreement
Exhibit C Form of Intercreditor Agreement
|
INDENTURE, dated as of December 15, 1994, among EMCOR Group,
Inc. (formerly known as JWP INC.), a Delaware corporation (the
"Company"), MES Holdings Corporation, a
Delaware corporation ("MES"), SellCo Corporation, a Delaware
corporation ("SellCo" and, together with MES, the "Guarantors"),
and IBJ Schroder Bank & Trust Company, as trustee (the
"Trustee").
Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Company's 7% Senior Secured Notes, Series A, Due 1997 (the "Securities"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"Accountants' Certificate" means a certificate from Deloitte and Touche or from other independent certified public accountants of national standing.
"Affiliate" of any specified Person means any other Person,
directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person.
For
the purposes of this definition, "control" when used with respect
to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through
the
ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to
the foregoing.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Sale" has the meaning set forth in Section 4.11.
"Available Cash" means, at any date of determination, the
excess, if any, of (a) the sum of (i) the average daily balance
of collected funds on deposit for the immediately preceding
calendar month in the Cash Accounts (other than (A) customary
cash deposits made in the ordinary course of business consistent
with past practice in connection with payroll, employee benefit
and other similar or customary deposit arrangements, petty cash
accounts, disbursement accounts, or accounts holding retentions,
(B) cash deposited in a Cash Account maintained by a Water
Company, any Subsidiary of MES, or a Dynalectric Company, the
disbursement or withdrawal of which is prohibited or restricted,
by contract, course of dealing or otherwise, on the Issue Date,
(C) funds deposited in a Cash Account in respect of the proceeds
received in connection with an Asset Sale or (D) an amount equal
to the proceeds of (1) Indebtedness incurred by the Company
or any of its Subsidiaries and (2) the issuance of the Company's
Capital Stock), plus (ii) the lesser of (A) the average daily
unused portion of the credit available under the Revolving Credit
Agreement for such immediately preceding calendar month, or (B)
$40,000,000, minus (b) the reserve maintained in accordance with
the Bankruptcy Plan by the Company or any disbursing agent
therefor, in respect of disputed claims against the Company, and
minus (c) the tax reserve maintained by SellCo in respect of
taxes owing in connection with Asset Sales by the Company and any
of its Subsidiaries.
"Bankruptcy Law" has the meaning set forth in Section 6.01(b).
"Bankruptcy Plan" means the Third Amended Joint Plan of Reorganization of the Company and SellCo under Chapter 11 of the Bankruptcy Code (Chapter 11 Case No. 94 B 46404 (JHG)), as amended, supplemented or otherwise modified from time to time.
"Board of Directors" of a Person means the board of directors of such Person or any committee of such board of directors duly authorized to act hereunder.
"Business Day" means any day other than a Legal Holiday.
"Capital Expenditures" means, for any Person for any period,
the aggregate (without duplication) of (a) all expenditures by
such Person, except interest capitalized during construction,
during such period for property, plant or equipment, including,
without limitation, renewals, improvements, replacements and
capitalized repairs, that would be reflected as additions to
property,
plant or equipment on a consolidated balance sheet of such Person
prepared in conformity with GAAP, and (b) the principal amount of
all Indebtedness incurred or assumed in connection with
any such additions to property, plant and equipment. For the
purpose of this definition, the purchase price of equipment which
is acquired simultaneously with the trade-in of existing
equipment
owned by such Person or with insurance proceeds shall be included
in Capital Expenditures only to the extent of the gross amount of
such purchase price less the credit granted by the seller of
such equipment being traded in at such time or the amount of such
proceeds, as the case may be.
"Capital Lease" means, as to any Person, any lease of property, real or personal, in respect of which the present value of the minimum rental commitment would be capitalized on a balance sheet of such Person in accordance with GAAP.
"Capital Lease Obligation" means, as to any Person, the amount of the liability in respect of a Capital Lease which would at such time be required to be capitalized on a balance sheet of such Person in accordance with GAAP.
"Capital Stock" means any and all shares, interests, participations, rights or other equivalents (however designated) of any Person.
"Cash Accounts" means, collectively, all bank, money market and other deposit accounts maintained by the Company and its Subsidiaries other than the Imprest Accounts.
"Change of Control" means an event whereby any Person or group (as such term is defined in Rule 13d-5 of the Exchange Act) of related Persons, other than the Specified Holders, shall acquire beneficial ownership, directly or indirectly, of more than 50% of the outstanding voting stock of the Company.
"Change of Control Offer" has the meaning set forth in
Section 4.18(a).
"Change of Control Payment Date" has the meaning set forth in Section 4.18(a).
"Code" means the Internal Revenue Code of 1986 (or any successor legislation thereto), as amended from time to time.
"Collateral" means the "Pledged Collateral," as defined in each of the Pledge Agreements, and any and all other collateral securing the obligations of the Company, the Guarantors, or any other obligor under the Securities or under this Indenture pursuant to any other Collateral Document.
"Collateral Documents" means the Pledge Agreements and any
other document executed and delivered by the Company, a
Guarantor, or any other obligor under the Securities or
under this Indenture granting a Lien on any of its property to
secure payment of the obligations of the Company, the Guarantors,
or any other obligor under the Securities or under this
Indenture,
which document shall be in form and substance satisfactory to the
Trustee.
"Company" means EMCOR Group, Inc. (formerly known as JWP INC.), a Delaware corporation, and its successors.
"Comstock" means, so long as it is a Subsidiary of the Company, Comstock Canada, Ltd., a Canadian limited partnership, and its successors.
"Consolidated Cash Interest Expense" means, for any period,
total accrued interest expense (including the interest component
of Capital Lease obligations) of the Operating
Companies on a consolidated basis during such period, including,
without limitation, all commissions, discounts and other fees and
charges (to the extent such commissions, fees and charges are
included in "interest" under GAAP) owed with respect to letters
of credit, and net costs under interest rate contracts, but
excluding, however, (a) amortization of debt discount, (b)
interest paid
in property other than cash, (c) any other interest expense not
payable in cash, (d) interest on $16,000,000 principal amount of
the Subordinated Notes, and (e) commitment fees payable under the
Revolving Credit Agreement and the Dynalectric Revolving Credit
Agreement, all as determined in conformity with GAAP.
"Consolidated EBIT" for any period means Consolidated Net
Income (Loss) for such period increased (to the extent already
deducted therefrom) by the sum, on a consolidated basis,
of (a) all income tax expense for such period to the extent
included in Consolidated Net Income (Loss), and (b) all interest
expense for such period to the extent included in Consolidated
Net
Income (Loss).
"Consolidated Fixed Charge Coverage Ratio" at any date means
the ratio of (a) Consolidated EBIT plus depreciation and
amortization of the Operating Companies less any Capital
Expenditures of the Operating Companies for the applicable
quarters immediately preceding such determination date (the
"Reference Period") to (b) the sum of (i) Consolidated Cash
Interest
Expense incurred by the Operating Companies calculated on a pro
forma basis for the Reference Period; (ii) (A) for the Reference
Period from January 1, 1995 through December 31, 1995,
stated interest on the Securities, the Software House Notes and
the Subordinated Notes, excluding interest on $16,000,000
principal amount of the Subordinated Notes, accreted during the
period
from October 1, 1995 through December 31, 1995, (B) for the
Reference Period from April 1, 1995 through March 31, 1996,
stated interest on the Securities, the Software House Notes and
the
Subordinated Notes, excluding interest on $16,000,000 principal
amount of the Subordinated Notes, accreted from October 1, 1995
through March 31, 1996, (C) for the Reference Period from July
1, 1995 through June 30, 1996, stated interest on the Securities,
the Software House Notes and the Subordinated Notes, excluding
interest on $16,000,000 principal amount of the Subordinated
Notes, accreted from October 1, 1995 through June 30, 1996, (D)
for the Reference Period from October 1, 1995 through September
30, 1996, and for each Reference Period thereafter, stated
interest on the Securities, the Software House Notes and the
Subordinated Notes, excluding interest on $16,000,000 principal
amount of the Subordinated Notes, accreted during such Reference
Period; and (iii) cash dividends (including on any preferred
stock) paid by the Operating Companies during the Reference
Period to a Person other than an Operating Company. For purposes
of this definition, the factors set forth in (a) and (b) above
(other than cash dividends) shall be calculated after giving
effect on a pro forma basis (as if the same occurred at the
beginning of the
Reference Period) to (i) the acquisition by any Operating Company
of any Person which, as a result of such acquisition, becomes a
wholly-owned Subsidiary or the acquisition of assets constituting
a business by any Operating Company during such Reference Period
and (ii) any Asset Sales by an Operating Company (excluding gains
or losses recognized from such Asset Sales) occurring
during the Reference Period. In calculating cash interest
expense for purposes of determining the denominator of this
ratio, interest on Indebtedness of any Operating Company
determined on
a fluctuating basis, to the extent such interest is covered by an
agreement relating to an interest swap obligation, shall be
deemed to accrue at the rate per annum resulting after giving
effect to the
operation of such agreement.
"Consolidated Net Income (Loss)" means, for any period, the
aggregate of the net income (loss) of the Operating Companies for
such period, determined on a consolidated basis in
accordance with GAAP, provided that there shall be excluded from
such net income (to the extent otherwise included therein) (a)
any gain or loss realized upon the sale or other disposition
(including without limitation dispositions pursuant to
sale-leaseback transactions and costs related to closings of
operations, if incurred) of any real property or equipment of the
Operating
Companies which is not sold or otherwise disposed of in the
ordinary course of business or of any Capital Stock of any Person
owned by any Operating Company; (b) the net income (loss) of any
such Person accounted for by the equity method of accounting
(other than a venture permitted under Section 4.14(k)), except to
the extent of the amount of dividends or distributions paid to an
Operating Company; and (c) the net income (loss) of any other
Person acquired by any Operating Company in a pooling of
interests transaction for any period prior to the date of such
acquisition.
"Consolidated Tangible Net Worth" means, as at any date of determination, the consolidated tangible net worth of the Operating Companies, determined on a consolidated basis in accordance with GAAP.
"Contractor" means any Domestic MES Subsidiary as of the time of any determination of Seaboard Hard Dollar Backlog.
"Contractor Hard Dollar Backlog" means, for any Contractor that is the subject of a Contractor Sale, the aggregate contract price of all Seaboard bonded contracts of such Contractor (including contracts awarded but on account of which work has not yet commenced) less the amounts earned on account of such contracts, calculated on a percent of completion basis as of the month ended prior to the date of such Contractor Sale and in accordance with GAAP.
"Contractor Sale" means any sale or other disposition, pursuant to one transaction or a series of transactions, of all or substantially all of the Capital Stock or assets of a Contractor.
"Contractual Obligation" of any Person means any obligation,
agreement, undertaking or similar provision of any security
issued by such Person or of any agreement, undertaking,
contract, lease, indenture, mortgage, deed of trust or other
instrument (excluding a Security or this Indenture) to which such
Person is a party or by which it or any of its property is bound
or to
which any of its properties is subject, and includes, without
limitation, such Person's Material Contractual Obligations.
"Corporate Trust Office" shall be at the address of the Trustee specified in Section 12.02 or such other address as the Trustee may give notice of to the Company.
"Current Assets" means, at any date, the total consolidated current assets of the Operating Companies at such date, determined in conformity with GAAP.
"Current Liabilities" means, at any date, the total consolidated current liabilities of the Operating Companies at such date, determined in conformity with GAAP.
"Custodian" has the meaning set forth in Section 6.01(b).
"Default" means any event that is, or after notice or passage of time or both would be, an Event of Default.
"Defender" means (a) so long as it is a Subsidiary of the Company, Defender Indemnity Ltd., a Vermont corporation, and its successors, and (b) any other Domestic MES Subsidiary conducting insurance related services for the Company and its Subsidiaries similar to those conducted by Defender Indemnity Ltd.
"Disqualified Stock" means any Capital Stock which, by its
terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the
happening of
any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option
of the holder thereof, in whole or in part, on or prior to the
maturity date of the Securities.
"Domestic MES Subsidiaries" means each of the Subsidiaries of MES other than the Foreign MES Subsidiaries.
"Dynalectric Company" means, for so long as it is a Subsidiary of the Company, each of the following: Dynalectric Company, Dynalectric Company of Nevada, Inc., Dyn Specialty Contracting, Inc., Contra Costa Electric, Inc., JWP Systems/Kirkwood Electric Company, Inc., B&B Contracting and Supply Company, and their respective successors.
"Dynalectric Revolving Credit Agreement" means the Credit Agreement, dated as of December 14, 1995, by and among the Company, the Dynalectric Companies named therein and the other parties thereto and their respective successors and assigns, and any refinancings, replacements or renewals thereof permitted by Section 4.09.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.
"ERISA Affiliate" means any trade or business (whether or not incorporated) that is a member of a controlled group of which the Company or any of its Subsidiaries is a member or that is under common control with the Company or any of its Subsidiaries within the meaning of Section 414 of the Code and the regulations promulgated and rulings issued thereunder.
"ERISA Event" means (a) a Reportable Event, with respect to
a Title IV Plan or a Multiemployer Plan (other than a Reportable
Event not subject to the provision for 30-day notice to
the PBGC), or an event described in Section 4068 of ERISA; (b)
the withdrawal of the Company or any of its Subsidiaries or any
ERISA Affiliate from a Title IV Plan subject to Section 4063 of
ERISA during a plan year in which it was a "substantial
employer," as such term is defined in Section 4001(a)(2) of
ERISA, or the incurrence of liability by the Company or any of
its Subsidiaries
or any ERISA Affiliate under Section 4064 of ERISA upon the
termination of a Title IV Plan subject to Section 4063 of ERISA;
(c) the complete or partial withdrawal of the Company, any of its
Subsidiaries or any ERISA Affiliate from any Multiemployer Plan;
(d) the filing of a notice of intent to terminate a Title IV Plan
pursuant to Section 4041(a)(2) of ERISA or the treatment of a
plan amendment as a termination under Section 4041 of ERISA; (e)
the institution of proceedings to terminate a Title IV Plan or
Multiemployer Plan by the PBGC under Title IV of ERISA; (f)
the failure to make required contributions to a Qualified Plan;
or (g) any other event or condition which might constitute
grounds under Section 4042 of ERISA for the termination of, or
the
appointment of a trustee to administer, any Title IV Plan or
Multiemployer Plan, other than PBGC premiums due but not
delinquent under Section 4007 of ERISA.
"Event of Default" has the meaning set forth in Section 6.01(a).
"Excess Cash" means, at any date of determination, (a) if
the Seaboard Hard Dollar Backlog is less than $280,000,000, the
excess, if any, of Available Cash over $40,000,000, and (b) if
the Seaboard Hard Dollar Backlog equals or exceeds $280,000,000,
(i) the sum of the balances, from the financial statements
reflecting all necessary adjustments and accruals required by
Generally
Accepted Accounting Principles, of (A) cash and cash equivalents
of the Domestic MES Subsidiaries and the Company other than cash
restricted by agreement or contract (but including such cash
restricted by agreement or contract under contracts for which
there is an equal and offsetting account payable included in (ii)
(A) of this definition), (B) accounts receivable of the Domestic
MES
Subsidiaries outstanding less than 90 days, excluding any amounts
specifically reserved for and reduced for a pro-rata portion of
general accounts receivable reserves, including any reserves
maintained by the Company, (C) costs in excess of billings for
the Domestic MES Subsidiaries, net of reserves, including any
reserves maintained by the Company, and (D) (x) $20,000,000 at
any
time that the Seaboard Hard Dollar Backlog is greater than or
equal to $280,000,000 but less than $300,000,000, (y) $10,000,000
at any time that the Seaboard Hard Dollar Backlog is greater than
or equal to $300,000,000 but less than $320,000,000, and (z) zero
if the Seaboard Hard Dollar Backlog is equal to or greater than
$320,000,000; less (ii) the sum of (A) all current liabilities of
the
Domestic MES Subsidiaries and the Company (but not including any
liability on account of any Funded Indebtedness), and (B) any
balance outstanding under any working capital revolver or lines
of credit of or guaranteed by the Domestic MES Subsidiaries or
the Company, to the extent that such balance is not already
classified as a current liability under clause (ii)(A) above. A
positive
result of this calculation constitutes Excess Cash. For purposes
of determining Excess Cash, any date of determination shall be at
a financial reporting quarter end.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Foreign MES Subsidiary" means Comstock, each U.K. Subsidiary, each Middle-East Subsidiary, each Malaysian Subsidiary, U2, and any other Subsidiary of any MES Company permitted hereunder, incorporated and organized in a jurisdiction other than the United States of America, and each of their respective Subsidiaries.
"Funded Indebtedness" of any Person means the sum, without
duplication, of (a) total consolidated long-term Indebtedness of
such Person as shown on such Person's consolidated bal-
ance sheet (including current maturities of long-term
Indebtedness and excluding Indebtedness outstanding under the
Revolving Credit Agreement), (b) total Capital Lease Obligations
of such
Person reported as long-term Indebtedness on such Person's
consolidated balance sheet, and (c) Guaranties by such Person of
the Funded Indebtedness of others.
"GAAP" means Generally Accepted Accounting Principles as in effect on the Issue Date.
"Generally Accepted Accounting Principles" means generally
accepted accounting principles in the United States of America as
in effect from time to time set forth in the opinions
and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and the
statements and pronouncements of the Financial Accounting
Standards Board, or in such other statements by such other entity
as may be in general use by significant segments of the
accounting profession, which are applicable to the circumstances
as of the
date of determination.
"Guarantors" means, collectively, MES and SellCo and their respective successors, and "Guarantor" means either of the Guarantors individually.
"Guaranty" or "guaranty" means, as applied to any
obligation, (a) a guaranty (other than (i) by endorsement of
negotiable instruments for collection in the ordinary course of
business,
and (ii) a Performance Guaranty), direct or indirect, in any
manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of any part or all
of such
obligation including, without limitation, the Guaranty pursuant
to Article 11; and (b) an agreement, direct or indirect,
contingent or otherwise, the practical effect of which is to
assure in any way
the payment or performance (or payment of damages in the event of
non-performance) of any part or all of such obligation,
including, without limiting the foregoing, the payment of amounts
drawn down by letters of credit, but excluding any Performance
Guaranty. The amount of a guaranty shall be deemed to be the
maximum amount of the obligation guarantied for which the
guarantor could be held liable under such guaranty.
"Holder" means a Person in whose name a Security is registered.
"Imprest Accounts" means bank and other deposit accounts maintained by the Company or any of its Subsidiaries which are subject to Liens of the type described in clause (f) of the definition of the term "Permitted Liens".
"Indebtedness" means, when used with reference to any
Person, any indebtedness, contingent or otherwise, in respect of
borrowed money (whether or not the recourse of the lender is
to the whole of the assets of such Person or only to a portion
thereof) or evidenced by bonds (other than bonds constituting
Performance Guaranties), notes, debentures or similar instruments
or
obligations to provide cash collateral for or to cover or to
reimburse for drawings under letters of credit or representing
the balance deferred and unpaid of the purchase price of any
property
(except any such balance that constitutes a trade payable), and
shall also include, without limitation (but without duplication),
(a) any Capital Lease Obligations of such Person, (b) (to the
extent
not otherwise included in this definition) Guaranties of items
which would be included within this definition (regardless of
whether such items would appear upon such balance sheet), and (c)
all
Indebtedness referred to above secured by (or for which the
holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in property
(including,
without limitation, accounts and general intangibles) owned by
such Person even though such Person has not assumed or become
liable for the payment of such Indebtedness, provided that for
purposes of computing Indebtedness outstanding at any time, such
items shall be excluded to the extent that they would otherwise
be eliminated as inter-company items in consolidation.
"Indenture" means this Indenture as amended, supplemented or otherwise modified from time to time.
"Insignificant Subsidiary" means, at any date of
determination, any Subsidiary of SellCo that (a) has not for the
90-day period ending on such date carried on any active trade or
business or owned the Capital Stock of any Subsidiary that,
during such period, carried on any active trade or business, and
(b) has total liabilities (including contingent liabilities
estimated by the
Board of Directors of such Subsidiary in good faith) that exceed
its total assets.
"Insurance Related Letter of Credit Obligations" means, at
any time, the sum of (a) the maximum aggregate amount then
available to be drawn under all Insurance Related Letters
of Credit outstanding at such time (assuming the occurrence of,
and compliance with, all conditions for drawing) plus (b) the
aggregate amount of unpaid reimbursement obligations resulting
from
drawings under Insurance Related Letters of Credit.
"Insurance Related Letters of Credit" means standby letters of credit issued for the account of Defender or the Company in the ordinary course of business to secure its payment obligations under workers' compensation and liability insurance policies underwritten by Defender or such other underwriter in respect of the Company and its Subsidiaries and their respective employees and businesses.
"Intercreditor Agreement" means the Intercreditor Agreement, dated as of the Issue Date and substantially in the form of Exhibit C hereto, among the Trustee, the Software House Indenture Trustee, the SellCo Subordinated Indenture Trustee, the Company, MES and SellCo, as the same may be amended, supplemented or otherwise modified from time to time.
"Interest Deferral Securities" has the meaning set forth in
Section 2.02(d).
"Investment" means, when used with reference to any Person,
any direct or indirect advances, loans or other extensions of
credit or capital contributions by such Person to (by means of
transfers of property to others or payments for property or
services for the account or use of others, or otherwise), or
purchases or acquisitions by such Person of Capital Stock, bonds,
notes,
debentures or other securities or instruments issued by, any
other Person.
"IRS" means the Internal Revenue Service, or any successor thereto.
"Issue Date" means December 15, 1994.
"JWS" means, so long as it is a Subsidiary of the Company, Jamaica Water Supply Company, a New York corporation, and its successors.
"JWSC" means, (a) so long as it is a Subsidiary of the Company, Jamaica Water Securities Corp., a New York corporation, and its successors, and (b), so long as it is a Subsidiary of the Company, the immediate parent corporation, if any, of Jamaica Water Securities Corp., and its successors.
"Legal Holiday" has the meaning set forth in Section 12.07.
"Lien" means any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, security
interest, lien, charge, encumbrance or other preferential
arrangement of any
kind intended to assure payment of any Indebtedness or other
obligation or to assure any performance by any Person (including
any conditional sale or other title retention agreement, any
lease
in the nature thereof, and any agreement to give any security
interest).
"Malaysian Subsidiaries" means, so long as such corporation is a Subsidiary of the Company, (a) the corporation to be organized by the Company or any Subsidiary of the Company in Malaysia in connection with the operation and maintenance of power plants in Malaysia, and (b) if organized by a Subsidiary of the Company, the immediate parent corporation of such corporation so long as the principal asset of such parent corporation is such corporation, each of such corporation's Subsidiaries, and their respective successors.
"Management Stock Option Plan" means the Company's Management Stock Option Plan, dated as of the Issue Date.
"Material Adverse Change" means a material adverse change in
any of (a) the condition (financial or otherwise), business,
performance, prospects, operations or properties of the
Company or of the Operating Companies taken as one enterprise;
(b) the legality, validity or enforceability of this Indenture,
the Securities, any Collateral Document, the Intercreditor
Agreement
or any other document executed in connection with any of the
foregoing; (c) the perfection or priority of the Liens granted
pursuant to any Collateral Document; (d) the ability of the
Company
to repay its obligations under the Securities or this Indenture
or to perform its obligations under the Securities, this
Indenture, any Collateral Document or the Intercreditor
Agreement; or (e) the
rights and remedies of the Trustee or the Holders of Securities
under the Securities, this Indenture, any Collateral Document or
the Intercreditor Agreement.
"Material Adverse Effect" means an effect that results in or causes, or has a reasonable likelihood of resulting in or causing, a Material Adverse Change.
"Material Contractual Obligation" means, in respect of any Person, (a) the articles of incorporation, bylaws, partnership agreement, or other organizational and governing documents of such Person; (b) in the case of the Company, the Software House Notes, the Software House Indenture, the Software House Senior Pledge Agreement, the Software House Subordinated Pledge Agreement, each of the other "Collateral Documents" (as defined in the Software House Indenture) to which it is a party, the Subordinated Notes, the Subordinated Note Indenture, the Management Stock Option Plan, the Revolving Credit Agreement and the Dynalectric Revolving Credit Agreement; (c) in the case of SellCo, the SellCo Subordinated Notes, the SellCo Subordinated Indenture, the Software House Notes, the Software House Indenture, the Software House SellCo Pledge Agreement and each of the other "Collateral Documents" (as defined in the SellCo Subordinated Indenture) to which it is a party; (d) in the case of MES, the Revolving Credit Agreement, the Software House Notes, the Software House Indenture, the Subordinated Notes and the Subordinated Note Indenture; and (e) in the case of the Dynalectric Companies, the Dynalectric Revolving Credit Agreement.
"MES" means MES Holdings Corporation, a Delaware corporation, and its successors.
"MES Companies" means MES and each of its Subsidiaries.
"Middle-East Subsidiaries" means, so long as such Persons are Subsidiaries of the Company, Lunar Drake & Scull (UAE), a United Arab Emirates corporation, Drake & Scull Assarain, an Omani corporation, Drake & Scull (Cayman Islands) Ltd., a Cayman Islands corporation, JWP-Nesma Ltd., a Saudi Arabia corporation, JWP (Cayman Islands), Ltd., a Cayman Islands corporation and their respective successors.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which the Company or any of its Subsidiaries or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five years made or accrued an obligation to make contributions on behalf of participants who are or were employed by any of them.
"Net Cash Proceeds" means, when used with reference to any
Asset Sale or series of related Asset Sales effected on or after
December 1, 1993 (other than an Asset Sale consisting of
the assets of any MES Company or of any Dynalectric Company or
the Capital Stock of Dyn Specialty Contracting, Inc.), (a) the
aggregate amount of the cash portion of the purchase price, and
(b) all other cash consideration (including, without limitation,
any cash payments received by way of deferred payment of
principal pursuant to a note and any interest thereon,
receivable,
contingent payment arrangement, dividend, distribution or
otherwise, but only as and when received) received after the
Issue Date directly or indirectly by the Company or any of its
Subsidiaries
in respect of an Asset Sale, which cash consideration equals or
exceeds $250,000, after deducting, without duplication (i) sales,
transfer and similar taxes and reasonable out-of-pocket expenses
and
fees (including reasonable legal, accounting and brokerage fees
and expenses) incurred by the Company or such Subsidiary (which
taxes, expenses and fees are classified as such in accordance
with
Generally Accepted Accounting Principles) in connection with such
sale; (ii) employee severance costs incurred in connection with
the sale of any business constituting an Asset Sale; (iii) fixed,
determined liabilities in accordance with Generally Accepted
Accounting Principles retained by the Company or such Subsidiary
in connection with such Asset Sale including amounts payable in
respect of any insurance matters or employee benefit matters;
(iv) reserves established in respect of contingent liabilities in
accordance with Generally Accepted Accounting Principles retained
by
the Company or such Subsidiary in connection with such Asset
Sale; (v) customary costs incurred in connection with the closing
of a business constituting or arising in connection with such
Asset
Sale; (vi) reserves (in an amount established by the Company's
Board of Directors in good faith after due consideration of all
relevant facts and circumstances) maintained by the Company in
connection with any unresolved legal proceedings instituted by
the holders of the Company's Warrants of Participation in respect
thereof, and (vii) reserves maintained in accordance with the
Bankruptcy Plan by the Company or any disbursing agent therefor,
in respect of disputed unsecured claims against the Company;
provided, however, that with respect to the sale of the Capital
Stock or assets of one or more of the Water Companies, an
aggregate amount not in excess of $15,000,000, which is either
applied to the repayment of Indebtedness outstanding under and
pursuant to the Revolving Credit Agreement or deposited in a cash
collateral account pursuant to the provisions thereof, shall not
be considered "Net Cash Proceeds" hereunder.
"Net Debt Offering Proceeds" means the principal amount of Indebtedness of the Company (other than Indebtedness incurred under or evidenced by the Securities, the Software House Notes, the SellCo Subordinated Notes, the Subordinated Notes, the Revolving Credit Agreement, the Dynalectric Revolving Credit Agreement, and the SellCo Intercompany Note), net of the amount of (a) reasonable brokers' and advisors' fees and commissions payable in connection with such Indebtedness; (b) all federal, state and local taxes payable as a direct consequence of such Indebtedness; (c) the reasonable fees and expenses directly attributable to the incurrence of such Indebtedness, to the extent not included in clause (a); and (d) reserves maintained in accordance with the Bankruptcy Plan by the Company or any disbursing agent therefor, in respect of disputed unsecured claims against the Company.
"Net Equity Offering Proceeds" means the gross cash proceeds received by the Company from the issuance, subsequent to the Issue Date, of the Company's Capital Stock (upon the exercise of options, warrants or otherwise), other than the issuance of the Company's common stock pursuant to the Management Stock Option Plan, less (a) all reasonable out-of-pocket expenses (including reasonable legal, accounting and advisor's fees and expenses), discounts and commissions incurred, and all federal, state and local taxes assessed, in connection therewith; and (b) reserves maintained in accordance with the Bankruptcy Plan by the Company or any disbursing agent therefor, in respect of disputed unsecured claims against the Company.
"Nevada Subsidiaries" means Dynalectric Company of Nevada and Hansen Mechanical Contractors, Inc., each a Nevada corporation, and their respective Subsidiaries and successors.
"Obligors" means, collectively, the Company and the Guarantors, and "Obligor" means any of the Obligors singly.
"OECD" means the Organization for Economic Cooperation and Development.
"Offer Price" has the meaning set forth in Section 4.18(a).
"Officer" means the Chairman of the Board, the President,
the Chief Financial Officer, the Treasurer, the Assistant
Treasurer, any Vice President, the Secretary, the Assistant
Secretary
or the Controller of an obligor, as the context requires.
"Officers' Certificate" means a certificate signed by two Officers of the Company, delivered to the Trustee, and which shall include the statements set forth in Section 12.05.
"Operating Companies" means the Company, individually, each of the MES Companies and each of the Dynalectric Companies.
"Opinion of Counsel" means a written opinion from independent legal counsel who is acceptable to the Trustee. The counsel may not be an employee of, or counsel to, the Company or the Trustee.
"Paying Agent" has the meaning set forth in Section 2.03(a).
"Payment Securities" means the Securities issued under this Indenture on the Issue Date and those issued after the Issue Date pursuant to Section 3.F.3(i) of the Bankruptcy Plan.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto.
"Pension Plan" means an employee pension benefit plan, as
defined in Section 3(2) of ERISA (other than a Multiemployer
Plan), which is not an individual account plan as defined in
Section 3(34) of ERISA, and which the Company, any of its
Subsidiaries or, if a Title IV Plan, any ERISA Affiliate
maintains, contributes to or has an obligation to contribute to
on behalf of
participants who are or were employed by any of them.
"Performance Guaranties" means, in respect of the Company or
any of its Subsidiaries, contingent obligations arising from the
issuance of performance guaranties, assurances,
indemnities, bonds, letters of credit or similar agreements in
the ordinary course of business in respect of the contracts
(other than for borrowed money) of the Company, any of the
Subsidiaries
of the Company, or Unique Construction for the benefit of surety
companies or for the benefit of others to induce such others to
forgo the issuance of a surety bond in their favor.
"Permitted Investments" means (a) securities issued or
directly and fully guarantied or insured by the United States of
America or any agency or instrumentality thereof (provided that
the full faith and credit of the United States of America is
pledged in support thereof) with a maturity not more than one
year from the date of acquisition; (b) time deposits and
certificates of
deposit of any domestic commercial bank of recognized standing
having capital and surplus of at least $500,000,000 or a
commercial bank organized under the laws of any other country
that is a
member of the OECD and having total assets of at least
$500,000,000, in either case, the outstanding short-term
securities of which are rated at least A-1 by Standard & Poor's
Corporation or at
least P-1 by Moody's Investors Service, Inc., or carry an
equivalent rating by a nationally recognized rating agency if
both of the two named rating agencies cease publishing ratings of
investments,
which time deposits or certificates of deposit mature not more
than one year from the date of acquisition; (c) commercial paper
and demand notes rated at least A-1 or the equivalent thereof by
Standard & Poor's Corporation or at least P-1 or the equivalent
thereof by Moody's Investors Service, Inc. and maturing within
one year after the date of acquisition; and (d) debt securities
issued
by any State of the United States of America or any political
subdivision thereof rated at least A- or the equivalent thereof
by Standard & Poor's Corporation or A3 or the equivalent thereof
by
Moody's Investors Service, Inc. and maturing within one year
after the date of acquisition.
"Permitted Liens" means, with respect to any Person, (a)
pledges or deposits by such Person under workmen's compensation
laws, unemployment insurance laws or similar legislation,
or good faith deposits in connection with bids, tenders,
contracts (other than for borrowed money) or leases to which such
Person is a party, or deposits to secure public or statutory
obligations
of such Person or deposits of cash or United States Government
bonds to secure surety or appeal bonds to which such Person is a
party, or deposits as security for contested taxes or import
duties
or for the payment of rent; (b) Liens arising by operation of law
in favor of materialmen, mechanics, warehousemen, carriers,
lessors, bankers or other similar Persons incurred in the
ordinary
course of business which secure its obligations (other than for
borrowed money) to such Person; provided, however, that (i) the
Person incurring such Lien is not in default with respect to such
payment obligation to such other Person, or (ii) the Person
incurring such Lien is in good faith and by appropriate
proceedings diligently contesting such obligation and adequate
provision is made
for the payment thereof in accordance with Generally Accepted
Accounting Principles; (c) Liens for taxes, assessments or other
governmental charges not yet subject to penalties for non-payment
or which are being contested in good faith and by appropriate
proceedings, if adequate reserves, as may be required by
Generally Accepted Accounting Principles, shall have been made
therefor;
(d) Liens in favor of issuers of surety bonds issued pursuant to
the request of and for the account of such Person or any Person
guarantying such surety bonds in the ordinary course of its
business;
(e) survey exceptions, encumbrances, easements or reservations
of, or rights of others for, rights of way, sewers, electric
lines, telegraph and telephone lines and other similar purposes,
or zoning
or other restrictions as to the use of real properties or Liens
incidental to the conduct of the business of such Person or to
the ownership of its properties; and (f) Liens consisting of
restrictions
regarding the disbursement or withdrawal of funds deposited by a
Subsidiary of the Company in bank accounts maintained by such
Subsidiary in the ordinary course of business consistent with
past
practice, which accounts are (i) maintained in connection with
specific construction projects or contracts from which payments
and disbursements with respect to such projects or contracts are
to
be made or (ii) required by customers of such Subsidiary to be
excluded from the Company's or such Subsidiary's cash management
system.
"Person" means any individual, corporation, limited
liability company, partnership, joint venture, trust,
unincorporated organization or government or any agency or
political subdivision
thereof.
"Plan" means an employee benefit plan, as defined in Section 3(3) of ERISA, which the Company or any of its Subsidiaries maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them.
"Pledge Agreements" means the Series A Senior Pledge Agreement, the Series A Subordinated Pledge Agreement and the Series A SellCo Pledge Agreement.
The "principal" of a debt security means the principal of the security plus the premium, if any, on the security.
"Qualified Plan" means an employee pension benefit plan, as defined in Section 3(2) of ERISA, which is intended to be tax-qualified under Section 401(a) of the Code, and which the Company, any of its Subsidiaries or any ERISA Affiliate maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them.
"Quarter" means a fiscal quarterly period of the Company or any of its Subsidiaries.
"Registrar" has the meaning set forth in Section 2.03(a).
"Reportable Event" means any of the events described in
Section 4043(b)(1), (2), (3), (5), (6), (8) or (9) of ERISA.
"Restricted Debt Prepayment" means any purchase, redemption,
defeasance (including, but not limited to, in-substance or legal
defeasance), prepayment, other acquisition or re-
tirement for value, or payment (other than (a) a required
scheduled or mandatory payment or redemption or required payment
on demand; (b) payments under the Revolving Credit Agreement,
the Dynalectric Revolving Credit Agreement or other revolving
credit facilities of the Operating Companies permitted herein;
(c) payments made by a Subsidiary of the Company to the Company
or another Subsidiary of the Company in respect of intercompany
Indebtedness permitted hereunder; or (d) payments permitted under
Section 4.09(xxxi)), directly or indirectly, by the Company
or any of its Subsidiaries, of Indebtedness of the Company or any
of its Subsidiaries, other than in respect of the Securities.
"Restricted Investment" means any direct or indirect Investment by the Company or any Subsidiary of the Company in any Affiliate of the Company, other than investments permitted pursuant to Section 4.14.
"Restricted Payment" means any (a) Stock Payment by the
Company or a Subsidiary of the Company, (b) Restricted
Investment, or (c) Restricted Debt Prepayment. Notwithstanding
the foregoing, Restricted Payments shall not include tax payments
by a Subsidiary of the Company to the Company or to another
Subsidiary of the Company that is the parent entity of such
Subsidiary, or payments of dividends or other distributions by a
Subsidiary of the Company so long as such dividends or
distributions are made pro rata to all shareholders of the same
class in
respect of which such dividend or distribution is made.
"Revolving Credit Agreement" means the Credit Agreement, dated as of December 14, 1994, by and among the Company, MES, and the other parties thereto and their respective successors and assigns, and any refinancings, replacements or renewals thereof permitted by Section 4.09.
"Rohr Indebtedness" means Indebtedness of University Cogeneration, Inc. owed to Connecticut General Insurance Company and outstanding on the Issue Date.
"Seaboard" means Seaboard Surety Company.
"Seaboard Hard Dollar Backlog" means the aggregate contract price of all Seaboard bonded contracts of Contractors (including contracts awarded but on account of which work has not yet commenced), less the amounts earned on account of such contracts, calculated on a percent of completion basis in accordance with Generally Accepted Accounting Principles less the Contractor Hard Dollar Backlog.
"Sea Cliff" means, so long as it is a Subsidiary of the Company, Sea Cliff Water Company, a New York corporation, and its successors.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Security" means any Payment Security or any Interest Deferral Security.
"SellCo" means SellCo Corporation, a Delaware corporation, and its successors.
"SellCo Companies" means SellCo, each of the Subsidiaries of SellCo and each of the Software House Subsidiaries.
"SellCo Intercompany Note" means the promissory note of the Company in favor of SellCo, dated the Issue Date, in an aggregate principal amount of $5,464,133.78, which promissory note shall be payable after the payment in full of the Securities and prior to the date on which the SellCo Subordinated Notes are redeemed and canceled or deemed to have been redeemed and canceled pursuant to Section 3.09 of the SellCo Subordinated Indenture, but in no event earlier than the fifth anniversary of the "Issue Date" (as defined in the SellCo Subordinated Indenture).
"SellCo Subordinated Indenture" means the Indenture, dated the Issue Date, between SellCo, as issuer and Shawmut Bank Connecticut, National Association, as trustee, pursuant to which SellCo issued the SellCo Subordinated Notes.
"SellCo Subordinated Indenture Trustee" means the "Trustee," as defined in the SellCo Subordinated Indenture.
"SellCo Subordinated Notes" means SellCo's 12% Subordinated Contingent Payment Notes, Due 2004, issued by SellCo pursuant to the Sellco Subordinated Indenture in an aggregate principal amount not exceeding the sum of $46,000,000 plus the Additional Interest Amount (as defined in the Bankruptcy Plan) in respect thereof, together with any pay-in-kind interest accrued thereon pursuant to the terms thereof.
"SellCo Subordinated Pledge Agreement" means the Pledge Agreement, dated the Issue Date, pursuant to which the "Pledged Collateral," as defined therein, shall be pledged by SellCo to secure the payment of SellCo's obligations under the SellCo Subordinated Notes and the SellCo Subordinated Indenture, as the same may be amended, supplemented or otherwise modified from time to time.
"Series A SellCo Pledge Agreement" means the Pledge Agreement, dated the Issue Date and substantially in the form of Exhibit B-3 hereto, pursuant to which the "Pledged Collateral," as defined therein, shall be pledged by SellCo to secure the payment of SellCo's obligations under the Securities and this Indenture, as the same may be amended, supplemented or otherwise modified from time to time.
"Series A Senior Pledge Agreement" means the Pledge Agreement, dated the Issue Date and substantially in the form of Exhibit B-1 hereto, pursuant to which the "Pledged Collateral," as defined therein, shall be pledged by the Company to secure the payment of the Company's obligations under the Securities and this Indenture, as the same may be amended, supplemented or otherwise modified from time to time.
"Series A Subordinated Pledge Agreement" means the Pledge Agreement, dated the Issue Date and substantially in the form of Exhibit B-2 hereto, pursuant to which the "Pledged Collateral," as defined therein, shall be pledged by the Company to secure the payment of the Company's obligations under the Securities and this Indenture, as the same may be amended, supplemented or otherwise modified from time to time.
"Software House Indenture" means the Indenture, dated the Issue Date, among the Company, as issuer, MES and SellCo, as guarantors, and United States Trust Company of New York, as trustee, pursuant to which the Company issued the Software House Notes.
"Software House Indenture Trustee" means the "Trustee," as defined in the Software House Indenture.
"Software House Notes" means the Company's 7% Senior Secured Notes, Series B, Due 1997, issued by the Company pursuant to the Software House Indenture in an aggregate principal amount not exceeding the sum of $11,357,000 plus the Additional Interest Amount (as defined in the Bankruptcy Plan) in respect thereof, together with any pay-in-kind interest accrued thereon pursuant to the terms thereof.
"Software House SellCo Pledge Agreement" means the Pledge Agreement, dated the Issue Date, pursuant to which the "Pledged Collateral," as defined therein, shall be pledged by SellCo to secure the payment of SellCo's obligations under the Software House Notes and the Software House Indenture, as the same may be amended, supplemented or otherwise modified from time to time.
"Software House Senior Pledge Agreement" means the Pledge Agreement, dated the Issue Date, pursuant to which the "Pledged Collateral," as defined therein, shall be pledged by the Company to secure the payment of the Company's obligations under the Software House Notes and the Software House Indenture, as the same may be amended, supplemented or otherwise modified from time to time.
"Software House Subordinated Pledge Agreement" means the Pledge Agreement, dated the Issue Date, pursuant to which the "Pledged Collateral," as defined therein, shall be pledged by the Company to secure the payment of the Company's obligations under the Software House Notes and the Software House Indenture, as the same may be amended, supplemented or otherwise modified from time to time.
"Software House Subsidiaries" means, so long as such Persons
are Subsidiaries of the Company, JWP/MEC Corp., a Pennsylvania
corporation, University Energy Services of California
Inc., a California corporation (and, if organized by the Company,
a 100% owned direct Subsidiary of the Company, so long as (a) the
principal asset of such Subsidiary is the Capital Stock of
University Energy Services of California Inc., and (b) the
Capital Stock of such Subsidiary is pledged to the Trustee under
the Series A Subordinated Pledge Agreement), JWP Pacific
International
Inc., a Delaware corporation, JWP Telecom, Inc., a Delaware
corporation, and JWP Energy Products, Inc., an Idaho corporation,
each of the Subsidiaries of such corporations, and their
respective
successors.
"Specified Holder" means a Holder to which one or more Securities is issued on the Issue Date.
"Stock Payment" means:
(a) with respect to a Person, any dividend, either in cash or in property (except dividends payable in common stock of such Person), on, or the making by such Person of any other distribution in respect of, its Capital Stock, now or hereafter outstanding, or the redemption, repurchase, retirement or other acquisition for value by such Person, directly or indirectly, of its Capital Stock or any warrants, rights or options to purchase or acquire shares of any class of its Capital Stock, now or hereafter outstanding; and
(b) with respect to any Subsidiary, any such dividend (except dividends payable in common stock of such Subsidiary) or distribution in respect of, or any such redemption, repurchase, retirement or other acquisition of, its Capital Stock or the Capital Stock of any Person of which it is a Subsidiary or any warrants, rights, or options to purchase or acquire shares of any class of its Capital Stock or the Capital Stock of any Person of which it is a Subsidiary, now or hereafter outstanding.
"Subordinated Notes" means the Company's 11% Series C Notes,
Due 2001, issued by the Company pursuant to the Subordinated Note
Indenture in an aggregate principal amount not
exceeding the sum of $60,000,000 plus the Additional Interest
Amount (as defined in Bankruptcy Plan) in respect thereof,
together with any pay-in-kind interest accrued thereon pursuant
to the
terms thereof.
"Subordinated Note Indenture" means the Indenture, dated the Issue Date, between the Company, as issuer, MES, as guarantor, and Shawmut Bank Connecticut, National Association, as trustee, pursuant to which the Company issued the Subordinated Notes.
"Subsidiary" of a Person means (a) any corporation of which
the outstanding Capital Stock having at least a majority of the
votes entitled to be cast in the election of directors, under
ordinary circumstances, shall at the time be owned or controlled,
directly or indirectly, by such Person, by such Person and one or
more of its Subsidiaries or by one or more of its Subsidiaries;
(b) any other Person the power to direct the policies, management
or affairs of which is contractually held by such Person, or by
such Person and one or more of its Subsidiaries or by one or more
of its Subsidiaries; or (c) any other Person of which at least a
majority of voting interest, under ordinary circumstances, is at
the time, directly or indirectly, owned or controlled by such
Person,
or by such Person and one or more of its Subsidiaries or by one
or more of its Subsidiaries. Notwithstanding the foregoing, for
purposes of this Indenture, (i) none of JWP Information Services,
Inc., Antwerp Education Center N.V., Microcom N.V., Sivea
Benelux, Micro Avenue or JWP Information Systems S.A.R.L. shall
be deemed Subsidiaries of the Company or any of its Subsidiaries,
and (ii) any Middle-East Subsidiary and any Malaysian Subsidiary
and its respective Subsidiaries shall be deemed Subsidiaries of
the Company and certain of its Subsidiaries so long as the
Company, individually or together with any of such Subsidiaries
of the Company, owns or controls Capital Stock entitling it to
cast at least one-third of the votes entitled to be cast at the
election
of directors of such Middle East Subsidiary or such Malaysian
Subsidiary, respectively.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA, except as provided in Sections 9.01 and 9.03 hereof.
"Title IV Plan" means a Pension Plan, other than a Multiemployer Plan, which is covered by Title IV of ERISA.
"Trustee" means IBJ Schroder Bank & Trust Company until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder.
"Trust Officer" means any officer within the corporate trust
group (or any successor group of the Trustee) including any Vice
President, Assistant Vice President, Secretary, Assistant
Secretary or any other officer or assistant officer of the
Trustee customarily performing functions similar to those
performed by the persons who at the time shall be such officers,
respectively, or
to whom any corporate trust matter is referred at the Trustee's
Corporate Trust Office because of his/her knowledge of and
familiarity with the particular subject.
"U.K. Subsidiaries" means, so long as such Persons are Subsidiaries of the Company, JWP U.K. Ltd., a United Kingdom corporation, and each of its Subsidiaries (other than any Middle East Subsidiary or any Malaysian Subsidiary) and their respective successors.
"Unique Construction" means Unique Construction Company, an Illinois corporation, and its successors.
"Unrestricted Cash Coverage Ratio" at any date means the
ratio of (a) Consolidated EBIT (other than Consolidated EBIT
attributable to the Foreign MES Subsidiaries) plus depre-
ciation and amortization of the Operating Companies (other than
depreciation and amortization attributable to the Foreign MES
Subsidiaries) plus any cash received by any of the Operating
Companies (other than the Foreign MES Subsidiaries) from any
Water Company or any Foreign MES Subsidiary during the applicable
quarters immediately preceding such determination date less
any Capital Expenditures of the Operating Companies (other than
Capital Expenditures of the Foreign MES Subsidiaries not funded
by the Company) for the applicable quarters immediately pre-
ceding such determination date (the "Reference Period"), to (b)
the sum of (i) Consolidated Cash Interest Expense incurred by the
Operating Companies (other than the Foreign MES Companies)
calculated on a pro forma basis for the Reference Period, and
(ii) cash dividends (including on any preferred stock) paid by
the Operating Companies (other than the Foreign MES Companies)
during the Reference Period to a Person other than an Operating
Company (other than the Foreign MES Companies). For purposes of
this definition, the factors set forth in (a) and (b) above
(other than cash dividends) shall be calculated after giving
effect on a pro forma basis (as if the same occurred at the
beginning of the Reference Period) to (i) the acquisition by any
Operating
Company of any Person which, as a result of such acquisition,
becomes a wholly-owned Subsidiary or the acquisition of assets
constituting a business by any Operating Company during such
Reference Period and (ii) any Asset Sales by an Operating Company
(excluding gains or losses recognized from such Asset Sales)
occurring during the Reference Period. In calculating cash
interest expense for purposes of determining the denominator of
this ratio, interest on Indebtedness of any Operating Company
determined on a fluctuating basis, to the extent such interest is
covered by an agreement relating to an interest swap obligation,
shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreement.
"U.S. Government Obligations" has the meaning set forth in
Section 8.01(f).
"U2" means, so long as it is a Subsidiary of the Company, University Mechanical Contractors, Inc., a Washington corporation, and its successors.
"Water Company" means, so long as it is a Subsidiary of the Company, each of JWS, JWSC, and Sea Cliff, and their respective successors.
"Withdrawal Liability" means, at any time, the aggregate amount of the liabilities, if any, pursuant to Section 4201 of ERISA, and any increase in contributions pursuant to Section 4243 of ERISA with respect to all Multiemployer Plans.
Section 1.02.Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Securities means the Company or any other obligor on the Securities (including each Guarantor).
All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them.
Section 1.03. Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the plural include the singular; and
provisions apply to successive events and transactions.
ARTICLE 2
THE SECURITIES
Section 2.01. Form and Dating.
The Securities, and the Trustee's certificate of
authentication in respect thereof, shall be substantially in the
form of Exhibit A, the terms of which are incorporated in and
made a part of
this Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange rule, agreements to
which the Company is subject or usage. Each Payment Security
shall be dated the Issue Date. Each Interest Deferral Security
shall be dated the date of its authentication. The Securities
shall be issuable only in registered form and only in
denominations of
$100 and integral multiples thereof; provided, however, that in
the case of a partial redemption on the Issue Date, Securities
issued prior to such redemption may be issued in any
denomination.
Section 2.02. Execution and Authentication.
(a) An Officer of the Company shall sign the Securities for
the Company by manual or facsimile signature. Such signature
shall be attested to by the Secretary of the Company. The
Company's seal shall be reproduced on the Securities. Each
Guarantor shall execute its Guaranty in the manner set forth in
Section 11.03. If an Officer whose signature is on a Security no
longer
holds that office at the time the Security is authenticated, the
Security shall nevertheless be valid.
(b) A Security shall not be valid until authenticated by the manual signature of a Trust Officer on behalf of the Trustee.
The signature of such Trust Officer shall be conclusive evidence, and the only evidence, that the Security has been authenticated under this Indenture.
(c) The Trustee shall, from time to time, authenticate Payment Securities for original issue up to the aggregate principal amount stated in paragraph 4 of the Securities, upon a written order of the Company signed by two Officers, which order shall set forth the amount and the date of the Securities to be authenticated. The aggregate principal amount of Payment Securities outstanding at any time may not exceed $71,000,000, except as provided in Section 2.07.
(d) Interest on the Payment Securities shall accrue commencing on the Issue Date. As provided in Paragraph 2 of the Securities, the Company is required on each interest payment date, in lieu of the payment interest in cash on the outstanding Securities, to pay interest on the outstanding Securities through the issuance of additional Securities (the "Interest Deferral Securities") in an aggregate principal amount equal to the interest that would be payable with respect to the outstanding Securities if such interest were paid in cash. On each interest payment date, the Trustee or authenticating agent shall authenticate Interest Deferral Securities for issuance to each Holder of Securities on the preceding record date, as shown by the records of the Registrar, in the amount required to pay such interest (which shall be determined based on the aggregate amount of Securities held by each Holder as shown by the records of the Trustee). Each issuance of Interest Deferral Securities shall be made pro rata, except that the Company shall pay cash to any Holder to the extent necessary to avoid issuing Interest Deferral Securities in denominations which are not integral multiples of $100.
(e) The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Securities. Unless limited by the term of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with any obligor or an Affiliate of any obligor.
Section 2.03. Registrar and Paying Agent.
(a) The Company shall maintain or cause to be maintained an office or agency where Securities may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Securities may be presented or surrendered for payment ("Paying Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent, Registrar or co-registrar without notice to any Holder. The Company shall notify the Trustee of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent, Registrar or co-registrar, except as otherwise provided in this Indenture.
(b) The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which shall incorporate the provisions of the TIA. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall give prompt written notice to the Trustee of the name and address of any such Agent. If the Company fails to maintain a Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee shall act as such, and shall be entitled to appropriate compensation in accordance with Section 7.07.
(c) The Company initially appoints the Trustee as Registrar, Paying Agent and agent for service of notices and demands in connection with the Securities.
Section 2.04. Paying Agent to Hold Money in Trust.
Not later than each date on which principal and interest on
the Securities is due and payable (other than by issuance of
Interest Deferral Securities), the Company (or any other obligor
on the Securities) shall deposit with the Paying Agent, in
immediately available funds, money sufficient to pay such
principal and interest. The Company (and any other obligor on
the Securities)
shall require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent shall hold in trust for the
benefit of Holders or the Trustee all money held by the Paying
Agent
for the payment of principal of or interest on the Securities
(whether such money has been paid to it by the Company or any
other obligor on the Securities), and shall notify the Trustee of
any
default by the Company (or any other obligor on the Securities)
in making any such payment. While any such default continues,
the Trustee may require a Paying Agent to pay all money held by
it to the Trustee. The Company at any time may require a Paying
Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Com-
pany) shall have no further liability for the money delivered to
the Trustee. If the Company acts as Paying Agent, it shall
segregate and hold in a separate trust fund for the benefit of
the Holders
all money held by it as Paying Agent.
Section 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of
the names and addresses of the Holders and shall otherwise comply
with
TIA Section 312(a). If the Trustee is not the Registrar, the Company
shall cause to be furnished to the Trustee at least 15 Business
Days before each interest payment date and at such other times as
the Trustee may request in writing, within 30 days of such
request, a list in such form and as of such date as the Trustee
may reasonably require, of the names and addresses of the Holders
and
the Company shall otherwise comply with TIA Section 312(a).
Section 2.06. Transfer and Exchange.
(a) When Securities are presented to the Registrar or a co-registrar with a request to register, transfer or exchange them for an equal principal amount of Securities of other authorized denominations, the Registrar shall register the transfer or make the exchange if its requirements for such transactions are met; provided, however, that any Security presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar and the Trustee, duly executed by the Holder thereof or his attorney duly authorized in writing. To permit registrations of transfers and exchanges, the Company shall issue and the Trustee shall authenticate Securities which the Holder making the transfer or exchange is entitled to receive at the Registrar's written request, subject to such rules as the Trustee may reasonably require.
(b) The Company shall not be required (i) to issue,
register the transfer of or exchange Securities during a period
beginning at the opening of business on a Business Day 15 days
before
the day of any selection of Securities for redemption under
Section 3.02 and ending at the close of business on the day of
selection; (ii) to register the transfer of or exchange any
Security so
selected for redemption in whole or in part, except the
unredeemed portion of any Security being redeemed in part; or
(iii) to register the transfer or exchange of a Security between
the record
date and the next succeeding interest payment date.
(c) No service charge shall be made to the Holder for any registration of transfer or exchange (except as otherwise expressly permitted herein), but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than such transfer tax or similar governmental charge payable upon exchanges (without a transfer to another Person) pursuant to Section 2.10, 3.06 or 9.05, in which event the Company shall be responsible for the payment of any such taxes).
(d) Prior to due presentment for registration of transfer of any Security, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary.
Section 2.07. Replacement Securities.
(a) If any mutilated Security is surrendered to the Trustee, or the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall issue and the Trustee, upon the written order of the Company signed by two Officers, shall authenticate a replacement Security of like tenor and principal amount, bearing a number not contemporaneously outstanding, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or stolen Security, if the Trustee's requirements for replacement of Securities are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent or any authenticating agent from any loss that any of them may suffer if a Security is replaced. The Company and the Trustee may charge for their expenses in replacing a Security.
(b) Every replacement Security is an additional obligation of the Company and each Guarantor, and shall be entitled to the benefits of this Indenture equally and proportionately with any and all other Securities issued hereunder.
(c) The provisions of this Section 2.07 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.
Section 2.08. Outstanding Securities.
(a) The Securities outstanding at any time are all the Securities authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those redeemed or purchased by the Company pursuant to Article 3, and those described in this Section as not outstanding. If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser.
(b) If the principal amount of any Security is considered paid under Section 4.01, it ceases to be outstanding and interest on it ceases to accrue.
(c) A Security ceases to be outstanding if the Company or one of its Subsidiaries holds the Security.
Section 2.09. Treasury Securities.
(a) In determining whether the Holders of the required principal amount of Securities have given or concurred in any request, demand, authorization, notice, direction, waiver or consent, Securities owned by an Affiliate of the Company (other than a Specified Holder) shall be disregarded and considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such request, demand, authorization, notice, direction, waiver or consent, only Securities that a Trust Officer knows are so owned shall be so disregarded.
(b) In determining whether the Holders of the required principal amount of Securities have (i) directed the time, method or place of conducting any proceeding for any remedy available to the Trustee hereunder, or exercising any trust or power conferred upon the Trustee; (ii) consented to the waiver of any past Event of Default and its consequences; or (iii) consented to the postponement of any interest payment, Securities owned by a Specified Holder shall be disregarded and considered as though not outstanding only if such Specified Holder is an Affiliate of the Company, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction or consent, only Securities that a Trust Officer knows are so owned shall be so disregarded.
Section 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the
Company may prepare and, upon written request from the Company
signed by two Officers of the Company, the Trustee shall
authenticate temporary Securities. Temporary Securities shall be
in any authorized denomination, substantially in the form of
definitive Securities and with other variations that the Company
considers appropriate for temporary Securities. Without
unreasonable delay, the Company shall prepare and the Trustee,
upon receipt of the written order of the Company signed by two
Officers,
shall authenticate definitive Securities in exchange for
temporary Securities. Until such exchange, temporary Securities
shall be entitled to the same rights, benefits and privileges as
definitive Secu-
rities.
Section 2.11. Cancellation.
The Company at any time may deliver Securities previously
authenticated hereunder to the Trustee for cancellation. The
Registrar and Paying Agent shall forward to the Trustee any
Securities surrendered to them for registration of transfer,
exchange or payment. The Trustee shall cancel all Securities
surrendered for registration of transfer, exchange, payment,
replacement
or cancellation and shall destroy canceled Securities (subject to
the record-retention requirement of the Exchange Act), and
certification of their destruction shall be delivered to the
Company
unless the Company shall direct that canceled Securities be
returned to it. The Company may not reissue or issue new
Securities to replace Securities that it has redeemed or paid or
that have
been delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the
Securities, it shall pay the defaulted interest in any lawful
manner plus, to the extent lawful, interest payable on the
defaulted
interest, to the Persons who are Holders on a subsequent special
record date, which date shall be at least five Business Days
prior to the payment date, in each case at the rate provided in
the
Securities and in Section 4.01 (which interest shall be paid,
except on the maturity date of the Securities, in the form of
Interest Deferral Securities). The Company shall, with the
consent of the
Trustee, fix or cause to be fixed each such special record date
and payment date. At least 15 days before a special record date,
the Company (or the Trustee in the name of and at the expense
of the Company) shall mail to the Holders and to the Trustee
(unless the Trustee mailed such notice on behalf of the Company)
a notice that states the special record date, the related payment
date and the amount of such interest to be paid.
Section 2.13. CUSIP Numbers.
The Company, in issuing the Securities, may use "CUSIP"
numbers (if then generally in use), and the Trustee shall use
CUSIP numbers in notices of redemption or exchange as a
convenience to the Holders; provided, however, that any such
notice shall state that no representation is made as to the
correctness of such numbers either as printed on the Securities
or as
contained in any notice of redemption or exchange, and that
reliance may be only on the other identification numbers printed
on the Securities, and any redemption shall not be affected by
any
defect in or omission of such numbers.
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee.
If the Company elects to redeem Securities pursuant to the
optional redemption provisions of Section 3.07, it shall furnish
to the Trustee, at least 45 days but not more than 60 days
(unless
a shorter period shall be agreed to in writing by the Trustee)
before a redemption date, an Officers' Certificate setting forth
the Section of this Indenture and/or paragraph of the Securities
pursuant to which the redemption shall occur, the redemption
date, the principal amount of Securities to be redeemed and the
redemption price; provided, however, that if the Company redeems
Securities on the Issue Date, such notice of such redemption
shall be given on the Issue Date.
Section 3.02. Selection of Securities to Be Redeemed.
(a) If less than all of the Securities are to be redeemed (other than pursuant to a repurchase thereof pursuant to Section 4.18 below), the Trustee shall select the Securities to be redeemed by lot or by a method that complies with applicable legal and stock exchange requirements, if any, taking into account the provisions of clause (b) of this Section 3.02. The particular Securities to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Securities not previously called for redemption; provided, however, that if the Company redeems Securities on the Issue Date, the Trustee shall select such Securities to be redeemed on the Issue Date.
(b) The Trustee shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Security selected for partial redemption, the principal amount thereof to be redeemed. Securities and portions of them selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Securities of a Holder are to be re- deemed, the entire outstanding amount of Securities held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption.
Section 3.03. Notice of Redemption.
(a) At least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed a notice of redemption, by first-class mail, postage prepaid, to each Holder whose Securities are to be redeemed at the Holder's last address, as it shall appear on the register of the Securities; provided, however, that if the Company shall redeem Securities on the Issue Date, no such notice shall be required. A copy of such notice shall be mailed to the Trustee in the same manner and on the same day that the notice is mailed to the Holders.
(b) The notice shall identify the Securities to be redeemed and shall state:
(i) the redemption date;
(ii) the redemption price;
(iii) if any Security is being redeemed in part, the portion of the principal amount of such Security to be redeemed and that, after the redemption date, upon surrender of such Security, a new Security or Securities in principal amount equal to the unredeemed portion will be issued;
(iv) the name and address of the Paying Agent;
(v) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price;
(vi) that, unless the Company defaults in making such redemption payment, interest on Securities called for redemption ceases to accrue on and after the redemption date;
(vii) the paragraph of the Securities and/or Section of
this Indenture pursuant to which the Securities called for
redemption are being redeemed, and, if such redemption is
being made pursuant to Section 3.08(b), (c), (d), (e) or
(f), setting forth in reasonable detail the facts and
circumstances surrounding the event giving rise to such required
redemption and
the calculations made by the Company in determining the
amount of Securities to be redeemed; and
(viii) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Securities.
At the Company's request, the Trustee shall give the notice
of redemption in the Company's name and at its expense; provided,
however, that the Company shall deliver to the Trustee,
at least 45 days prior to the redemption date, an Officers'
Certificate requesting that the Trustee give such notice and
setting forth the text of the information to be stated in such
notice as
provided in this Section 3.03(b), and the Trustee shall have no
responsibility whatsoever with regard to such notice being
accurate or correct.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed, Securities called for redemption become due and payable on the redemption date at the redemption price set forth in the Security or this Indenture, as the case may be.
Section 3.05. Deposit of Redemption Price.
(a) No later than the redemption date, the Company shall deposit in immediately available funds with the Trustee or with the Paying Agent (or, if the Company or a Subsidiary of the Company is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued interest on all Securities to be redeemed on that date. The Trustee or the Paying Agent shall return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest on, all Securities to be redeemed.
(b) If the Company complies with clause (a) of this Section 3.05, interest on the Securities to be redeemed will cease to accrue on the applicable redemption date (including, if applicable, the Issue Date), whether or not such Securities are presented for payment. If any Security called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest will be paid on the unpaid principal from the redemption date until such principal is paid and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Securities and in Section 4.01.
Section 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the Company shall issue and the Trustee shall authenticate for the Holder at the expense of the Company a new Security equal in principal amount to the unredeemed portion of the Security surrendered.
Section 3.07. Optional Redemption.
The Company may redeem all or any portion of the Securities, upon the terms and at the redemption price set forth in paragraph 5 of the Securities in an aggregate amount at any date of determination not to exceed Excess Cash. Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Sections 3.01 through 3.06.
Section 3.08. Mandatory Redemption.
(a) The Company shall redeem on December 15, 1996, Securities in an aggregate principal amount of $10,000,000 at a redemption price of 100% of the principal amount thereof plus accrued and unpaid interest to the redemption date. The Company may reduce the principal amount of Securities to be redeemed pursuant to this Section 3.08(a) by subtracting 100% of the principal amount of any Securities theretofore redeemed by the Company pursuant to Sections 3.07, 3.08(b), 3.08(c), 3.08(d), 3.08(e) or 3.08(f) and not previously applied for this purpose.
(b) Concurrently with its receipt of any Net Cash Proceeds
in respect of an Asset Sale or series of related Asset Sales
effected by the Company (other than (i) for so long as any
Software
House Note is outstanding, a sale of assets constituting "Pledged
Shares" under the Software House Senior Pledge Agreement, and
(ii) an Asset Sale permitted under Section 5.01(a), (b), (c), (d)
or (e)), the Company shall redeem Securities, at a redemption
price of 100% of the principal amount thereof, together with
accrued interest to the date of such redemption on the principal
amount
of Securities redeemed, in an amount equal to such Net Cash
Proceeds (it being understood that the Company shall, on the
Issue Date, and subject to the parenthetical above, redeem
Securities
in accordance with this clause (b) in an amount equal to all Net
Cash Proceeds held by the Company on the Issue Date).
(c) Concurrently with its receipt of any Net Equity Offering Proceeds (other than in connection with an offering or series of offerings constituting a Change of Control) in an amount in excess of $25,000,000, the Company shall redeem Securities, at a redemption price of 100% of the principal amount thereof, together with accrued interest to the date of such redemption on the principal amount of Securities redeemed, in an amount equal to such excess.
(d) Concurrently with its receipt of any Net Debt Offering Proceeds in respect of Indebtedness permitted under Section 4.09(vi), the Company shall redeem Securities, at a redemption price of 100% of the principal amount thereof, together with accrued interest to the date of such redemption on the principal amount of Securities redeemed, in an amount equal to such Net Debt Offering Proceeds.
(e) From and after the later to occur of (i) the payment in
full of the Loans (as defined in the Revolving Credit Agreement
as in effect on the Issue Date and the Dynalectric Revolving
Credit Agreement as in effect on the Issue Date), together with
all accrued interest thereon, and the termination of the
Aggregate Loan Commitment (as defined in the Revolving Credit
Agreement and the Dynalectric Revolving Credit Agreement), and
(ii) December 31, 1995, within 45 days after the last day of June
and December of each calendar year, commencing on
December 31, 1995, the Company shall redeem Securities, at a
redemption price of 100% of the principal amount thereof,
together with accrued interest to the date of such redemption on
the
principal amount of Securities redeemed, in an amount equal to
100% of Excess Cash as at the last day of June or December of
such calendar year, as the case may be.
(f) Concurrently with the receipt by any Subsidiary of the Company of Net Cash Proceeds in respect of any Asset Sale or series of related Asset Sales by such Subsidiary (or within 60 days after such receipt if such Net Cash Proceeds do not exceed $500,000), other than, for so long as any Software House Note is outstanding, a sale of assets of any Software House Subsidiary, the Company shall redeem Securities, at a redemption price of 100% of the principal amount thereof, together with accrued interest to the date of such redemption on the principal amount of Securities redeemed, in an amount equal to the product of such Net Cash Proceeds multiplied by a fraction, the numerator of which is the aggregate number of shares of the common stock of such Subsidiary owned directly or indirectly by the Company, and the denominator of which is the aggregate number of shares of common stock of such Subsidiary issued and outstanding (it being understood that the Company shall, on the Issue Date, and, in respect of Net Cash Proceeds received in connection with the sale of the Capital Stock or assets of a Software House Subsidiary, subject to the repayment in full of the Software House Notes, redeem Securities in accordance with this clause (f) in an amount equal to all such Net Cash Proceeds held by each Subsidiary of the Company on the Issue Date).
(g) Notwithstanding anything to the contrary contained in this Section 3.08:
(i) the Company shall only be required to redeem Securities in respect of an Asset Sale by JWS or Sea Cliff (A) to the extent dividends or other distributions by JWS or Sea Cliff of Net Cash Proceeds in respect of such Asset Sale would not violate the terms of any Contractual Obligation binding upon JWS or Sea Cliff, as the case may be, or any rule or regulation of any governmental authority binding upon JWS or Sea Cliff, as the case may be, and (B) in an amount equal to such Net Cash Proceeds received by JWS or Sea Cliff in respect of such Asset Sale, multiplied by a fraction, the numerator of which is the aggregate number of shares of the common stock of JWS, Sea Cliff or JWSC, as the case may be, owned by JWSC or the Company, as the case may be, and the denominator of which is the aggregate number of shares of common stock of JWSC, JWS or Sea Cliff, as the case may be, issued and outstanding; and
(ii) in respect of any Asset Sale by any Foreign MES Subsidiary, the Company shall only be required to redeem Securities (A) to the extent dividends or other distributions by such Foreign MES Subsidiary to the Company or other Subsidiary of the Company of Net Cash Proceeds in respect of such Asset Sale would not violate the terms of any Contractual Obligation binding upon such Foreign MES Subsidiary or any rule or regulation of any governmental authority binding upon any of such Foreign MES Subsidiary, and (B) in an amount equal to the Net Cash Proceeds received by such Foreign MES Subsidiary in respect of such Asset Sale, multiplied by a fraction, the numerator of which is the aggregate number of shares of the common stock of such Foreign MES Subsidiary owned by the Company or any Subsidiary of the Company, and the denominator of which is the aggregate number of shares of common stock of such Foreign MES Subsidiary issued and outstanding.
(h) Other than as specifically provided in this Section 3.08, any redemption pursuant to this Section 3.08 shall be made pursuant to the provisions of Sections 3.01 through 3.06.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Securities.
(a) The Company shall pay the principal of and interest on the Securities on the dates and in the manner provided in the Securities and this Indenture. Principal and interest shall be considered paid on the date due if the Paying Agent holds on such date money deposited by the Company in immediately available funds (or in the case of interest due other than in cash, Interest Deferral Securities), designated for and sufficient to pay all principal and interest then due.
(b) The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 2% per annum in excess of the then applicable interest rate on the Securities to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace period) at the same rate to the extent lawful.
Section 4.02. Maintenance of Office or Agency.
(a) The Company shall maintain in the Borough of Manhattan, The City of New York, an office or agency (which may be an office of the Trustee, Registrar or co-registrar) where Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee.
(b) The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.
(c) The Company hereby designates the Corporate Trust Office of the Trustee in the Borough of Manhattan, the City of New York, as one such office or agency of the Company in accordance with Section 2.03.
Section 4.03. SEC Reports; Reports to Securityholders.
(a) The Company shall file with the Trustee and mail to the
Holders, within 15 days after it files them with the SEC, copies
of the annual and quarterly reports and of the information,
documents and other reports (or copies of such portions of any of
the foregoing as the SEC may by rules and regulations prescribe)
that the Company is required to file with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act. The Company also shall
comply with the provisions of TIA Section 314(a).
(b) From and after the date at which audited financial statements of the Company are prepared for the Company's 1993 fiscal year, so long as any of the Securities are outstanding, the Company shall prepare (i) for the first three Quarters of each fiscal year (commencing with the first Quarter commencing after the Issue Date), quarterly reports (containing information including, but not limited to, unaudited combined or consolidated financial statements) and (ii) for each fiscal year commencing with the 1994 fiscal year, an annual report (containing audited financial statements and an opinion thereon by the Company's independent certified public accountants) in substantially the form which it would be required to file under Section 13 of the Exchange Act if it had a class of securities listed on a national securities exchange. The Company shall cause a copy of such reports to be mailed to the Trustee and to each of the Holders of the Securities within 50 days after the close of each of the first three Quarters of each fiscal year (commencing with the first Quarter commencing after the Issue Date) and within 95 days after the close of each fiscal year commencing with the 1994 fiscal year, at such Holder's address appearing on the register of the Securities.
Section 4.04. Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 105 days after the end of each fiscal year of the Company commencing with the 1994 fiscal year and within 60 days after the end of each Quarter commencing with the first Quarter commencing after the Issue Date, a certificate of the principal executive officer, the principal financial officer or the principal accounting officer of the Company stating, as to the officer signing such certificate, that a review of the activities of the Company and its Subsidiaries during the preceding fiscal period has been made under the supervision of such signing officer with a view to determining whether each of the Company and such Subsidiaries has kept, observed, performed and fulfilled its obligations under this Indenture, and that to the best of his knowledge no Default or Event of Default has occurred, and setting forth in reasonable detail each of the calculations performed by the Company in respect of the covenants set forth in Sections 4.09(vi) and 4.09(viii) (if Indebtedness has been incurred in such fiscal year under such Sections) and Sections 4.11, 4.15, 4.16, 4.18 (if a Change of Control has occurred during such fiscal year), 4.27 and 4.28; or, if the signer has knowledge of any such Default or Event of Default, specifying each such Default or Event of Default and the nature thereof and what action the Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the annual reports delivered to the Trustee and the Holders pursuant to Section 4.03(b) above shall be accompanied by a written statement of the Company's independent public accountants (who shall be Deloitte and Touche or another firm of established national reputation) that in the course of the regular audit of the business of the Company and its Subsidiaries, which audit was conducted by such accountants in accordance with generally accepted auditing standards, such accountants have obtained no knowledge that a Default or Event of Default has occurred and is continuing, or, if in the opinion of such accountants, a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any Default or Event of Default.
(c) The Company shall deliver to the Trustee, immediately
upon an Officer having knowledge of (i) any Event of Default,
(ii) the fact that any Indebtedness of the Company or any
Subsidiary of the Company in an amount in excess of $500,000 has
been or could be declared due and payable before its maturity
because of the occurrence of any default (or any event which,
with
notice or the lapse of time, or both, shall constitute such
default) under such Indebtedness, or (iii) the occurrence of any
event requiring the performance by the Company or any of its
Subsidiaries
under any Performance Guaranty, an Officers' Certificate
specifying such Event of Default or Default or other event and
what action the Company is taking or proposes to take with
respect
thereto.
Section 4.05. Stay, Extension and Usury Laws.
Each Obligor covenants (to the extent that it may lawfully
do so) that it shall not at any time insist upon, plead, or in
any manner whatsoever claim, and shall resist any and all efforts
to
be compelled to take the benefit or advantage of, any stay or
extension law or any usury law or other law which would prohibit
or forgive any Obligor from paying all or any portion of the
principal
of and/or interest on the Securities as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which
may affect the covenants or the performance of this Indenture;
and
(to the extent that it may lawfully do so) each Obligor hereby
expressly waives all benefit or advantage of any such law, and
covenants that it will not hinder, delay or impede the execution
of any
power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been
enacted.
Section 4.06. Limitation on Restricted Payments.
The Company shall not, and shall not permit MES, any Domestic MES Subsidiary, any Dynalectric Company or any SellCo Company to, directly or indirectly, make any Restricted Payment; provided, however, that the foregoing shall not prohibit:
(a)the purchase, redemption, retirement or other acquisition by any Water Company of any of its shares of preferred stock or Indebtedness pursuant to any sinking fund or other mandatory retirement requirement in respect thereof or the optional repurchase or repayment thereof if the proceeds used therefor are not available for the payment of dividends by such Water Company;
(b)acquisitions permitted under Sections 5.01(g) and 5.01(h); or
(c)renewals, extensions or replacements of Indebtedness permitted by Section 4.09(xxxi).
Section 4.07. Limitations on Transactions with Affiliates.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, enter into or renew any
transaction (including without limitation the purchase, sale,
lease, or
exchange of any property or the rendering of any service) with
any Affiliate of the Company or of any Subsidiary (other than a
transaction between the Company, MES, any Domestic MES
Subsidiary or any Dynalectric Company and MES, any Domestic MES
Subsidiary, any Dynalectric Company or the Company); provided,
however, that this Section 4.07 shall not be violated by
(a) the payment of reasonable and customary directors fees to
directors who are not employees of the Company or such
Subsidiary; (b) the incurrence of Indebtedness and the making of
Investments permitted in Sections 4.09 and 4.14; (c) payments by
the Company in respect of the Securities, the Software House
Notes, or the Subordinated Notes, in each case in accordance with
the terms thereof; (d) payments by SellCo in respect of the
SellCo Subordinated Notes in accordance with the terms thereof;
(e) payments by MES and SellCo pursuant to their respective
Guaranties set forth in Article 11; (f) the making of Restricted
Payments permitted in Section 4.06; (g) Performance Guaranties
permitted under Section 4.29; or (h) any other transaction
directly
or indirectly with or for the benefit of any Affiliate of the
Company or any of its Subsidiaries on a basis no less favorable
to the Company or such Subsidiary as would be obtained in a
comparable
arm's length transaction with a Person not an Affiliate (as
determined by a majority of the disinterested members of the
board of directors of the Company or such Subsidiary).
Section 4.08. Limitation on Liens.
The Company shall not, and shall not permit any of its Subsidiaries to, create, assume or suffer to exist any Lien upon any of its assets, now owned or hereafter acquired, except:
(a) Liens arising under the Collateral Documents;
(b) Liens on the assets of the Company (other than (i) the Capital Stock of MES, the Software House Subsidiaries, the Water Companies, SellCo and the Subsidiaries of SellCo, and (ii) the Series A Substitute Collateral and the Series B Substitute Collateral, as such terms are defined in the Bankruptcy Plan) and any of the MES Companies (i) arising under or pursuant to the Revolving Credit Agreement and the Dynalectric Revolving Credit Agreement, securing Indebtedness incurred thereunder in an aggregate principal amount outstanding not in excess of $70,000,000, and (ii) securing the obligations of any of the MES Companies under Performance Guaranties;
(c) Liens arising under (i) the Software House Senior Pledge Agreement, the Software House Subordinated Pledge Agreement, the Software House SellCo Pledge Agreement, and the SellCo Subordinated Pledge Agreement, each as in effect on the Issue Date, and (ii) each of the other "Collateral Documents" (as defined in the Software House Indenture and in the SellCo Subordinated Indenture);
(d) Liens pursuant to Capital Lease Obligations permitted under Section 4.09(viii);
(e) purchase money mortgages or pledges or other purchase money Liens upon any property acquired by the Company or any of its Subsidiaries (other than the Water Companies) after the Issue Date acquired or held by such company in the ordinary course of business and securing solely the purchase price of such property or Indebtedness incurred solely for the purpose of financing the acquisition of such property (but only to the extent the Indebtedness secured by such Liens shall otherwise be permitted under Section 4.09) in an aggregate principal amount which does not exceed (i) $10,000,000 in the aggregate, in the case of the Operating Companies, and (ii) $1,500,000 in the aggregate, in the case of the SellCo Companies (other than the Water Companies).
(f) Permitted Liens;
(g) Liens existing on the Issue Date;
(h) Liens (including purchase money mortgages or pledges or other purchase money Liens) on the assets of the Water Companies, securing Indebtedness permitted by Section 4.09(xvi);
(i) Liens on the assets of the Operating Companies securing obligations (other than for borrowed money) in the ordinary course of business in an aggregate amount not in excess of $10,000,000 at any time outstanding;
(j) Liens on the assets of Foreign MES Subsidiaries securing Indebtedness permitted under Section 4.09 incurred by any Foreign MES Subsidiary;
(k) Liens on the insurance policies of the Company, MES, any Domestic MES Subsidiary or any Dynalectric Company arising in connection with the deferred payment or financing thereof in the ordinary course of business;
(l) Liens consisting of cash collateral deposits made by the Company, MES, any MES Subsidiary, any Dynalectric Company or Defender in the ordinary course of business in connection with the Company's, MES', any MES Subsidiary's or any Dynalectric Company's insurance program consistent with past practices;
(m) Liens incurred by Defender in respect of its pledge of promissory notes made by the Company in favor of Defender, securing Defender's obligations under Insurance Related Letter of Credit Obligations;
(n) Liens existing on any property of a corporation at the time such corporation becomes a Subsidiary of the Company, which Liens were not created, incurred or assumed in contemplation thereof, provided that no such Lien shall extend to or cover any other property of the Company or any Subsidiary;
(o) Liens on the assets of the Company (other than any such assets constituting Collateral) and the common stock or assets of the Dynalectric Companies securing (i) indebtedness incurred under and pursuant to the Dynalectric Revolving Credit Agreement and (ii) obligations of the Dynalectric Companies under Performance Guaranties;
(p) Liens on up to $15,000,000 of the proceeds received in respect of the sale by the Company or a Water Company of the common stock or assets of a Water Company, securing outstanding Indebtedness under the Revolving Credit Agreement and the Dynalectric Revolving Credit Agreement;
(q) Liens on the tangible personal property of the Company to be located at the Company's executive offices at 101 Merritt Seven Corporate Park, Norwalk, Connecticut, to secure Indebtedness to the State of Connecticut or any agency or instrumentality thereof in an aggregate amount at any time outstanding not in excess of $200,000; and
(r) any extension, renewal or replacement (or successive
extensions, renewals or replacements) of Liens permitted by this
Section 4.08 without any increase in the amount of Indebtedness
secured thereby or in the assets subject to such Lien.
Section 4.09. Limitation on Additional Indebtedness and Capital Stock.
The Company shall not, and shall not permit any of its
Subsidiaries to (a) directly or indirectly, create, incur, issue,
assume, guaranty or otherwise become directly or indirectly
liable with
respect to any Indebtedness; or (b) issue any Capital Stock,
except:
(i) the Securities;
(ii) Indebtedness of the Company and MES under the Revolving Credit Agreement in an aggregate principal amount not in excess of $60,000,000 at any time outstanding, and Guaranties of such Indebtedness by any of the Subsidiaries of MES;
(iii) Indebtedness of the Company in respect of the Software House Notes and the Subordinated Notes;
(iv) Indebtedness of SellCo in respect of the SellCo Subordinated Notes;
(v) the Guaranties of (A) SellCo in respect of its Guaranty pursuant to Article 11 and its guaranty of the Indebtedness of the Company under the Software House Notes and the Software House Indenture, and (B) MES in respect of its Guaranty pursuant to Article 11, its guaranty of the Indebtedness of the Company under the Software House Notes and the Software House Indenture, and its guaranty of the Indebtedness of the Company under the Subordinated Notes and the Subordinated Note Indenture;
(vi) Funded Indebtedness of the Company, the Net Debt
Offering Proceeds of which are used by the Company in accordance
with Section 3.08(d); provided, however, that (A)
if the aggregate amount of outstanding Securities on the
date the Company issues such Funded Indebtedness is $15,000,000
or less, the Net Debt Offering Proceeds of such Funded
Indebtedness shall be in an amount sufficient to redeem all
of the outstanding Securities, together with all accrued but
unpaid interest thereon; and (B) if the aggregate amount of
outstanding Securities on the date the Company issues such
Funded Indebtedness exceeds $15,000,000, such Net Debt Offering
Proceeds shall be in an amount at least equal to 50% of
such outstanding Securities; and provided further, that if,
after the application of the Net Debt Offering Proceeds of such
Funded Indebtedness in accordance with Section 3.08, the
Securities will not be redeemed in full, together with all
accrued but unpaid interest thereon, the Company may issue such
Funded Indebtedness only if (1) the Funded Indebtedness so is-
sued does not mature earlier than the maturity of the
Securities; and (2) the Funded Indebtedness so issued has (x) no
scheduled principal, sinking fund, redemption, prepayment or
other
payments (other than interest payments) due in respect
thereof on or prior to the maturity date of the Securities, and
(y) covenants relating to limitations on Restricted Payments,
payment
restrictions of Subsidiaries, Liens and additional
Indebtedness of the Company and its Subsidiaries, in each case no
more restrictive than the similar covenants set forth in the
Securities
in this Indenture;
(vii) Indebtedness of the Company or any of its Subsidiaries
(other than the Water Companies) secured by Liens permitted by
Section 4.08(e);
(viii) Indebtedness of the Company or any of its Subsidiaries (other than the Water Companies) under Capital Lease Obligations; provided, however, that the aggregate amount of Capital Lease Obligations incurred after the Issue Date in any fiscal year of the Company under this clause (viii) by (A) the Operating Companies shall not exceed an amount equal to 50% of the Capital Expenditures made by such Operating Companies during such fiscal year and permitted by Section 4.16, and by (B) the SellCo Companies (other than the Water Companies) shall not exceed $3,000,000 at any time outstanding;
(ix) Indebtedness of Defender and the Company consisting of Insurance Letter of Credit Obligations not in excess of $75,000,000 at any one time outstanding;
(x) Indebtedness (A) arising from loans or advances to any MES Company from any other MES Company made in the ordinary course of business and consistent with MES's cash management system; (B) arising from loans or advances to any Dynalectric Company from any other Dynalectric Company made in the ordinary course of business consistent with Dynalectric's cash management system; (C) arising from loans or advances to any of the SellCo Companies from any other SellCo Company made in the ordinary course of business consistent with SellCo's cash management system; and (D) arising from loans or advances to the Company from any MES Company made from and after the Issue Date in the ordinary course of business and consistent with the Company's past practices, in an aggregate amount at any time outstanding not in excess of $5,000,000;
(xi) Indebtedness incurred after the Issue Date arising
from loans or advances by the Company or any MES Company to (i)
the SellCo Companies in an aggregate principal amount
at any time outstanding not in excess of $7,000,000, and
(ii) the Dynalectric Companies in an aggregate amount at any time
outstanding not in excess of $8,000,000;
(xii) Indebtedness of Comstock in an aggregate principal amount not in excess of $20,000,000 (Canadian) at any time outstanding (other than (A) Capital Lease Obligations, (B) Indebtedness owed to the Company or any Subsidiary of the Company, which Indebtedness is outstanding on the Issue Date, (C) Indebtedness owed to any Foreign MES Subsidiary, and (D) Indebtedness permitted under Section 4.09(xxiv)), and Guaranties by the Company, JWP International, Inc. or one or more Foreign MES Subsidiaries of such Indebtedness;
(xiii) Indebtedness of the U.K. Subsidiaries in an aggregate principal amount not in excess of Pound20,000,000 at any time outstanding (other than (A) Capital Lease Obligations, (B) Indebtedness owed to the Company or any Subsidiary of the Company, which Indebtedness is outstanding on the Issue Date, (C) Indebtedness owed to any Foreign MES Subsidiary, and (D) Indebtedness permitted under Section 4.09(xxiv)) and Guaranties by JWP International, Inc. or one or more Foreign MES Subsidiaries of such Indebtedness;
(xiv) Indebtedness of the Middle East Subsidiaries and the Malaysian Subsidiaries in an aggregate principal amount not in excess of Pound7,000,000 at any time outstanding (other than (A) Capital Lease Obligations, (B) Indebtedness owed to the Company or any Subsidiary of the Company, which Indebtedness is outstanding on the Issue Date, (C) Indebtedness owed to any Foreign MES Subsidiary, and (D) Indebtedness permitted under Section 4.09(xxiv)) and Guaranties by JWP International Inc. or one or more Foreign MES Subsidiaries of such Indebtedness;
(xv) Indebtedness of U2 in an aggregate principal amount not in excess of $4,000,000 at any time outstanding (other than (A) Capital Lease Obligations, (B) Indebtedness owed to the Company which Indebtedness is outstanding on the Issue Date, (C) Indebtedness owed to any Foreign MES Subsidiary, and (D) Indebtedness permitted under Section 4.09(xxiv));
(xvi) Indebtedness of the Water Companies and preferred stock of the Water Companies, the aggregate principal amount outstanding and liquidation preference of which shall not exceed $130,000,000 at any time of determination;
(xvii) Capital Stock issued by the Company (other than Disqualified Stock), so long as the Net Equity Offering Proceeds thereof are applied in accordance with Section 3.08(c);
(xviii) Indebtedness of the Company to Defender in an aggregate principal amount not in excess of $75,000,000 at any time outstanding, incurred in connection with Insurance Related Letters of Credit;
(xix) Indebtedness consisting of deferred payment obligations of the Company or any of its Subsidiaries for insurance premiums, or incurred by the Company or any of its Subsidiaries in respect of funds borrowed for the payment of such premiums, in either case in the ordinary course of business and consistent with past practices;
(xx) Indebtedness of any of the Operating Companies consisting of reimbursement obligations with respect to documentary letters of credit issued for its own account in the ordinary course of business;
(xxi) Indebtedness of any of the SellCo Companies consisting of reimbursement obligations with respect to documentary letters of credit issued for its own account in the ordinary course of business;
(xxii) contingent reimbursement obligations of Defender or the Company in respect of Insurance Related Letters of Credit in an aggregate amount not in excess of $75,000,000 at any time outstanding;
(xxiii) Indebtedness outstanding on the Issue Date;
(xxiv) Indebtedness of Foreign MES Subsidiaries consisting of loans or advances made after the Issue Date by the Company or any Domestic MES Subsidiary in an aggregate principal amount not in excess of $5,000,000 at any time outstanding;
(xxv) Indebtedness of one or more of the Company and the Dynalectric Companies pursuant to the Dynalectric Revolving Credit Agreement, in an aggregate principal amount not in excess of $10,000,000 at any time outstanding, and Guaranties of such Indebtedness by the other Dynalectric Companies, MES, and the Domestic MES Subsidiaries;
(xxvi) Indebtedness of the Company to SellCo in an aggregate principal amount not in excess of $5,464,133.78 at any time outstanding, evidenced by the SellCo Intercompany Note;
(xxvii) Indebtedness of any corporation at the time such corporation becomes a Subsidiary which Indebtedness was not created, assumed or guaranteed in contemplation thereof;
(xxviii) Indebtedness of (A) a Foreign MES Subsidiary to any other Foreign MES Subsidiary, (B) a Dynalectric Company to any other Dynalectric Company, (C) the Company or any MES Company to any other MES Company (other than a Foreign MES Subsidiary), and (D) any SellCo Company to any other SellCo Company;
(xxix) additional Indebtedness in an aggregate amount at any time outstanding not in excess of $5,000,000;
(xxx) Indebtedness of the Company in an aggregate amount at any time outstanding not in excess of $200,000 to the State of Connecticut or any agency or instrumentality thereof, incurred in connection with the relocation of the Company's executive offices to the State of Connecticut; and
(xxxi) any renewals, extensions or replacements of Indebtedness permitted under this Section 4.09 in an aggregate amount not in excess of the Indebtedness being renewed, extended or replaced.
Notwithstanding the above, at no time will the Company or
any of its Subsidiaries be permitted to incur or assume
Indebtedness or issue Capital Stock if a Default or Event of
Default
would exist upon the incurrence or assumption of such
Indebtedness, the issuance of such Capital Stock, or immediately
thereafter.
Section 4.10.Limitation on New Subsidiaries.
The Company shall not have any direct Subsidiaries other than MES, SellCo, Dyn Specialty Contracting, Inc., and each of the Software House Subsidiaries.
Section 4.11. Limitation on Sales of Assets.
Subject to Section 4.12, the Company shall not, and shall
not permit any of its Subsidiaries to, sell, lease, convey or
otherwise dispose of any assets (which shall include the Capital
Stock
of any Subsidiary) (an "Asset Sale"), other than the sale or
disposition of inventory or equipment sold in each case in the
ordinary course of business or equipment or motor vehicles that
have
become obsolete or are replaced in the ordinary course of
business (provided that the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the
Company or any of
its Subsidiaries shall be governed by the provisions of Section
5.01), unless (i) such Asset Sale is for at least fair market
value (as determined, in respect of any Asset Sale generating Net
Cash
Proceeds in excess of $250,000, by the majority of the
disinterested members of the board of directors of the Company or
such Subsidiary, as the case may be, in good faith), (ii) in
connection with
an Asset Sale in respect of the assets or Capital Stock of any
Water Company, at least 50% of the consideration therefor
consists solely of cash and such cash is received within 60 days
of the
closing of such Asset Sale, excluding from such consideration the
assumption of liabilities by the purchaser in connection with
such Asset Sale, (iii) the Company complies with Section 3.08,
such assets do not consist of the Capital Stock of MES or SellCo,
and (v) any notes, bonds, securities, instruments, properties or
other non-cash assets constituting proceeds of any such Asset
Sale
are pledged to the Trustee as Collateral under the Pledge
Agreements or another Collateral Document.
Section 4.12. Limitation on Certain Transfers of Assets.
The Company shall not, and shall not permit any Subsidiary
to, transfer, sell, assign or contribute any assets to any
Subsidiary of the Company other than (a) Investments of the type
per-
mitted under Section 4.14, (b) sales, leases, conveyances or
other dispositions of assets permitted under Sections 4.06, 4.08
and 4.11, (c) transfers, sales, assignments or contributions of
assets to any
Domestic MES Subsidiary, any Dynalectric Company or any SellCo
Subsidiary in connection with, and at the time of, the sale of
such Domestic MES Subsidiary, Dynalectric Company or SellCo
Subsidiary, provided that the sale of such assets would otherwise
have been permitted under the other provisions described in this
Indenture, including, without limitation, Section 4.11 and
Article
5, and (d) the sale, transfer, assignment or contribution of the
Capital Stock or assets of (i) any Domestic MES Subsidiary to any
other Domestic MES Subsidiary, (ii) any Dynalectric Company
to another Dynalectric Company or to any MES Company, (iii) any
Subsidiary of SellCo to any other Subsidiary of SellCo, (iv) any
Foreign MES Subsidiary to any other Foreign MES Subsidiary,
or (v) any Software House Subsidiary to any other Software House
Subsidiary.
Section 4.13.No Material Changes in the Nature of the Business.
The Company shall not, and shall not permit any of its Subsidiaries to, engage in any business not related to its businesses engaged in on the Issue Date.
Section 4.14. Limitation on Investments and Advances.
The Company shall not, and shall not permit any of its Subsidiaries to, make any Investments in or advances to any other Person, except for:
(a) Permitted Investments;
(b) Investments in the Company, MES or any Domestic MES Subsidiary;
(c) Investments consisting of extensions of trade credit and notes receivable, in either case, made or obtained in the ordinary course of business consistent with past practice;
(d) existing Investments (but only to extent of the capital invested in such investments at the Issue Date unless otherwise provided in this Section 4.14);
(e) Investments consisting of loans or advances to the Company, MES, any Domestic MES Subsidiary or any Dynalectric Company made in the ordinary course of business and consistent with past practices in connection with the Company's, MES's or the Dynalectric Companies' cash management system;
(f) Investments made after the Issue Date consisting of loans, advances or capital contributions (i) by the Company, MES, or any MES Subsidiary to any SellCo Company; provided, however, that such Investments in the aggregate shall not exceed at any time outstanding $7,000,000, (ii) by the Company, MES, or any MES Subsidiary to any Dynalectric Company; provided, however, that such Investments in the aggregate shall not exceed at any time outstanding $8,000,000, (iii) by a Dynalectric Company to any other Dynalectric Company, and (iv) by a SellCo Company to any other SellCo Company;
(g) loans or advances to employees of the Company, MES, any Domestic MES Company, any Dynalectric Company or any SellCo Company, which loans and advances in the aggregate shall not exceed $500,000 at any time outstanding;
(h) Investments made by the Company or any MES Company after the Issue Date in (i) Comstock in an aggregate amount not in excess of $5,000,000 (Canadian) at any time outstanding, and (ii) Foreign MES Subsidiaries in an aggregate amount not in excess of $5,000,000 at any time outstanding;
(i) Investments made by any Foreign MES Subsidiary in any Foreign MES Subsidiary;
(j) Investments of the Company or any of its Subsidiaries consisting of notes, bonds, debentures or other securities or instruments (other than general partnership and similar interests) acquired by the Company or such Subsidiary in connection with an Asset Sale permitted hereunder;
(k) Investments of the Company or any of its Subsidiaries made in the ordinary course of business in connection with its capacity as a co-venturer in a joint venture, corporation or other similar pooling of efforts in respect of a specific project or series of related specific projects for a limited or fixed duration to conduct a business of the type in which the Company or such Subsidiary is presently engaged, consistent with past practices;
(l) Investments of SellCo evidenced by the SellCo Intercompany Note;
(m) Investments of Defender consisting of Indebtedness incurred by the Company permitted in Section 4.09(xviii); and
(n) Additional Investments made in the ordinary course of business consistent with past practice in an aggregate amount not in excess of $2,500,000 at any time outstanding.
Section 4.15. Maintenance of Coverage Ratios.
(a) The Operating Companies shall maintain an Unrestricted Cash Coverage Ratio for each of the periods listed below of not less than the following ratio, calculated as of the last date of the periods indicated below:
Unrestricted Cash
Measurement Period Coverage Ratio
January 1, 1995 - September 30, 1995 1.00:1
January 1, 1995 - December 31, 1995 1.00:1
Each Rolling Four Fiscal Quarter
Period ending thereafter 1.00:1
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(b) The Operating Companies shall maintain a Consolidated Fixed Charge Coverage Ratio for each of the periods listed below of not less than the following ratio, calculated as of the last date of the periods indicated below:
Consolidated Fixed Charge
Measurement Period Coverage Ratio
January 1, 1995 - September 30, 1995 1.00:1
January 1, 1995 - December 31, 1995 1.00:1
Each Rolling Four Fiscal Quarter
Period ending thereafter 1.50:1
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Section 4.16. Capital Expenditures.
(a) The Company shall not permit the aggregate Capital Expenditures of the Operating Companies made during each of the fiscal years set forth below to be in excess of the maximum amount set forth below for such fiscal year:
Maximum Amount of
Fiscal Year Beginning in Capital Expenditures
1994 10,000,000
1995 10,500,000
1996 11,000,000
1997 and thereafter 11,500,000
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(b) The Company shall not permit the aggregate Capital Expenditures of the SellCo Companies (other than the Water Companies) made during each of the fiscal years set forth below to be in excess of the maximum amount set forth below for such fiscal year:
Maximum Amount of
Fiscal Year Beginning in Capital Expenditures
1994 4,000,000
1995 4,000,000
1996 4,000,000
1997 and thereafter 4,000,000
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Section 4.17. Corporate Existence.
Except as permitted under Article 5, the Company shall do or
cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence and the corporate,
partnership or other existence of each Subsidiary of the Company
in accordance with the respective organizational documents as
they may be from time to time amended of the Company and each
such Subsidiary and the rights (charter and statutory),
governmental licenses and governmental franchises of the Company
and its Subsidiaries; provided, however, that neither the Company
nor any
of its Subsidiaries shall be required to preserve any statutory
right, governmental license or governmental franchise of any
Subsidiary of the Company, unless the failure to do so would have
a
Material Adverse Effect; and provided further that nothing in
this Section 4.17 shall prohibit the dissolution of any such
Subsidiary of the Company (other than MES, SellCo or any Software
House Subsidiary) if such dissolution would not have a Material
Adverse Effect.
Section 4.18. Change of Control.
(a) If there shall at any time or times occur a Change of Control, then the Company shall notify the Holders in writing of such occurrence and shall make an offer to repurchase (the "Change of Control Offer"), not later than the 90th day after the earlier of (i) an Officer of the Company obtaining knowledge of such occurrence, and (ii) written notice to the Company by the Trustee or any Holder of any Security of such occurrence (the "Change of Control Payment Date"), all Securities then outstanding at a price equal to 100% of the outstanding principal amount thereof plus accrued and unpaid interest to the repurchase date (the "Offer Price").
(b) The Company shall comply with all applicable law (including, without limitation, Rule 14e-1 under the Exchange Act, if applicable) in the event that the Company shall be required to make an offer to redeem pursuant to this Section 4.18.
(c) Subject to Section 4.18(b), the Company shall provide the Trustee with written notice of the Change of Control Offer at least 60 days before any such Change of Control Payment Date and at least 10 days before the notice of any Change of Control Offer is mailed to Holders. Notice of a Change of Control Offer shall be mailed by the Company not less than 45 days or more than 60 days before the Change of Control Payment Date to the Holders at their last registered addresses with a copy to the Trustee and the Paying Agent. The Change of Control Offer shall remain open from the time of mailing until one Business Day before the Change of Control Payment Date. The notice shall contain all instructions and materials necessary to enable such Holders to tender Securities pursuant to the Change of Control Offer. The notice, which shall govern the terms of the Change of Control Offer, shall state, in addition to anything required to be stated therein under applicable law:
(i) that the Change of Control Offer is being made pursuant to this Section 4.18 and that all Securities validly tendered will be accepted for payment;
(ii) the Offer Price and the Change of Control Payment Date;
(iii) that any Security not tendered for payment will continue to accrue interest;
(iv) that, unless the Company defaults in making such repurchase payment, any Security accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest on and after the Change of Control Payment Date;
(v) that Holders electing to have a Security repurchased pursuant to a Change of Control Offer will be required to surrender the Security, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Security completed, to the Company at the address specified in the notice at least one Business Day before the Change of Control Payment Date;
(vi) that Holders will be entitled to withdraw their election if the Company receives, not later than one Business Day prior to the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Securities the Holder delivered for repurchase and a statement that such Holder is withdrawing his election to have such Security repurchased;
(vii) that Holders whose Securities are repurchased only in part will be issued new Securities representing the unrepurchased portion of the Securities surrendered;
(viii) the instructions that Holders must follow in order to tender their Securities; and
(ix) the circumstances and relevant facts regarding such Change of Control (including, but not limited to, information (to the extent reasonably available to the Company) with respect to pro forma historical and projected financial information after giving effect to such Change of Control, information regarding the Persons acquiring control, and such Person's business plans going forward).
(d) On the Change of Control Payment Date, the Company shall, to the extent lawful (i) accept for payment Securities or portions thereof tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent money sufficient to pay the Offer Price of all Securities or portions thereof so tendered, and (iii) deliver to the Trustee Securities so accepted, together with an Officer's Certificate stating the Securities or portions thereof tendered to the Company. The Paying Agent shall promptly mail or deliver to the Holders of Securities so accepted payment in an amount equal to the Offer Price, and the Trustee shall promptly authenticate and mail or deliver to Holders whose Securities are repurchased only in part a new Security equal in principal amount to the unrepurchased portion of the Security surrendered. For purposes of this Section 4.18, the Trustee shall act as Paying Agent.
Section 4.19. Maintenance of Properties.
The Company shall cause all material properties owned by the
Company or any of its Subsidiaries or used or useful in the
conduct of its business or the business of any of its
Subsidiaries
to be maintained and kept in good condition, repair and working
order (ordinary wear and tear excepted) and supplied with all
necessary equipment and shall cause to be made all necessary re-
pairs, renewals, replacements, betterments and improvements
thereof, all as in the reasonable judgment of the Company may be
necessary so that the business carried on in connection therewith
may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section shall prevent the
Company or any of its Subsidiaries from discontinuing the
operation
or maintenance of any of such properties if such discontinuance
is, in the reasonable judgment of the Company, desirable in the
conduct of its business or the business of any of its
Subsidiaries and
not disadvantageous in any material respect to the Holders.
Section 4.20. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (a) all
taxes, assessments and governmental charges levied or imposed
upon the Company or any of its Subsidiaries or upon the income,
profits or property of the Company or any Subsidiary, and (b) all
lawful claims for labor, materials and supplies that, if unpaid,
might by law become a Lien upon the property of the Company or
any of its Subsidiaries; provided, however, that neither the
Company nor any of its Subsidiaries shall be required to pay or
discharge or cause to be paid or discharged any such tax,
assessment, charge or claim (i) whose amount, applicability or
validity is being contested in good faith by appropriate
proceedings, and
with respect to which appropriate reserves have been established
in accordance with Generally Accepted Accounting Principles or
(ii) if the failure to so pay or discharge would not have a
Material Adverse Effect.
Section 4.21. Maintenance of Insurance.
The Company shall, and shall cause its Subsidiaries to, keep
at all times all of their properties that are of an insurable
nature insured against loss or damage with insurers believed by
the
Company to be responsible to the extent that property of similar
character is usually so insured by corporations similarly
situated and owning like properties in accordance with good
business
practice. The Company shall, and shall cause its Subsidiaries
to, use the proceeds from any such insurance policy to repair,
replace or otherwise restore the property to which such proceeds
relate;
provided that the Company or such Subsidiary may elect not to
make such repair, replacement or restoration if the Company or
such Subsidiary determines in good faith that such repair,
replace-
ment or restoration is not in the best interests of the Company
or such Subsidiary.
Section 4.22. Compliance with Law.
The Company shall, and shall cause each of its Subsidiaries
to, comply, in all material respects, with all applicable
federal, state and local laws and regulations, including, without
limitation,
ERISA, those regarding the collection, payment and deposit of
employees' income, unemployment and Social Security taxes and
those relating to environmental matters, except where the failure
to comply would not have a Material Adverse Effect.
Section 4.23. Books and Records.
The Company shall, and shall cause each of its Subsidiaries to, keep proper records and books of account with respect to its business activities, in which proper entries, reflecting all of their financial transactions, are made in accordance with Generally Accepted Accounting Principles.
Section 4.24. Employee Benefit Plans; ERISA.
The Company shall not, directly or indirectly, and shall not
permit its Subsidiaries or any ERISA Affiliate to, directly or
indirectly, by reason of an amendment or amendments (other than
any amendment required by applicable law or by any federal or
state agency or commission) to, or the adoption of, one or more
Title IV Plans, permit the present value of all accrued benefit
liabilities, under all Title IV Plans (using the actuarial
assumptions utilized for purposes of funding such Title IV Plans)
to increase by more than $2,000,000; provided that this
limitation shall not
be applicable to the extent that the fair market value of assets
allocable to such benefits, all determined as of the most recent
valuation date for each such Title IV Plan, is in excess of the
benefit
liabilities, or to increase to the extent security must be
provided to any Title IV Plan under Section 401(a)(29) of the
Code. Neither the Company nor any of its Subsidiaries shall
establish or
become obligated to any new Plan that is a "welfare benefit
plan," as defined in Section 3(1) of ERISA, for the purpose of
providing retiree medical and/or retiree life insurance benefits,
or modify
any existing welfare benefit plan for the benefit of retirees,
which would result in the present value of future liabilities
under any such plans to increase by more than $1,000,000 (except
as may be
required by applicable laws or by any state or federal agency or
commission). Except as hereinabove permitted with respect to any
Title IV Plan, neither the Company nor any of its Subsidiaries
shall establish or become obligated to any new Pension Plan, or
modify any existing Pension Plan, which would result in the
present value of future liabilities under any such plans
increasing by
more than $1,000,000.
Section 4.25. Modification of Material Contractual Obligations.
The Company shall not, and shall not permit any of its
Subsidiaries to, alter, amend, modify, rescind, terminate or
waive any of their respective rights under, or fail to comply in
all material
respects with, any of its Material Contractual Obligations;
provided, however, that (a) the Company and each of its
Subsidiaries may amend its certificate of incorporation and
bylaws (or other
similar governing documents) if such amendment would not have a
Material Adverse Effect, (b) the Company and the MES Companies
may amend the Revolving Credit Agreement if such
amendment would not have a Material Adverse Effect, and (c) the
Company and the Dynalectric Companies may amend the Dynalectric
Revolving Credit Agreement if such amendment would
not have a Material Adverse Effect.
Section 4.26. Security Interests.
The Company shall comply in all material respects with its obligations and agreements under the Collateral Documents and the Intercreditor Agreement.
Section 4.27. Lease Obligations.
(a) The Company shall not create or suffer to exist, or permit any of its Subsidiaries to create or suffer to exist, any obligations as lessee for the rental or hire of real or personal property of any kind under leases or agreements to lease having an original term of more than one year (other than Capital Leases) that would cause the liabilities of (i) the Operating Companies, on a consolidated basis, in respect of all such obligations (net of rentals received in connection with any sublease arrangements) to exceed the sum of (A) $24,000,000, plus (B) an amount equal to 110% of the obligations as lessee of any Subsidiary acquired by the Company and permitted by Section 5.01(g) or (h) on the date such Subsidiary was acquired in the Company's 1994 fiscal year, the sum of (A) $25,000,000, plus (B) an amount equal to 110% of the obligations as lessee of any Subsidiary acquired by the Company and permitted by Section 5.01(g) or (h) on the date such Subsidiary was acquired in the Company's 1995 fiscal year, the sum of (A) $26,000,000, plus (B) an amount equal to 110% of the obligations as lessee of any Subsidiary acquired by the Company and permitted by Section 5.01(g) or (h) on the date such Subsidiary was acquired in the Company's 1996 fiscal year, and the sum of (A) $27,000,000, plus (B) an amount equal to 110% of the obligations as lessee of any Subsidiary acquired by the Company and permitted by Section 5.01(g) or (h) on the date such Subsidiary was acquired in the Company's 1997 fiscal year, or (ii) the SellCo Companies (other than the Water Companies), on a consolidated basis, in respect of all such obligations to exceed $11,000,000 payable in any fiscal year.
(b) The Company shall not, and shall not permit any of its Subsidiaries to, become or remain liable as lessee or guarantor or other surety with respect to any lease, whether an operating lease or a Capital Lease, of any property (whether real or personal or mixed), whether now owned or hereafter acquired, which (i) the Company or any of its Subsidiaries has sold or transferred or is to sell or transfer to any other Person (other than customary contingent liabilities as a sublessor or assignor of a lease), or (ii) the Company or any of its Subsidiaries intends to use for substantially the same purposes as any other property that has been or is to be sold or transferred by that entity to any other Person in connection with such lease unless, in either case, the Company complies with Section 4.11.
Section 4.28. Maintenance of Consolidated Tangible Net Worth.
The Operating Companies shall at all times maintain a Consolidated Tangible Net Worth of not less than an amount equal to (a) from the Issue Date through December 31, 1994, $44,000,000, and (b) during each Quarter commencing on or after January 1, 1995, the sum of (i) $44,000,000 plus (ii) an amount equal to the sum of fifty percent of the cumulative Consolidated Net Income of the Operating Companies from January 1, 1995 through the date of determination.
Section 4.29. Performance Guaranties.
The Company shall not, and shall not permit any of its Subsidiaries to, enter into, assume, or otherwise become liable under, any Performance Guaranty except in the ordinary course of business consistent with sound commercial practices; provided, however, that the aggregate amount of Performance Guaranties in respect of the contracts of Unique Construction shall not exceed $8,000,000 at any time outstanding.
ARTICLE 5
MERGERS AND
ACQUISITIONS
Section 5.01. Mergers, Acquisitions, Etc.
The Company shall not and shall not permit any of its
Subsidiaries to (i) merge with any Person, (ii) consolidate with
any Person, (iii) acquire all or substantially all of the Capital
Stock
or stock equivalents of any Person, (iv) acquire, whether in one
transaction or in a series of transactions, all or substantially
all of the assets of any Person or assets constituting the
business of a
division, branch or other unit operation of any Person, or (v)
sell, lease, transfer or otherwise dispose of, whether in one
transaction or in a series of transactions, all or substantially
all of its assets,
except:
(a) the merger of a Domestic MES Subsidiary with and into, or sale or transfer of all or substantially all of the assets or Capital Stock of a Domestic MES Subsidiary to, MES or another Domestic MES Subsidiary;
(b) the merger of a Foreign MES Subsidiary with and into, or sale or transfer of all or substantially all of the assets or Capital Stock of a Foreign MES Subsidiary to, MES or another Foreign MES Subsidiary;
(c) the merger of a Dynalectric Company with and into, or sale or transfer of all or substantially all of the assets or Capital Stock of a Dynalectric Company to, another Dynalectric Company or an MES Subsidiary, or, with respect to the sale or transfer of the Capital Stock of a Dynalectric Company, to MES;
(d) the merger of a Subsidiary of SellCo with and into, or sale or transfer of all or substantially all of the assets or Capital Stock of a Subsidiary of Sellco to, SellCo or another Subsidiary of Sellco;
(e) the merger of a Software House Subsidiary with and into, or sale or transfer of all or substantially all of the assets or Capital Stock of a Software House Subsidiary to, another Software House Subsidiary;
(f) one or more Asset Sales in respect of all or substantially all of the assets of (i) any Subsidiary of MES (other than a sale by such Subsidiary that would constitute a sale of all or substantially all of the assets of MES), (ii) any Dynalectric Company, (iii) any SellCo Company, and (iv) any Software House Subsidiary, in each case, subject to compliance with Section 4.11;
(g) the acquisition for cash of all or substantially all of the assets of any corporation by any MES Subsidiary, provided that (i) such assets are purchased for no more than the fair market value thereof, and (ii) the aggregate fair market value of all such assets acquired during any calendar year shall not exceed $500,000; provided, however, that, to the extent the actual acquisition of assets pursuant to this clause (g) in any calendar year shall be less than the maximum amount set forth in this clause (g) for such calendar year (without giving effect to the carry over permitted by this provision), the difference between such stated maximum amount and such actual acquisitions shall, in addition, be available for acquisitions in the next succeeding calendar year; and
(h) the acquisition of all or substantially all of the assets of any domestic corporation by any Domestic MES Subsidiary, provided that (i) such assets are purchased for no more than the fair market value thereof, and (ii) the consideration for such assets consists solely of the common stock of such Domestic MES Subsidiary.
ARTICLE 6
DEFAULTS AND
REMEDIES
Section 6.01. Events of Default.
(a) An "Event of Default" occurs if:
(i) any Obligor defaults in the payment of interest on any Security (including, without limitation, the issuance of Interest Deferral Securities) when the same becomes due and payable and the Default continues for a period of five days;
(ii) any Obligor defaults in the payment of the principal of any Security when the same becomes due and payable at maturity, upon redemption, repurchase or otherwise;
(iii) any Obligor fails to observe or perform any covenant, condition or agreement on the part of the Company to be observed or performed pursuant to the Intercreditor Agreement or pursuant to Section 4.11, 4.15, 4.16, 4.17, 4.18, 4.25, 4.26, 4.28 or 4.29 or pursuant to Article 3 or Article 5;
(iv) any Obligor fails to comply with any of its other agreements or covenants in, or provisions of, the Securities, any Collateral Document, or this Indenture and the Default continues for the period and after the notice specified in Section 6.01(c);
(v) any representation or warranty in Article 10 or in any Collateral Document shall have been incorrect in any material respect when made;
(vi) (A) a default in the payment of principal, premium or
interest when due occurs (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) under
any agreement, Guaranty, note, mortgage, indenture or
instrument (other than the Securities) under which there may be
issued or by which there may be secured or evidenced any Indebt-
edness of the Company or any of its Subsidiaries (other than
(1) the Rohr Indebtedness, (2) Indebtedness of an Insignificant
Subsidiary or (3) so long as such Indebtedness is not
guaranteed, directly or indirectly, by the Company, any of
the domestic MES subsidiaries, MES or any of the SellCo
Companies, Indebtedness of any of the UK Subsidiaries outstanding
under a credit facility existing on the Issue Date and any
extension, renewal, or replacement thereof) in an amount or
amounts in excess of (x) $7,500,000 individually or in the
aggregate,
in respect of the Indebtedness of Comstock, and (y)
$5,000,000 individually or $7,000,000 in the aggregate, in
respect of the Indebtedness of the Company or any of its
Subsidiaries other
than Comstock, (B) a default occurs under any such
agreement, note, mortgage, indenture or instrument, the effect of
which (1) results in the acceleration of such Indebtedness, or
(2) permits the holder of such Indebtedness to accelerate,
declare to be due and payable, or demand total or partial
redemption, prepayment or repurchase of, all or any portion of
such
Indebtedness prior to its stated maturity, or (C) all or any
portion of such Indebtedness is required to be prepaid, redeemed,
purchased or defeased, or an offer to prepay, redeem,
purchase or defease such Indebtedness is required to be
made, in each case prior to the stated maturity thereof;
(vii) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of its Subsidiaries (other than an Insignificant Subsidiary or in respect of the Rohr Indebtedness) and such judgment or judgments remain undischarged for a period (during which execution shall not be effectively stayed) of 60 days, provided that any such judgment or judgments exceeds $1,000,000 individually or $1,500,000 in the aggregate;
(viii) the Company or any of its Subsidiaries (other than an Insignificant Subsidiary) pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case, or
(B) consents to the entry of an order for relief against it in an involuntary case, or
(C) consents to the appointment of a Custodian of it or for all or substantially all of its property, or
(D) makes a general assignment for the benefit of its creditors, or
(E) is unable to pay its debts as the same become due; or
(ix) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:
(A) is for relief against the Company or any Subsidiary of the Company (other than an Insignificant Subsidiary) in an involuntary case, or
(B) appoints a Custodian of the Company or any Subsidiary of the Company (other than an Insignificant Subsidiary) or for all or substantially all of its property, or
(C) orders the liquidation of the Company or any Subsidiary of the Company (other than an Insignificant Subsidiary),
and the order or decree remains unstayed and in effect for 60 days; or
(x) the Liens on any of the Collateral granted or purported to be granted pursuant to any Collateral Document shall be or become unenforceable or invalid, or the priority thereof shall become diminished; or
(xi) with respect to any Plan, (A) a prohibited
transaction within the meaning of Section 4975 of the Code or
Section 406 of ERISA occurs that in the reasonable determination
of the
Trustee could result in direct or indirect liability to the
Company or any of its Subsidiaries; (B) with respect to any Title
IV Plan, the filing of a notice to voluntarily terminate any such
plan in a distress termination; (C) with respect to any
Multiemployer Plan, the Company, any of its Subsidiaries, or any
ERISA Affiliate shall incur any Withdrawal Liability; (D) with
respect to any Qualified Plan, the Company, any of its
Subsidiaries, or any ERISA Affiliate shall incur an accumulated
funding deficiency or request a funding waiver from the IRS, and
(E) with respect to any Title IV Plan or Multiemployer Plan
that has an ERISA Event not described in clause (B), (C) or (D)
above that, in the reasonable determination of the Trustee,
there is a reasonable likelihood for termination of any such
plan by the PBGC and for resulting liability of the Company, any
of its Subsidiaries or any ERISA Affiliate; provided,
however, that the events listed in clauses (A) through (E)
above shall constitute Events of Default only if the liability,
deficiency or waiver request of the Company, any of its
Subsidiaries
or any ERISA Affiliate, whether or not assessed, exceeds,
individually or in the aggregate, $1,000,000; or
(xii) the Guaranty pursuant to Article 11 shall cease for any reason to be in full force and effect or either Guarantor, or any Person acting by or on behalf of either Guarantor, shall deny or disaffirm its obligations under such Guaranty.
(b) The term "Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.
(c) A Default under Section 6.01(a)(iv) is not an Event of Default until 30 days after the Trustee notifies the Obligors, or until 30 days after the Holders of at least 25% in aggregate principal amount of the then outstanding Securities notify the Obligors (and the Trustee, if such notice is given by the Holders), in writing, of the Default. The notice must specify the Default, demand that it be remedied and state that the notice is a "Notice of Default."
Section 6.02. Acceleration.
If an Event of Default (other than an Event of Default
specified in clause (viii) or (ix) of Section 6.01(a)) occurs and
is continuing, the Trustee may, by written notice to the Company,
or
the Holders of at least 25% in aggregate principal amount of the
then outstanding Securities may, by written notice to the
Obligors and the Trustee, and the Trustee shall, upon the request
of such
Holders, declare the unpaid principal of, and any accrued but
unpaid interest on, all the Securities to be due and payable.
Upon such declaration, the unpaid principal of, and accrued and
unpaid
interest shall be due and payable immediately in cash. In the
event of a declaration of acceleration because an Event of
Default specified in Section 6.01(a)(vi) has occurred and is
continuing, such
declaration of acceleration shall be automatically annulled if
such default is cured or waived or the holders of the
Indebtedness that is the subject of such Event of Default have
rescinded their
declaration of acceleration in respect of such Indebtedness
within 30 days thereof and the Trustee has received written
notice of such cure, waiver or rescission and no other Event of
Default
under Section 6.01(a)(vi) has occurred that has not been cured or
waived within 30 days of the declaration of acceleration of such
Indebtedness in respect thereof. If an Event of Default
specified
in clause (viii) or (ix) of Section 6.01(a) occurs, the unpaid
principal of, and any accrued but unpaid interest on, all the
Securities shall ipso facto become and be immediately due and
payable
in cash without any declaration or other act on the part of the
Trustee or any Holder. The Holders of a majority in aggregate
principal amount of the then outstanding Securities by written
notice
to the Trustee may rescind an acceleration and its consequences
if the rescission would not conflict with any judgment or decree
of a court of competent jurisdiction and if all existing Events
of
Default (except nonpayment of principal or interest on the
Securities that has become due solely because of the
acceleration) have been cured or waived. No such rescission
shall affect any
subsequent Default or Event of Default or impair any right
consequent thereto.
Section 6.03. Other Remedies.
(a) Notwithstanding any other provision of this Indenture, if an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture, including, without limitation, the Guaranty, pursuant to Article 11.
(b) The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
Subject to Section 9.02, the Holders of at least a majority
in aggregate principal amount of the then outstanding Securities
by notice to the Trustee may waive an existing Default or Event
of Default and its consequences except a continuing Default or
Event of Default in the payment of the principal of or interest
on any Security. Upon any such waiver, such Default or Event of
Default shall cease to exist and, together with any Event of
Default arising therefrom, shall be deemed to have been cured for
every purpose of this Indenture, but no such waiver shall extend
to
any subsequent or other Default or impair any right consequent
thereon.
Section 6.05. Control by Majority.
(a) The Holders of at least a majority in aggregate principal amount of the then outstanding Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it. The Trustee may refuse, however, to follow any direction that conflicts with law or this Indenture, that may be unduly prejudicial to the rights of other Holders, or would subject the Trustee to personal liability. The Trustee shall be entitled to indemnification reasonably satisfactory to it against losses or expenses caused by the taking or not taking of such action.
(b) The Company may set a record date for purposes of
determining the identity of Holders entitled to vote or consent
to any action by vote or consent authorized or permitted under
this Indenture, which record date shall be the later of 10 days
prior to the first solicitation of such consent or the date of
the most recent list of Holders furnished to the Trustee pursuant
to
Section 2.05 of this Indenture prior to such solicitation. If a
record date is fixed, those persons who were Holders of
Securities at such record date (or their duly designated
proxies), and only
those persons, shall be entitled to take such action by vote or
consent or to revoke any vote or consent previously given,
whether or not such persons continue to be Holders after such
record date.
No such vote or consent shall be valid or effective for more than
120 days after such record date.
Section 6.06. Limitation on Suits.
(a) A Holder may pursue a remedy with respect to this Indenture or the Securities only if:
(i) the Holder gives to the Trustee written notice of a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount of the then outstanding Securities make a written request to the Trustee to pursue the remedy;
(iii) such Holder or Holders offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense;
(iv) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and
(v) during such 60-day period, the Holders of a majority in aggregate principal amount of the then outstanding Securities do not give the Trustee a direction inconsistent with the request.
(b) A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder.
Section 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the
right of any Holder to receive payment of principal of and
interest on the Security, on or after the respective due dates
expressed
in the Security, or to bring suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired
or affected without the consent of such Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a)(i) or
(ii) occurs and is continuing, the Trustee is authorized to
recover judgment in its own name and as trustee of an express
trust
against any or all of the Obligors or any other obligor on the
Securities for the whole amount of principal and interest
remaining unpaid on the Securities and interest on overdue
principal and,
to the extent lawful, interest and such further amount as shall
be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements
and
advances of the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and
other papers or documents as may be necessary or advisable in
order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel) and the Holders allowed
in any judicial proceedings relative to any Obligor (or any
other obligor upon the Securities), its creditors or its property
and shall be entitled and empowered to collect, receive and
distribute any money or other property payable or deliverable on
any
such claims, and any custodian in any such judicial proceeding is
hereby authorized by each Holder to make such payments to the
Trustee, and in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents
and
counsel, and any other amounts due the Trustee under Section
7.07. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents
and
counsel, and any other amounts due the Trustee under Section 7.07
out of the estate in any such proceeding shall be denied for any
reason, payment of the same shall be secured by a Lien on, and
shall be paid out of, any and all distributions, dividends,
money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or
under any
plan of reorganization or arrangement or otherwise. Nothing
herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any
Holder any
plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder, or to
authorize the Trustee to vote in respect of the claim of any
Holder in any
such proceeding except to vote for the election of a trustee in
bankruptcy or similar Person.
Section 6.10. Priorities.
(a) If the Trustee collects any money pursuant to this Article, any Collateral Document or the Intercreditor Agreement, it shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for
amounts due under Section 7.07, including payment of all
compensation, expense and liabilities incurred, and all advances
made, by
the Trustee, and the costs and expenses of collection;
Second: to the Holders for amounts due and unpaid on the
Securities for principal and interest, ratably, without
preference or priority of any kind, according to the amounts due
and
payable on the Securities for principal and interest,
respectively; and
Third: to the Obligors or as otherwise provided in the Intercreditor Agreement.
(b) The Trustee may fix a record date and payment date for any payment to Holders and give whatever notice to the Holders the Trustee deems appropriate.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action
taken or omitted by it as a Trustee, a court in its discretion
may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable
attorneys' fees,
against any party litigant in the suit, having due regard to the
merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee,
a suit
by a Holder pursuant to Section 6.06, or a suit by Holders of
more than 10% in aggregate principal amount of the then
outstanding Securities.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default known to the Trustee:
The duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee.
(ii) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. The Trustee shall, however, examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:
(i) This clause (c) does not limit the effect of clause
(a) or (b) of this Section.
(ii) The Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts.
(iii) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05.
(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the
Trustee is subject to clause (a), (b), (c) and (e) of this
Section 7.01.
(e) Notwithstanding anything to the contrary outstanding, no provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability or expense that may be incurred thereby, including, but not limited to, liability relating to any environmental laws, rules or regulations.
(f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.
Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely and shall be protected from acting or refraining from acting based upon any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate (which shall conform to the provisions of Section 12.05) or an Opinion of Counsel, or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in the Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered the Trustee reasonable security and indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction.
Section 7.03. Individual Rights of Trustee.
The Trustee, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Company, the other Obligors or an Affiliate of the Obligors with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. The Trustee is subject, however, to Sections 7.10 and 7.11.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for, and makes no
representation as to the validity or adequacy of this Indenture
or the Securities; it shall not be accountable for the Company's
use
of any proceeds from the Securities or any money paid to the
Company or upon the Company's direction under any provision
hereof; it shall not be responsible for the use or application of
any
money received by any Paying Agent other than the Trustee; and it
shall not be responsible for any statement or recital herein or
any statement in the Securities or any other document in
connection with the sale of the Securities or pursuant to this
Indenture other than its certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing
and if it is known to the Trustee, the Trustee shall mail to the
Holders, as their names and addresses appear on the register of
the Securities, a notice of the Default or Event of Default
within 90 days after the occurrence thereof. Except in the case
of a Default or Event of Default in payment on any Security, the
Trustee
may withhold the notice if and so long as a committee of its
Trust Officers in good faith determines that withholding the
notice is in the interests of the Holders.
Section 7.06. Reports by Trustee to Holders.
(a) Within 60 days after each May 15, beginning with the May 15 following the date of this Indenture, the Trustee shall mail to the Holders, in the manner and to the extent required by TIA Section 313(c), a brief report dated as of such reporting date that complies with TIA Section 313(a). The Trustee shall also comply with TIA Section 313(b). The Trustee shall also transmit by mail all reports as required by TIA Section 313(c).
(b) Commencing at the time this Indenture is qualified under the TIA, a copy of each report at the time of its mailing to Holders shall be filed with the SEC and each stock exchange on which the Securities are listed. The Company shall promptly notify the Trustee when the Securities are listed on any stock exchange.
Section 7.07. Compensation and Indemnity.
(a) The Obligors, jointly and severally, agree that they shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Obligors, jointly and severally, agree that they shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel.
(b) The Obligors, jointly and severally, shall indemnify the Trustee for, and hold it harmless against, any and all loss, liability or expense incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, except as set forth in Section 7.07(c). The Trustee shall notify each Obligor promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify each Obligor shall not relieve any Obligor of its obligations hereunder. The Obligors shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Obligors shall pay the reasonable fees and expenses of such counsel. The Obligors need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The obligation of the Obligors under this Section 7.07 shall survive the satisfaction and discharge of this Indenture.
(c) The Obligors need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through its own negligence or willful misconduct.
(d) To secure the Obligors' payment obligations in this Section, the Trustee shall have a claim and Lien prior to the Securities on all money or property held or collected by the Trustee, except that held in trust to pay principal of and interest on particular Securities. Such Lien shall survive the satisfaction and discharge of the Indenture.
(e) When the Trustee incurs expenses or renders services
after an Event of Default specified in Section 6.01(a) (viii) or
(ix) occurs, the expenses and the compensation for the services
are intended to constitute expenses of administration under any
Bankruptcy Law.
Section 7.08. Replacement of Trustee.
(a) A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section.
(b) The Trustee may resign at any time and be discharged from the trust hereby created by so notifying the Company in writing. The Holders of a majority in aggregate principal amount of the then outstanding Securities may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if:
(i) the Trustee fails to comply with Section 7.10;
(ii) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law;
(iii) a Custodian or public officer takes charge of the Trustee or its property; or
(iv) the Trustee becomes incapable of acting.
(c) If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in aggregate principal amount of the then outstanding Securities may appoint a successor Trustee to replace the successor Trustee appointed by the Company.
(d) If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 10% in aggregate principal amount of the then outstanding Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee.
(e) If the Trustee after written request by any Holder who
has been a Holder for at least six months fails to comply with
Section 7.10, such Holder may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment
of a successor Trustee.
(f) A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to the Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Obligors' obligations under Section 7.07 shall continue for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, Etc.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust
business to, another corporation, the successor corporation
without any further
act shall be the successor Trustee, provided such successor is
eligible and qualified under Section 7.10.
Section 7.10. Eligibility; Disqualification.
(a) There shall at all times be one or more Trustee(s) hereunder at least one of whom shall be at all times either:
(i) a corporation organized and doing business under the laws of the United States of America or of any state or the District of Columbia, authorized under such laws to exercise corporate trust powers and subject to supervision or examination by federal or state authority and having a combined capital and surplus of at least $50,000,000; or
(ii) a corporation or other Person organized and doing business under the laws of a foreign government that is permitted to act as Trustee pursuant to a rule, regulation or order of the SEC, authorized under such laws to exercise corporate trust powers, and subject to supervision or examination by authority of such foreign government or a political subdivision thereof substantially equivalent to supervision or examination applicable to United States institutional trustees, and having a combined capital and surplus of at least $50,000,000.
(b) If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then, for the purposes of this Section 7.10, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 7.10, it shall resign immediately in the manner and with the effect hereinafter specified in this Article 7. Neither the Company nor any person directly or indirectly controlling, controlled by, or under common control with, the Company shall serve as Trustee hereunder.
(c) The Trustee shall be subject to the provisions of Section 310(b) of the TIA during the period of time provided for therein.
Nothing herein shall prevent the Trustee from filing with the SEC the application referred to in the second to last paragraph of Section 310(b) of the TIA.
(d) Notwithstanding the provisions of clause (a) of this
Section 7.10, no obligor upon the Securities or any Affiliate of
such obligor shall serve as Trustee hereunder.
Section 7.11.Preferential Collection of Claims Against Company.
The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE 8
DISCHARGE OF
INDENTURE
Section 8.01. Termination of Company's Obligations.
(a) This Indenture shall cease to be of further effect (except that the Obligors' obligations under Section 7.07 and the Obligors', Trustee's and Paying Agent's obligations under Section 8.03 shall survive) when all outstanding Securities theretofore authenticated and issued have been delivered (other than destroyed, lost or stolen Securities that have been replaced or paid) to the Trustee for cancellation and each Obligor has paid all sums payable hereunder.
(b) In addition, the Obligors may terminate their obligations under the Securities and this Indenture if:
(i) the Company has irrevocably deposited in trust for the benefit of the Holders with the Trustee or (at the option of the Trustee) with a trustee reasonably satisfactory to the Trustee and the Company, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee at any time prior to the stated maturity of the Securities or the date of redemption of all of the outstanding Securities, money or U.S. Government Obligations maturing as to principal and interest in such amounts and at such times as are sufficient (in the reasonable opinion of a nationally recognized firm of independent accountants expressed in a written certificate thereof delivered to the Trustee, without consideration of the reinvestment of such interest) to pay principal of and interest on the outstanding Securities (other than Securities replaced pursuant to Section 2.07) to maturity or redemption, as the case may be, and to pay all other sums payable by it hereunder, provided that (A) the trustee of the irrevocable trust shall have been irrevocably instructed to pay such money or the proceeds of such U.S. Government Obligations to the Trustee and (B) the Trustee shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to the payment of said principal and interest with respect to the Securities;
(ii) the Obligors deliver to the Trustee an Officers' Certificate stating that all conditions precedent provided for herein relating to the satisfaction and discharge of this Indenture have been complied with, and an Opinion of Counsel to the same effect;
(iii) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or as a result thereof;
(iv) the Obligors shall have delivered to the Trustee (A) either (1) a ruling directed to the Trustee received from the Internal Revenue Service to the effect that the Holders of the Securities will not recognize income, gain or loss for federal income tax purposes as a result of the Obligors' exercise of its option under this clause (b) and will be subject to federal income tax on the same amount and in the same manner and at the same time as would have been the case if such option had not been exercised or (2) an Opinion of Counsel, reasonably satisfactory to the Trustee, to the same effect as the ruling described in clause (1), accompanied by a ruling to that effect published by the Internal Revenue Service, and (B) an Opinion of Counsel, reasonably satisfactory to the Trustee, to the effect that (1) after the passage of 90 days following the deposit, the trust funds will not be subject to the preference provisions of Section 547 of Title 11 of the United States Code (except that no opinion need be given with respect to the application of subsection (6)(4)(b) thereof), or (2) (x) the Trustee will hold, for the benefit of the Holders of Securities, a valid and perfected security interest in such trust funds, and (y) the Holders of Securities will be entitled to receive adequate protection of their interests in such trust funds if such trust funds are used;
(v) each Obligor has paid or caused to be paid all sums then payable by such Obligor hereunder and under the Securities; and
(vi) the exercise by the Obligors of their option under this clause (b) shall not cause the Trustee to have a conflicting interest as defined in Section 7.10 or for purposes of the TIA with respect to any securities of the Company.
(c) Notwithstanding the foregoing paragraph (b), prior to the end of the 90-day period following the deposit referred to above, none of the Company's obligations or, to the extent applicable, any Guarantor's obligations, under this Indenture shall be discharged and, subsequent to the end of such 90-day period, the Obligors' respective obligations under Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.10, 4.01, 4.02, 4.05, 4.17, 7.07, 7.08, 8.03 and 8.04 and under Article 11 shall survive until the Securities are no longer outstanding. Thereafter, only the Obligors' and the Trustee's obligations in Sections 7.07, 8.03 and 8.04 shall survive.
(d) After such irrevocable deposit made pursuant to Section 8.01(b) and satisfaction of the other conditions set forth herein, the Trustee upon request shall acknowledge in writing the discharge of the Obligors' obligations under this Indenture except for those surviving obligations specified above.
(e) In order to have money available on a payment date to pay principal of or interest on the Securities, the U.S. Government Obligations shall be payable as to principal or interest at least one Business Day before such payment date in such amounts as will provide the necessary money.
(f) "U.S. Government Obligations" means securities that are
(i) direct obligations of the United States of America for the
payment of which its full faith and credit is pledged or (ii)
obligations of a Person controlled or supervised by, and acting
as an agency or instrumentality of, the United States of America,
the timely payment of which is unconditionally guarantied as a
full
faith and credit obligation by the United States of America,
that, in either case under clause (i) or (ii), are not callable
or redeemable at the option of the issuer thereof.
Section 8.02. Application of Trust Money.
The Trustee or a trustee satisfactory to the Trustee and the Company shall hold in trust money or U.S. Government Obligations deposited with it pursuant to Section 8.01(b). It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of and interest on the Securities.
Section 8.03. Repayment to the Company.
(a) The Trustee and the Paying Agent shall promptly pay to the Company, upon written request, any excess money or securities held by them at any time after the termination of the Company's obligations in accordance with Section 8.01.
(b) The Trustee and the Paying Agent shall pay to the Company, upon written request, any money held by them for the payment of principal or interest that remains unclaimed for two years and six months after the date upon which such payment shall have become due; provided, however, that the Company shall have caused notice of such payment to be mailed to each Holder entitled thereto not less than 30 days prior to such repayment. After payment to the Company, the Holders entitled to the money must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease.
Section 8.04. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money
or U.S. Government Obligations in accordance with Section 8.02 by
reason of any legal proceeding or by reason of any order
or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, the
Obligors' obligations under this Indenture and the Securities
shall be revived
and reinstated as though no deposit had occurred pursuant to
Section 8.01(b) until such time as the Trustee or Paying Agent is
permitted to apply all such money or U.S. Government Obligations
in accordance with Section 8.02; provided, however, that if any
Obligor has made any payment of interest on or principal of any
Securities because of the reinstatement of its obligations, such
Obligor shall be subrogated to the rights of the Holders of such
Securities to receive such payment from the money or U.S.
Government Obligations held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENTS
Section 9.01. Without Consent of Holders.
(a) The Obligors and the Trustee may amend or supplement this Indenture or the Securities without the consent of any Holder:
(i) to cure any ambiguity, defect or inconsistency;
(ii) to comply with any requirements of the SEC in connection with the qualification of this Indenture under the TIA as then in effect;
(iii) to provide for uncertificated Securities in addition to certificated Securities; or
(iv) to make any change that does not adversely affect the rights of any Holder hereunder or under any Collateral Document, the Intercreditor Agreement or any Security.
(b) Upon the written request of the Obligors, accompanied by a resolution of the Boards of Directors of the Obligors authorizing the execution of any such supplemental Indenture, and, upon receipt by the Trustee of the documents described in Section 9.06, the Trustee shall join with the Obligors in the execution of any supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may, in its discretion, but shall not be obligated to, enter into such supplemental Indenture.
Section 9.02. With Consent of Holders.
(a) The Obligors and the Trustee may amend any of the provisions of this Indenture, any Collateral Document, the Intercreditor Agreement or the Securities or waive compliance in a particular instance by any Obligor of any provision of this Indenture, any Collateral Document, the Intercreditor Agreement or the Securities, with the written consent of the Holders of at least a majority in aggregate principal amount of the then outstanding Securities; provided that, without the consent of each Holder affected, an amendment or waiver under this Section may not:
(i) reduce the principal amount of Securities the Holders of which must consent to an amendment or waiver;
(ii) reduce the rate of or change the time for payment of interest, including defaulted interest, on any Security;
(iii) reduce the principal or premium (if any) of or change the fixed maturity of any Security or alter the redemption provisions with respect thereto;
(iv) make any Security payable in money other than that stated in the Security;
(v) make any change in Section 6.04 or 6.07 or in this clause (v) of this Section 9.02(a);
(vi) waive a Default in the payment of principal of or interest on, or redemption payment with respect to, any Security;
(vii) make any change in Section 2 of the Intercreditor Agreement;
(viii) release any Collateral consisting of the Capital Stock of MES or SellCo; or
(ix) release any Guarantor or modify the provisions of this Indenture relating to the Guaranty set forth in Article 11 in a manner adverse to the Holders.
(b) Upon the written request of the obligors, accompanied by a resolution of the Boards of Directors of the obligors authorizing the execution of any such supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders as aforesaid, and upon receipt by the Trustee of the documents described in Section 9.06, the Trustee shall join with the obligors in the execution of such supplemental Indenture unless such supplemental Indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may, in its discretion, but shall not be obligated to, enter into such supplemental Indenture.
(c) It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof.
(d) After an amendment or waiver under this Section becomes effective, the Company shall mail to the Holders of each Security affected thereby a notice briefly describing the amendment or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental Indenture or waiver.
(e) The Company shall give the Holders of the Securities notice of the effectiveness of any amendment under this Section 9.02.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment to this Indenture or the Securities at a time when this Indenture shall be qualified under the TIA shall be set forth in a supplemental Indenture that complies with the TIA as then in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment or waiver becomes effective, a consent to
it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that
evidences the same Indebtedness as the consenting Holder's
Security, even if notation of the consent is not made on any
Security. Any such Holder or subsequent Holder may, however,
revoke
the consent as to his Security or portion of a Security if the
Trustee receives written notice of revocation before the date the
amendment or waiver becomes effective. An amendment or waiver
becomes effective in accordance with its terms and thereafter
binds every Holder. The Company may fix a record date for
determining which Holders must consent to such amendment or
waiver.
Section 9.05. Notation on or Exchange of Securities.
The Trustee may place an appropriate notation about an
amendment or waiver on any Security thereafter authenticated.
The Company, in exchange for all Securities, may issue and the
Trustee shall authenticate new Securities that reflect the
amendment or waiver. Failure to make the appropriate notation or
issue a new Security shall not affect the validity and effect of
such
amendment or waiver.
Section 9.06. Trustee to Sign Amendments, Etc.
The Trustee shall sign any amendment or supplemental
Indenture authorized pursuant to this Article 9 if the amendment
does not adversely affect the rights, duties, liabilities or
immunities of the Trustee. If it does, the Trustee may, but need
not, sign it. In signing or refusing to sign such amendment or
supplemental Indenture, the Trustee shall be entitled to receive,
if
requested, an indemnity reasonably satisfactory to it and to
receive, and, subject to Section 7.01, shall be fully protected
in relying upon, an Officers' Certificate and an Opinion of
Counsel as
conclusive evidence that such amendment or supplemental Indenture
is authorized or permitted by this Indenture, that it is not
inconsistent herewith, and that it will be valid and binding upon
the
Company in accordance with its terms. The Company may not sign
an amendment or supplemental Indenture until the Board of
Directors approves it.
ARTICLE 10
COLLATERAL
Section 10.01. Pledge of Collateral.
(a) Each of the Company and SellCo has made an assignment
of its right, title and interest in and to all of the "Pledged
Collateral" (as defined in the Pledge Agreements) to the Trustee
under the Pledge Agreements to which it is a party for the
benefit of the Holders of Securities and the Trustee. The due
and punctual payment of the principal of, premium, if any, and
interest
on, the Securities when and as the same shall be due and payable,
whether on an interest payment date, at maturity, by
acceleration, call for redemption or otherwise, and interest on
the overdue
principal and interest, if any, of the Securities according to
the terms hereunder or thereunder (and at the rate set forth
therein), and payment of all other obligations of the Obligors to
the Trustee
and the Holders pursuant to the terms of this Indenture are (and
are intended to be) secured by such Pledged Collateral as
provided in the Pledge Agreements, subject to the terms of the
Intercreditor Agreement. At the time the Pledge Agreements were
executed, each of the Company and SellCo had full right, power
and lawful authority to grant, convey, hypothecate, assign,
mortgage and pledge the property constituting such Pledged
Collateral, in the manner and form done, or intended to be done,
in the Pledge Agreements, free and clear of all liens, pledges,
charges and encumbrances whatsoever, except (i) the liens created
by the Pledge Agreements, the Software House Senior Pledge
Agreement, the Software House Subordinated Pledge Agreement,
the Software House SellCo Pledge Agreement, and the SellCo
Subordinated Pledge Agreement, and, except to the extent
otherwise provided therein, and (ii) liens permitted under
Section 4.08(p),
and the Company and SellCo (a) shall forever warrant and defend
title to the same against the claims of all persons whatsoever,
(b) shall execute, acknowledge and deliver to the Trustee such
further assignments, transfers, assurances or other instruments
as the Trustee may reasonably require or request, and (c) shall
do or cause to be done all such acts and things as may be
necessary
or proper, or as may be reasonably required by the Trustee, to
assure and confirm to the Trustee the security interests in such
Pledged Collateral contemplated hereby, by the Pledge Agreements
or any part thereof, as from time to time constituted, so as to
render the same available for the security and benefit of this
Indenture and of the Securities secured hereby, according to the
intent
and purposes herein expressed. The Pledge Agreements create a
direct and valid lien on the property constituting Collateral, as
set forth therein. To the extent applicable, the Pledge
Agreements
will be governed by the Uniform Commercial Code in effect from
time to time in the State of New York. Each Holder, by accepting
a Security, irrevocably agrees to be bound by the provisions
of the Pledge Agreements and the Intercreditor Agreement.
(b) Upon the receipt by the Company or any SellCo Company
(other than a Software House Subsidiary) of any proceeds from an
Asset Sale (other than (i) Net Cash Proceeds used for
the redemption of (A) Securities pursuant to Section 3.08, or (B)
Software House Notes pursuant to the Software House Indenture,
and any cash proceeds in excess of such Net Cash Proceeds
used in determining the amount of such Net Cash Proceeds, (ii)
proceeds pledged to the Trustee pursuant to the terms of the
Pledge Agreements, (iii) proceeds pledged to the Software House
Indenture Trustee pursuant to the terms of the Software House
Senior Pledge Agreement, the Software House Subordinated Pledge
Agreement and the Software House SellCo Pledge Agreement)
and (iv) cash proceeds of the type described in the proviso
contained in the definition of the term "Net Cash Proceeds" in
Section 1.01 (but only to the extent such cash proceeds are
applied as
specified in such definition), the Company shall (i) execute and
deliver to the Trustee such Collateral Documents and take such
further actions as shall be requested by the Trustee to grant to
the
Trustee a Lien on such proceeds, (ii) deliver such proceeds to
the Trustee, file or record such financing statements, mortgages,
agreements or other documents, notify such third parties, and do
all further actions as are necessary to perfect the Lien granted
to the Trustee, and (iii) execute and deliver such further
instruments, documents and agreements, deliver such opinions of
counsel,
and do such further acts as the Trustee shall request to carry
out the provisions of this Section 10.01(b). The Lien on any
Collateral granted to the Trustee under any Collateral Document
pursuant to this Section 10.01(b) shall be senior to any Lien in
such Collateral granted to the Software House Indenture Trustee
and the SellCo Subordinated Indenture Trustee pursuant to any
"Collateral Document" (as defined in the Software House Indenture
and the SellCo Subordinated Indenture).
(c) Upon receipt by the Company or any of the Software
House Subsidiaries of any proceeds from an Asset Sale in respect
of the Capital Stock or assets of any Software House
Subsidiary (other than (i) Net Cash Proceeds used for the
redemption of (A) Securities pursuant to Section 3.08, or (B)
Software House Notes pursuant to the Software House Indenture,
and any
cash proceeds in excess of such Net Cash Proceeds used in
determining the amount of such Net Cash Proceeds, (ii) proceeds
pledged to the Trustee pursuant to the terms of the Pledge
Agreements, and (iii) proceeds pledged to the Software House
Indenture Trustee pursuant to the terms of the Software House
Senior Pledge Agreement and the Software House Subordinated
Pledge Agreement), the Company shall (i) execute and deliver to
the Trustee such Collateral Documents and take such further
actions as shall be requested by the Trustee to grant to the
Trustee
a Lien on such proceeds, (ii) if any Software House Note remains
outstanding, deliver such proceeds to the Software House
Indenture Trustee, as bailee, and thereafter, to the Trustee,
file or
record such financing statements, mortgages, agreements or other
documents, notify such third parties, and do all further actions
as are necessary to perfect the Lien granted to the Trustee, and
(iii) execute and deliver such further instruments, documents and
agreements, deliver such opinions of counsel, and do such further
acts as the Trustee shall request to carry out the provisions of
this Section 10.01(c). The Lien on any Collateral granted to the
Trustee under any Collateral Document pursuant to this Section
10.01(c) shall be (A) senior to any Lien in such Collateral
granted
to the SellCo Subordinated Indenture Trustee pursuant to any
"Collateral Document" (as defined in the SellCo Subordinated
Indenture), and (B) subject to any Lien in such Collateral
granted to
the Software House Indenture Trustee pursuant to any "Collateral
Document" (as defined in the Software House Indenture).
Section 10.02. Recording, Etc.
(a) The Company has duly delivered to (i) the Trustee, pursuant to the Series A Senior Pledge Agreement, the Pledged Collateral referred to therein, and (ii) the Software House Indenture Trustee, as bailee, pursuant to the Series A Subordinated Pledge Agreement, the Pledged Collateral referred to therein, in each case together with appropriate stock powers therefor and assignments thereof, duly executed in blank. SellCo has duly delivered to the Trustee, pursuant to the Series A SellCo Pledge Agreement, the Pledged Collateral referred to therein, together with appropriate stock powers therefor and assignments thereof, duly executed in blank. In addition, each of the Company and SellCo, as the case may be, has caused, at its own expense, the Pledge Agreements to which it is a party, this Indenture, all amendments or supplements thereto and hereto, and all appropriate financing statements to be registered, recorded and filed or re-recorded, refiled and renewed in such manner and in such place or places, if any, as may be required by law in order fully to preserve and protect the Liens of the Pledge Agreements on all parts of the Collateral and to effectuate and preserve the security of the Holders and all rights of the Trustee.
(b) The Company and each other obligor on the Securities shall furnish to the Trustee, promptly after the execution and delivery of this Indenture, and promptly after the execution and delivery of any amendment hereto or to the Collateral Documents or any other instrument of further assurance, an Opinion of Counsel stating that, in the opinion of such Counsel, subject to customary exclusions and exceptions reasonably acceptable to the Trustee, either (i) this Indenture, the Pledge Agreements, any such amendment and all other instruments of further assurance have been properly recorded, registered and filed and all such other action has been taken to the extent necessary to make effective the Lien intended to be created by the Collateral Documents, and reciting the details of such action or referring to prior Opinions of Counsel in which such details are given, and stating that, as to the Collateral Documents, such recording, registering and filing are the only recordings, registering and filings necessary to give notice thereof and that no re-recordings, re-registering or refilings are necessary to maintain such notice, and further stating that all financing statements and continuation statements have been executed and filed that are necessary fully to preserve and protect the rights of the Security holders and the Trustee hereunder and under the Collateral Documents, or (ii) no such action is necessary to make such Lien and assignment effective.
(c) The Company and each other obligor on the Securities shall furnish to the Trustee, within 30 days after March 31 in each year beginning with March 31, 1995, an Opinion of Counsel, dated as of such date, (i) stating that, in the opinion of such counsel, subject to customary exclusions and exceptions reasonably acceptable to the Trustee, either (A) all such action has been taken with respect to the recording, registering, filing, re-recording, re-registering and refiling of the Indenture, all supplemental indentures, financing statements, continuation statements and all other instruments of further assurance as are necessary to maintain the Lien of the Collateral Documents and reciting the details of such action or referring to prior Opinions of Counsel in which such details are given, and stating that all financing statements and continuation statements have been executed and filed that are necessary fully to preserve and protect the rights of the Security holders and the Trustee hereunder and under the Collateral Documents, or (B) no such action is necessary to maintain such Lien and assignment and (ii) stating what, if any, action of the foregoing character is necessary during the one-year period commencing March 31 in the then-current calendar year so to maintain such Lien and assignment during such period.
(d) To the extent applicable, the Company and each obligor on the Securities shall cause TIA Section 314(d) relating to the release of property from the Lien of the Collateral Documents to be complied with. Any certificate or opinion required by TIA Section 314(d) may be made by an Officer of the Company, except in cases which TIA Section 314(d) requires that such certificate or opinion be made by an independent person.
Section 10.03. Suits to Protect the Collateral.
The Trustee shall have power to institute and maintain such
suits and proceedings as it may deem expedient to prevent any
impairment of the Collateral by any acts that may be unlawful
or in violation of any Collateral Document, the Intercreditor
Agreement, or this Indenture, and such suits and proceedings as
the Trustee may deem expedient to preserve or protect its
interests
and the interests of the Securityholders in the Collateral
(including power to institute and maintain suits or proceedings
to restrain the enforcement of or compliance with any legislative
or other
governmental enactment, rule or order that may be
unconstitutional or otherwise invalid if the enforcement of, or
compliance with, such enactment, rule or order would impair the
Security
hereunder or be prejudicial to the interests of the Holders or
the Trustee).
Section 10.04.Authorization of Receipt of Funds by the Trustee Under the Collateral Documents and the Intercreditor Agreement.
The Trustee is authorized to receive any funds for the benefit of Holders distributed under the Collateral Documents and the Intercreditor Agreement and to make further distributions of such funds to the Holders according to the provisions of this Indenture.
ARTICLE 11
GUARANTY OF
SECURITIES
Section 11.01. Guaranty.
(a) Subject to the provisions of this Article 11, each
Guarantor hereby unconditionally guaranties to each Holder and to
the Trustee, on behalf of the Holders, (i) the due and punctual
payment of the principal of and interest on each Security, when
and as the same shall become due and payable, whether at
maturity, upon redemption, by acceleration or otherwise, the due
and
punctual payment of interest on the overdue principal of and
interest, if any, on the Securities, to the extent lawful, and
the due and punctual performance of all other obligations of the
Company
to the Holders or the Trustee all in accordance with the terms of
such Security and this Indenture, and (ii) in the case of any
extension of time of payment or renewal of any Securities or any
of
such other obligations, that the same will be promptly paid in
full when due or performed in accordance with the terms of the
extension or renewal, at stated maturity, upon redemption, by
acceleration or otherwise. Each Guarantor hereby agrees that its
obligations hereunder shall be absolute and unconditional,
irrespective of, and shall be unaffected by, any invalidity,
irregularity
or unenforceability of any such Security or this Indenture, any
failure to enforce the provisions of any such Security or this
Indenture, any waiver, modification or indulgence granted to the
Company with respect thereto, by any Holder of such Security or
the Trustee, or any other circumstances that may otherwise
constitute a legal or equitable discharge of a surety or such
Guarantor.
Each Guarantor hereby waives diligence, presentment, filing of
claims with a court in the event of merger or bankruptcy of the
Company, any right to require a proceeding first against the
Company, the benefit of discussion, protest or notice with
respect to any such Security or the Indebtedness evidenced
thereby and all demands whatsoever (except as specified below),
and
covenants that this Guaranty will not be discharged as to any
such Security except by payment in full of the principal thereof
and interest thereon and as provided in Section 8.01. Each
Guarantor
further agrees that, as between such Guarantor, on the one hand,
and the Holders and the Trustee, on the other hand, (i) the
maturity of the obligations guarantied hereby may be accelerated
as
provided in Article 6 for the purposes of this Guaranty,
notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the obligations
guarantied hereby, and
(ii) in the event of any declaration of acceleration of such
obligations as provided in Article 6, such obligations (whether
or not due and payable) shall forthwith become due and payable by
such
Guarantor for the purpose of this Guaranty. In addition, without
limiting the foregoing provisions, upon the effectiveness of an
acceleration under Article 6, the Trustee shall promptly make a
demand for payment on the Securities under the Guaranty provided
for in this Article 11 and not discharged.
(b) Each Guarantor hereby waives any rights of subrogation or any similar rights against the Company in respect of any amounts paid to any Holder by such Guarantor pursuant to the provisions of this Guaranty.
(c) The Guaranty set forth in this Section 11.01 shall not be valid or become obligatory for any purpose with respect to a Security until the certificate of authentication on such Security shall have been signed by or on behalf of the Trustee.
Section 11.02. Obligations of the Guarantors Unconditional.
(a) Nothing contained in this Article 11 or elsewhere in this Indenture or in any Security is intended to or shall impair, as between each Guarantor and the Holders, the obligations of such Guarantor, which obligations are independent of the obligations of the Company under the Securities and the Indenture and are absolute and unconditional, to pay to the holders the principal of and interest on the Securities as and when the same shall become due and payable in accordance with the provisions of this Guaranty, or is intended to or shall affect the relative rights of the Holders and creditors of such Guarantor, nor shall anything herein or therein prevent the Trustee or any Holder from exercising all remedies otherwise permitted by applicable law upon the occurrence of an Event of Default.
(b) This Article 11 shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment of any of the Securities is rescinded or must otherwise be returned by the Holders or the Trustee upon the insolvency, bankruptcy or reorganization of any obligor or otherwise, all as though such payment had not been made.
(c) Each Guarantor hereby covenants and agrees that it shall comply with all its obligations, requirements and restrictions contained in Articles 4, 5 and 6 of this Indenture so as not to create a Default or Event of Default under this Indenture.
Section 11.03. Execution and Delivery of Guaranties.
(a) To evidence its Guaranty set forth in this Article 11, each Guarantor hereby agrees that a notation of such Guaranty shall be placed on each Security authenticated and delivered by the Trustee and that this Guaranty shall be executed on behalf of such Guarantor by the manual or facsimile signature of an Officer of such Guarantor.
(b) Each Guarantor hereby agrees that its Guaranty set forth in this Article 11 shall remain in full force and effect notwithstanding any failure to endorse on each Security a notation of such Guaranty.
(c) If an Officer of a Guarantor whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security on which a Guaranty is endorsed, such Guaranty shall be valid nevertheless.
(d) The delivery of any Security by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guaranty set forth in this Indenture on behalf of each Guarantor.
Section 11.04. Limitations of Guaranties.
Each Guarantor and, by its acceptance hereof, each Holder,
hereby confirms that it is the intention of all such parties that
in no event shall either Guarantor's obligations under its
Guaranty constitute or result in a violation of any applicable
fraudulent conveyance or similar law of any relevant
jurisdiction. Therefore, in the event that the Guaranty would,
but for this
sentence, constitute or result in such a violation, then the
liability of a Guarantor under such Guaranty shall be reduced to
the extent necessary to eliminate such violation under the
applicable
fraudulent conveyance or similar law. Subject to the preceding
limitation on liability, the Guaranty constitutes a guaranty of
payment in full when due and not merely a guaranty of
collectibility.
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by any of Sections 310 to 317,
inclusive, of the TIA through operation of Section 318(c)
thereof, such
imposed duties shall control.
Section 12.02. Notices.
(a) Any notice or communication by any obligor or the Trustee to any other party hereto is duly given if in writing and delivered in person or mailed by first-class mail (registered or certified, return receipt requested), postage prepaid, telex, telecopier or overnight air courier guarantying next day delivery, to such party's address:
If to the Company:
EMCOR Group, Inc.
101 Merritt Seven Corporate Park
Norwalk, Connecticut 06851-1060
Attention: President
Telecopier No.: (203) 849-7850
If to MES:
MES Holdings Corporation
c/o EMCOR Group, Inc.
101 Merritt Seven Corporate Park
Norwalk, Connecticut 06851-1060
Attention: President
Telecopier No.: (203) 849-7850
If to SellCo:
SellCo Corporation
c/o EMCOR Group, Inc.
101 Merritt Seven Corporate Park
Norwalk, Connecticut 06851-1060
Attention: President
Telecopier No.: (203) 849-7850
If to the Trustee:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: Corporate Trust and Agency Administration
Telecopier No.: (212) 858-2952
(b) The obligors or the Trustee, by notice to the other parties hereto, may designate additional or different addresses for subsequent notices or communications.
(c) If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time.
Section 12.03. Communication by Holders with Other Holders.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and
anyone else shall have the protection of TIA Section 312(c). Any
notice or communication given to a Holder shall be mailed to the
Holder at the Holder's address as it appears on the registration
books
of the Registrar and shall be sufficiently given if so mailed
within the time prescribed. Failure to mail a notice or
communication to a Holder or any defect in it shall not affect
its sufficiency with
respect to other Holders. If a notice or communication is mailed
in the manner provided above, it is duly given, whether or not
received by the addressee.
Section 12.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance satisfactory to the Trustee (which shall include the statements set forth in Section 12.05) stating that, in the opinion of the signers, all conditions precedent and covenants (including any covenants compliance with which constitutes a condition precedent), if any, provided for in this Indenture relating to the proposed action have been complied with; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05) stating that, in the opinion of such counsel, all such conditions precedent and covenants (including any covenants compliance with which constitutes a condition precedent) have been complied with.
Section 12.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than certificates pursuant to Section 4.04(a)) shall include:
(a) a statement that the person making such certificate or opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(d) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with.
Section 12.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions.
Section 12.07. Legal Holidays.
A "Legal Holiday" is a Saturday, Sunday or day on which banking institutions or trust companies in the City of New York or at a place of payment are authorized or obligated by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period.
Section 12.08. Duplicate Originals.
The parties may sign any number of copies of this Indenture.
One signed copy is enough to prove this Indenture.
Section 12.09. Governing Law.
The internal laws of the State of New York shall govern and be used to construe this Indenture and the Securities, without regard to the conflicts of law rules thereof.
Section 12.10. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or any of its Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.
Section 12.11. Successors.
All agreements of the Company and each Guarantor in this Indenture and the Securities shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor.
Section 12.12. Severability.
In case any provision in this Indenture or in the Securities
shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not
in any way
be affected or impaired thereby.
Section 12.13. Counterpart Originals.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the same agreement.
Section 12.14. Variable Provisions.
The Company initially appoints the Trustee as Paying Agent and Registrar.
Section 12.15. Table of Contents, Headings, Etc.
The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms or provisions hereof.
SIGNATURES
EMCOR GROUP, INC.
By:______________________________
Title:
MES HOLDINGS CORPORATION
By:______________________________
Title:
SELLCO CORPORATION
By:______________________________
Title:
IBJ SCHRODER BANK & TRUST
COMPANY,
as Trustee
By:______________________________
Title:
EXHIBIT A
(Face of Securities)
No.
EMCOR GROUP, INC.
7% Senior Secured Notes, Series A, Due 1997
EMCOR Group, Inc. (formerly known as JWP INC.), a corporation organized and existing under the laws of the State of Delaware, promises to pay to __________________ or registered assigns the principal sum of _________ Dollars on December 15, 1997, as set forth herein.
Interest Payment Dates: June 15 and December 15
Record Dates: June 1 and December 1
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further
provisions shall for all purposes have the same effect as if set
forth at this
place.
EMCOR GROUP, INC.
By:
Title:
Attest:
[SEAL]
By:
Title: Secretary
Dated:
Certificate of Authentication: This is one
of the Securities referred to in the
within-mentioned Indenture.
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By:
Authorized Signatory
(Back of Securities)
EMCOR GROUP, INC.
7% Senior Secured Notes, Series A, Due 1997
1. Interest. EMCOR Group, Inc. (formerly known as JWP INC.), a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Security from the date of issuance until maturity at the interest rate of 7.0% per annum, payable as set forth in paragraph 2.
The Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law, as defined
in the Indenture) on overdue principal at the rate equal to 2%
per annum in excess of the then-applicable interest rate on the
Securities to the extent lawful; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy
Law)
on overdue installments of interest (without regard to any
applicable grace period) at the same rate to the extent lawful.
Interest shall be computed on the basis of a 360-day year of
twelve 30-day
months.
2. Method of Payment. The Company shall pay interest semiannually in arrears on each June 15 and December 15 to the holders of record of this Security ("Holders") at the close of business on the June 1 and December 1 next preceding the interest payment date, commencing June 15, 1995. Interest shall initially accrue from the date of issuance of this Security (which, in the case of Payment Securities shall be deemed to be the Issue Date), and the first interest payment date will be June 15, 1995.
The Company shall pay interest on the Securities (except
defaulted
interest) to the persons who are registered Holders of Securities
at the close of business on the record date for the next interest
payment date even though Securities are canceled after the record
date and on or before the interest payment date. Holders must
surrender Securities to a Paying Agent to collect principal
payments. The Company shall pay principal and, except as set
forth
below, interest in money of the United States of America that at
the time of payment is legal tender for payment of public and
private debts. The Company may, however, pay principal and,
except as set forth below, interest by check payable in such
money.
The Company shall, in lieu of the payment of interest in
cash on this Security (other than on the final maturity date of
this Security), pay interest on this Security on each interest
payment
date by the issuance of additional Securities (the "Interest
Deferral Securities") in an aggregate principal amount up to the
amount of interest that would be payable with respect to this
Security
if such interest was paid in cash. For purposes of determining
the principal amount of Interest Deferral Securities to be
received as interest pursuant to this paragraph, each Interest
Deferral
Security will have a value equal to its face value. On each such
interest payment date, the Trustee or authenticating agent shall
authenticate Interest Deferral Securities for original issuance
to each
Holder of Securities on the preceding record date, as shown by
the records of the Registrar, dated the date of such interest
payment date, in the principal amount calculated in the previous
sentence. Each issuance of Interest Deferral Securities shall be
made pro rata with respect to the outstanding Securities, except
that the Company shall pay cash to any Holder to the extent
necessary to avoid issuing Interest Deferral Securities in
denominations that are not integral multiples of $100. Any
Interest Deferral Security shall be governed by the Indenture and
shall be
subject to the same terms as this Security (except, as the case
may be, with respect to the title, issuance date and aggregate
principal amount). The term Securities shall include the
Interest
Deferral Securities that are issued under the Indenture.
3. Paying Agent and Registrar. IBJ Schroder Bank & Trust Company, as Trustee (the "Trustee"), shall act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or Co-Registrar without prior notice. The Company or any of its subsidiaries may act in any such capacity.
4. Indenture. The Company issued the Securities under an Indenture dated as of December 15, 1994 (the "Indenture") between the Company, MES Holdings Corporation, SellCo Corporation and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture. The Securities are subject to, and qualified by, all such terms, certain of which are summarized herein, and Holders are referred to the Indenture and such Act for a statement of such terms. The Payment Securities are general obligations of the Company limited to up to $71,000,000 in initial aggregate principal amount.
5. Optional Redemption. The Company may redeem all or any of the Securities at any time and from time to time at the redemption price of 100% of the principal amount thereof plus accrued but unpaid interest to the redemption date in an aggregate amount at any date of determination not in excess of Excess Cash.
6. Mandatory Redemption in Certain Instances. (a) Subject
to the terms of the Indenture, the Company will redeem on
December 15, 1996, Securities in an aggregate principal
amount of $10,000,000 at a redemption price of 100% of the
principal amount thereof plus accrued and unpaid interest to the
redemption date. The Company may reduce the principal amount
of Securities to be redeemed pursuant to this paragraph by
subtracting 100% of the principal amount of any Securities
theretofore redeemed by the Company pursuant to paragraphs 5,
6(b), 6(c),
6(d), 6(e) and 6(f) and not previously applied for this purpose.
(b) Concurrently with its receipt of any Net Cash Proceeds in respect of an Asset Sale or series of related Asset Sales effected by the Company (other than, for so long as any Software House Note is outstanding, a sale of assets constituting "Pledged Shares" under the Software House Senior Pledge Agreement), the Company will redeem Securities at a redemption price of 100% of the principal amount thereof, together with accrued interest to the date of such redemption on the principal amount of Securities redeemed, in an amount equal to such Net Cash Proceeds. In addition, and subject to the parenthetical above, the Company will redeem on the Issue Date Securities in an amount equal to all Net Cash Proceeds held by the Company on the Issue Date.
(c) Concurrently with its receipt of any Net Equity Offering Proceeds (other than in connection with an offering or series of offerings constituting a Change of Control) in an amount in excess of $25,000,000, the Company will redeem Securities at a redemption price of 100% of the principal amount thereof, together with accrued interest to the date of such redemption on the principal amount of Securities redeemed, in an amount equal to such excess.
(d) Concurrently with its receipt of any Net Debt Offering Proceeds in respect of Indebtedness permitted under Section 4.09(vi) of the Indenture, the Company will redeem Securities at a redemption price of 100% of the principal amount thereof, together with accrued interest to the date of such redemption on the principal amount of Securities redeemed, in an amount equal to such Net Debt Offering Proceeds.
(e) From and after the later to occur of (i) the repayment
in full of the Loans (as defined in the Revolving Credit
Agreement as in effect on the Issue Date and the Dynalectric
Revolving
Credit Agreement as in effect on the Issue Date), together with
all accrued interest thereon, and the termination of the
Aggregate Loan Commitment (as defined in the Revolving Credit
Agreement and the Dynalectric Revolving Credit Agreement), and
(ii) December 31, 1995, within 45 days after the last day of June
and December of each calendar year, commencing on
December 31, 1995, the Company will redeem Securities at a
redemption price of 100% of the principal amount thereof,
together with accrued interest to the date of such redemption on
the
principal amount of Securities redeemed, in an aggregate amount
equal to 100% of Excess Cash as at the end of such period.
(f) Subject to certain exceptions set forth in the Indenture, concurrently with the receipt by any Subsidiary of the Company of Net Cash Proceeds in respect of any Asset Sale or series of related Asset Sales by such Subsidiary (or within 60 days after such receipt if such Net Cash Proceeds do not exceed $500,000), other than, for so long as any Software House Note is outstanding, a sale of assets of any Software House Subsidiary, the Company will redeem Securities at a redemption price of 100% of the principal amount thereof, together with accrued interest to the date of such redemption on the principal amount of Securities redeemed, in an amount equal to such Net Cash Proceeds. In addition, and, in respect of Net Cash Proceeds received in connection with the sale of the Capital Stock or assets of a Software House Subsidiary, subject to the repayment in full of the Software House Notes, the Company will redeem on the Issue Date Securities in an amount equal to all such Net Cash Proceeds held by each of the Subsidiaries of the Company on the Issue Date.
7. Repurchase Upon Change of Control. If at any time a Change of Control occurs, the Company shall be required to offer to repurchase all outstanding Securities at a price equal to 100% of the outstanding principal amount thereof plus accrued interest thereon to the date of repurchase of such Securities. Holders of Securities that are the subject of such an offer to repurchase shall receive an offer to repurchase from the Company prior to any related repurchase date, and may elect to have such Securities repurchased by completing the form entitled "Option of Holder to Elect Purchase" appearing on this Security and by complying with the other requirements requested by the Company in respect of such repurchase.
8. Notice of Redemption. Notice of redemption pursuant to paragraph 5 of this Security shall be mailed at least 30 days but no more than 60 days before the redemption date to each Holder to be redeemed at his registered address; provided, however, that if the Company redeems Securities on the Issue Date, no such notice shall be required. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. In the event of a redemption of less than all of the Securities, the Securities shall be chosen for redemption by the Trustee by lot or other method authorized in the Indenture. On and after the redemption date, interest ceases to accrue on Securities or portions of them called for redemption.
If this Security is redeemed subsequent to a record date with respect to any interest payment date specified above and on or prior to such interest payment date, then any accrued interest shall be paid to the person in whose name this Security is registered at the close of business on such record date.
9. Denominations, Transfer, Exchange. Subject to certain exceptions set forth in the Indenture, the Securities are in registered form without coupons in denominations of $100 and integral multiples thereof. The transfer of Securities may be registered and Securities may be exchanged as provided in the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not exchange or register the transfer of any Security or portion of a Security selected for redemption.
Also, it need not exchange or register the transfer of any
Securities for a period of 15 days before a selection of
Securities to be
redeemed.
10. Persons Deemed Owners. The registered Holder of a Security shall be treated as its owner for all purposes.
11. Amendments and Waivers. Subject to certain exceptions, the Indenture or the Securities may be amended with the consent of the Holders of at least a majority in principal amount of the then outstanding Securities, and any existing Default may be waived with the consent of the Holders of at least a majority in principal amount of the then outstanding Securities. Without the consent of any Holder, the Indenture or the Securities may be amended to cure any ambiguity, defect or inconsistency, to provide for assumption of the Company's obligations to Holders or to make any change that does not adversely affect the rights of any Holder.
12. Defaults and Remedies. An Event of Default is:
default for five days in payment of interest on the Securities;
default in payment of principal on the Securities; failure by any
Obligor to comply with certain of its agreements in the
Indenture, the Securities or the Intercreditor Agreement; failure
by any Obligor for 30 days after notice to it to comply with any
of its other
agreements in the Indenture, the Securities or certain other
agreements; a material breach by the Company of certain of its
representations and warranties; certain defaults under, and the
acceleration prior to the maturity of, other indebtedness of the
Company and certain of its Subsidiaries; certain final judgments
that remain undischarged; certain events of bankruptcy or
insolvency; the ineffectiveness of the Guaranty contained in
Article 11 of the Indenture or the denial or disaffirmation of
its obligations thereunder by a Guarantor; the invalidity,
unenforceability
or diminished priority of the Liens on the Collateral under any
Collateral Document (each as defined in the Indenture); and
certain events related to ERISA. If an Event of Default occurs
and
is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Securities may declare
the principal amount of the Securities to be due and payable
immediately. In the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding
Securities become due and payable immediately without further
action or
notice. Holders may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or
Securities. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Securities
may direct the Trustee in its exercise of any trust or power.
The Trustee may
withhold from Holders notice of any continuing default (except a
default in payment of principal or interest) if it determines
that withholding notice is in their interests. The Company must
furnish
an annual compliance certificate to the Trustee.
13. Collateral. The obligations of the Company and the Guarantors under the Securities and the Indenture are secured by the Collateral (as defined in the Indenture), as set forth in the Indenture and the Collateral Documents referred to therein.
14. Unclaimed Money. If money for the payment of principal or interest remains unclaimed for two years and six months, the Trustee and the Paying Agent will pay the money back to the Company at its request. After that, Security holders entitled to the money must look to the Company for payment unless an abandoned property law designates another person and all liability of the Trustee and such Paying Agent with respect to such money shall cease.
15. Discharge Prior to Redemption or Maturity. If the Company deposits with the Trustee money or U.S. Government Obligations sufficient to pay principal of, premium, if any, and accrued interest on the Notes to redemption or maturity, the Company will be discharged from the Indenture and the Securities, except for certain sections thereof.
16. Trustee Dealings with Obligors. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for any obligor on the Securities or its Affiliates, and may otherwise deal with each such obligor or its Affiliates, as if it were not Trustee.
17. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations. Each Holder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities.
18. Authentication. This Security shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent.
19. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act.)
20. Indenture. Each Holder, by accepting a Security, agrees to be bound by all of the terms and provisions of the Indenture, as the same may be amended from time to time. Terms defined in the Indenture and not otherwise defined in this Security are used herein as defined in the Indenture.
21. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed hereon.
The Company will furnish to any Holder, upon written request and without charge, a copy of the Indenture. Request may be made to: EMCOR Group, Inc., 101 Merritt Seven Corporate Park, Norwalk, Connecticut 06851-1060, Attention: Secretary.
FORM OF NOTATION ON SECURITY
RELATING TO GUARANTY
SellCo Corporation and MES Holdings Corporation
(collectively, the "Guarantors," which term includes any
successor Person under the Indenture) have each unconditionally
guarantied,
to the extent set forth in the Indenture and subject to the
provisions in the Indenture, (a) the due and punctual payment of
the principal of and interest on the Securities, whether at
maturity, upon
redemption, by acceleration or otherwise, the due and punctual
payment of interest on overdue principal, and, to the extent
permitted by law, interest, and the due and punctual performance
of
all other obligations of the Company to the Holders or the
Trustee, all in accordance with the terms set forth in Article 11
of the Indenture and (b) in case of any extension of time of
payment or
renewal of any Securities or any of such other obligations, that
the same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at
stated maturity, upon redemption, by acceleration or otherwise.
The obligations of each Guarantor to the Holders of
Securities and to the Trustee pursuant to this Guaranty and the
Indenture are expressly set forth in Article 11 of the Indenture
and
reference is hereby made to the Indenture for the precise terms
of this Guaranty.
This Guaranty shall not be valid or obligatory for any purpose until the certificate of authentication on the Security upon which this Guaranty is noted shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers.
MES HOLDINGS CORPORATION
By:
Title:
SELLCO CORPORATION
By:
Title:
ASSIGNMENT FORM
To assign this Security, fill in the form below:
(I) or (we) assign and transfer this Security to
(Insert assignee's Social Security or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint _____________________________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him.
Date: ____________________ Your signature:
Sign exactly as your name appears on the other side of this Security)
Signature Guaranty: _____________________________________
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company pursuant to Section 4.18 of the Indenture, check the box:
#
If you want to elect to have only a portion of this Security purchased by the Company pursuant to the aforesaid Section of the Indenture, state the amount to be purchased by the Company: $______________
Date: Your Signature:
(Sign exactly as your name appears
on the other side of this Security)
Signature Guaranty:
|
SERIES A SENIOR PLEDGE AGREEMENT
|
PLEDGE AGREEMENT, dated December 15, 1994, made by EMCOR
Group, Inc. (formerly known
as JWP INC.), a Delaware corporation (the "Company"), to IBJ
Schroder Bank & Trust Company, as trustee
under the Indenture referred to below (in such capacity, the
"Trustee" and, together with the Holders (as
defined in the Indenture), the "Secured Parties").
W I T N E S S E T H:
WHEREAS, the Company has entered into an Indenture,
dated as of December 15, 1994, with the
Trustee in respect of the Company's 7% Senior Secured Notes,
Series A, Due 1997 (said Indenture, as it may
be amended, supplemented or otherwise modified from time to time,
being the "Indenture" and capitalized
terms not defined herein but defined therein or in the
Intercreditor Agreement referred to below being used
herein as therein defined); and
WHEREAS, the Trustee has entered into an Intercreditor
Agreement dated the date hereof and
substantially in the form of Exhibit C to the Indenture (as it
may be amended, supplemented or otherwise
modified from time to time, the "Intercreditor Agreement") with
the Company, SellCo and the other Trustees
referred to therein; and
WHEREAS, the Pledged Collateral is Category One Collateral under the Intercreditor Agreement; and
WHEREAS, the Company is the legal and beneficial owner
of (a) the shares of capital stock
described in Schedule I hereto (the "Pledged Shares") and issued
by the issuers named therein (the "Issuers"),
and (b) the Indebtedness (if any) described in said Schedule and
issued by the obligors named therein (the
"Pledged Debt"); and
WHEREAS, it is a requirement under the Indenture that
the Company shall have made the pledge
contemplated by this Agreement;
NOW, THEREFORE, in consideration of the premises, the
Company hereby agrees with the Trustee
on behalf and for the ratable benefit of the Secured Parties as
follows:
Section 1. Pledge.
(a) The Company hereby pledges to the Trustee on behalf and for the ratable benefit of the Secured Parties, and grants to the Trustee on behalf and for the ratable benefit of the Secured Parties a security inter- est in, the following (the "Pledged Collateral"):
(i) all of the Pledged Shares;
(ii) all additional shares of stock or other securities of any Issuer from time to time acquired by the Company in any manner (any such shares being "Additional Shares");
(iii) the certificates representing the shares referred to in clauses (i) and (ii) above;
(iv) all of the Pledged Debt;
(v) all notes or other instruments evidencing the indebtedness referred to in clause (iv) above; and
(vi) all dividends, principal, interest, cash, instruments and other property or proceeds, from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the foregoing.
(b) The pledge made and the security interest granted pursuant to this Agreement, and all rights and remedies of the Trustee and the other Secured Parties hereunder and in and to the Pledged Collateral shall be subject in all respects to the terms and provisions of the Intercreditor Agreement.
Section 2. Security for Obligations.
This Agreement secures and the Pledged
Collateral is security for the full and prompt
payment when due (whether at stated maturity, redemption,
repurchase, by acceleration or otherwise) of, and
the performance of, all of the Company's obligations under the
Securities, the Indenture, this Agreement, and
each other instrument, document and agreement executed by the
Company in connection with any of the
foregoing, whether now or hereafter existing and whether for
principal, premium, interest (including without
limitation, interest, whether or not allowed, after the filing of
a petition initiating any proceeding under any
Bankruptcy Law), penalties, commissions, charges, expenses, fees,
indemnifications, reimbursements, liabilities,
amounts payable, or otherwise (collectively, the "Obligations").
Section 3. Delivery of Pledged Collateral.
All certificates or instruments representing or
evidencing the Pledged Collateral shall be delivered to
and held by or on behalf of the Trustee pursuant hereto and shall
be in suitable form for transfer by delivery,
or shall be accompanied by duly executed instruments of transfer
or assignment in blank, all in form and
substance satisfactory to the Trustee. The Trustee shall have
the right, at any time in its discretion and
without notice to the Company, to transfer to or to register in
its name or in the name of any of its nominees
any or all of the Pledged Collateral. In addition, the Trustee
shall have the right at any time to exchange certi-
ficates or instruments representing or evidencing any of the
Pledged Collateral for certificates or instruments
of smaller or larger denominations.
Section 4. Representations and Warranties.
The Company makes the following representations:
(a) The Pledged Shares (i) have been duly authorized and validly issued; (ii) are fully paid and non- assessable; and (iii) constitute 100% of the issued and outstanding shares of stock of the respective Issuers thereof.
(b) The Company is the legal and beneficial owner of the Pledged Collateral free and clear of any Lien, except for (i) the Lien created by this Agreement, and (ii) the Lien created by the Software House Subordinated Pledge Agreement.
(c) The pledge of the Pledged Shares and the Pledged Debt pursuant to this Agreement creates a valid and perfected first priority security interest in the Pledged Collateral, in favor of the Trustee on behalf and for the ratable benefit of the Secured Parties securing the payment of all of the Obligations.
(d) No consent, authorization, approval, or other action by, and no notice to or filing with, any governmental authority is required either (i) for the pledge by the Company of the Pledged Collateral pursuant to this Agreement or for the due execution, delivery or performance of this Agreement by the Company, or (ii) for the exercise by the Trustee of the voting or other rights provided for in this Agreement or of the remedies in respect of the Pledged Collateral pursuant to this Agreement, except as may be required in connection with the disposition of the Pledged Collateral by laws affecting the offering and sale of securities generally.
(e) The Pledged Debt constitutes all of the "Series A Substitute Collateral," as defined in the Plan of Reorganization.
Section 5. Further Assurances, Etc.
(a) The Company agrees that at any time and from time to time, at the cost and expense of the Company, the Company will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that the Trustee may request, in order to perfect and protect the Lien granted or purported to be granted hereby or to enable the Trustee to exercise and enforce its rights and remedies hereunder with respect to any Pledged Collateral.
(b) The Company agrees to defend the title to the Pledged Collateral and the Lien thereon of the Trustee against the claim of any other Person and to maintain and preserve such Lien until indefeasible payment in full of all of the Obligations.
Section 6. Voting Rights; Dividends; Etc.
(a) As long as no Default or Event of Default shall have occurred and be continuing:
(i) The Company shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement, the Indenture, the Securities or any other instrument or document relating thereto; provided, however, that the Company shall not exercise or shall refrain from exercising any such right if such action would (A) in the reasonable good faith judgment of the Company have a material adverse effect on the value of the Pledged Collateral or any part thereof, or (B) be inconsistent with or violate any provision of this Agreement, the Securities or the Indenture.
(ii) The Company shall be entitled to receive and retain any and all dividends, principal, and interest paid in respect of the Pledged Collateral (subject to the Company's application thereof in accordance with the Indenture), other than any and all
(A) dividends and interest paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Pledged Collateral,
(B) dividends and other distributions paid or payable in cash in respect of any Pledged Shares or Additional Pledged Shares in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise distributed in redemption of, or in exchange for, any Pledged Collateral,
all of which shall be forthwith delivered to the Trustee
to hold as Pledged Collateral and shall, if
received by the Company, be received in trust for the
benefit of the Secured Parties, be segregated
from the other property or funds of the Company, and be
forthwith delivered to the Trustee as
Pledged Collateral in the same form as so received (with
any necessary indorsement).
(iii) The Trustee shall execute and deliver (or cause to be executed and delivered) to the Company all such proxies and other instruments as the Company may reasonably request for the pur- pose of enabling the Company to exercise the voting and other rights which it is entitled to exercise pursuant to paragraph (i) above and to receive the dividends, principal, or interest payments which it is authorized to receive and retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of a Default or an Event of Default:
(i) Upon notice by the Trustee to the Company, all rights of the Company to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 6(a)(i) above shall cease, and all such rights shall thereupon become vested in the Trustee who shall thereupon have the sole right to exercise such voting and other consensual rights.
(ii) All rights of the Company to receive the dividends, principal, interest payments and other distributions which it would otherwise be authorized to receive and retain pursuant to Section 6(a)(ii) above shall cease, and all such rights shall thereupon become vested in the Trustee who shall thereupon have the sole right to receive and hold as Pledged Collateral such dividends, principal, interest payments and other distributions.
(iii) All dividends, principal, interest payments and other distributions which are received by the Company contrary to the provisions of paragraph (ii) of this Section 6(b) shall be received in trust for the benefit of the Trustee, shall be segregated from other funds of the Company and shall be forthwith paid over to the Trustee as Pledged Collateral in the same form as so received (with any necessary indorsement).
(iv) The Company shall, if necessary to permit
the Trustee to exercise the voting and other
rights which it may be entitled to exercise pursuant to
Section 6(b)(i) above and to receive all
dividends, principal, interest payments and
distributions which it may be entitled to receive under
Section 6(b)(ii) above, execute and deliver to the
Trustee, from time to time and upon written notice
of the Trustee, appropriate proxies, dividend payment
orders and other instruments as the Trustee
may reasonably request. The foregoing shall not in any
way limit the Trustee's power and authority
granted pursuant to Section 8 hereof.
Section 7. Transfers and Other Liens; Additional Shares.
(a) The Company agrees that it will not (i) sell or otherwise dispose of, or grant any option or warrant with respect to, any of the Pledged Collateral, or (ii) create or permit to exist any Lien upon or with respect to any of the Pledged Collateral except for (A) the Lien created pursuant to this Agreement, and (B) the Lien created pursuant to the Software House Subordinated Pledge Agreement.
(b) The Company agrees that it will (i) cause each
Issuer not to issue any shares of stock or other
securities in addition to or in substitution for the Pledged
Shares except to the Company, (ii) pledge here-
under, immediately upon its acquisition (directly or indirectly)
thereof, any and all Additional Shares, and (iii)
promptly (and in any event within three Business Days) deliver to
the Trustee a Pledge Amendment, duly
executed by the Company, in substantially the form of Schedule II
hereto (a "Pledge Amendment"), in respect
of the Additional Shares, together with all certificates or other
instruments representing or evidencing the
same. The Company hereby (i) authorizes the Trustee to attach
each Pledge Amendment to this Pledge
Agreement, (ii) agrees that all Additional Shares listed on any
Pledge Amendment delivered to the Trustee
shall for all purposes hereunder constitute Pledged Shares, and
(iii) is deemed to have made, upon such
delivery, the representations and warranties contained in Section
4 hereof with respect to such Pledged
Collateral.
Section 8. Trustee Appointed Attorney-in-Fact and Proxy.
The Company hereby irrevocably constitutes and appoints
the Trustee and any officer or agent
thereof, with full power of substitution, as its true and lawful
attorney-in-fact and proxy with full irrevocable
power and authority in the place and stead of the Company and in
the name of the Company or in its own
name, from time to time in the Trustee's discretion, for the
purpose of carrying out the terms of this Agree-
ment, to take any and all appropriate action and to execute and
deliver any and all documents and instruments
which the Trustee may deem necessary or advisable to accomplish
the purposes of this Agreement, including,
without limitation, to receive, indorse and collect all
instruments made payable to the Company representing
any dividend, interest payment or other distribution or payment
in respect of the Pledged Collateral or any
part thereof, to give full discharge for the same, and to vote or
grant any consent in respect of the Pledged
Shares authorized by Section 6(b) hereof. The Company hereby
ratifies, to the extent permitted by law, all
that any said attorney shall lawfully do or cause to be done by
virtue hereof. This power, being coupled with
an interest, is irrevocable until the Obligations are paid in
full.
Section 9. Trustee May Perform.
If the Company fails to perform any agreement contained herein, the Trustee may itself perform, or cause performance of, such agreement, and the expenses of the Trustee incurred in connection therewith shall be payable by the Company under Section 12 hereof and constitute Obligations secured hereby.
Section 10. Reasonable Care.
The Trustee shall be deemed to have exercised reasonable
care in the custody and preservation of the
Pledged Collateral in its possession if the Pledged Collateral is
accorded treatment substantially equal to that
which the Trustee accords its own property, it being understood
that neither the Trustee nor any other
Secured Party shall have responsibility for (i) ascertaining or
taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any
Pledged Collateral, whether or not the Trustee
or any other Secured Party has or is deemed to have knowledge of
any such matter, or (ii) taking any
necessary steps to preserve rights against any Person with
respect to any Pledged Collateral.
Section 11. Remedies upon Default.
If any Event of Default shall have occurred and be continuing:
(a) The Trustee may exercise in respect of the Pledged Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party after default under the Uniform Commercial Code in effect in the State of New York at that time (the "UCC"), and the Trustee may also, without notice except as specified below, sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker's board or at any office of the Trustee or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Trustee may deem commercially reasonable. The Company agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to the Company of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Trustee shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. The Trustee may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. The Company hereby waives any claims against the Trustee arising by reason of the fact that the price at which any Pledged Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if the Trustee accepts the first offer received and does not offer such Pledged Collateral to more than one offeree.
(b) If the Trustee shall determine to exercise its right to sell all or any of the Pledged Collateral pursuant to this Section 11, the Company agrees that, upon request of the Trustee, the Company will, at its own cost and expense:
(i) execute and deliver, and use its best efforts to cause each issuer of the Pledged Collateral and its directors and officers to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts and things, as may be necessary or, in the reasonable opinion of the Trustee, advisable to register such Pledged Collateral under the provisions of the Securities Act of 1933, as from time to time amended (the "Securities Act"), and to cause the registration statement relating thereto to become effective and to remain effective for such period as prospectuses are required by law to be furnished, and to make all amendments and supplements thereto and to the related prospectus which, in the opinion of the Trustee, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission ("SEC") applicable thereto;
(ii) use its best efforts to qualify the Pledged Collateral under the state securities or "Blue Sky" laws and to obtain all necessary governmental approvals for the sale of the Pledged Collateral, as requested by the Trustee;
(iii) make available to its security holders, as soon as practicable, an earning statement which will satisfy the provisions of section 11(a) of the Securities Act; and
(iv) do or cause to be done all such other acts and things as may be necessary to make such sale of the Pledged Collateral or any part thereof valid and binding and in compliance with applicable law.
The Company further acknowledges the impossibility of
ascertaining the amount of damages which would be
suffered by the Secured Parties by reason of the failure by the
Company to perform any of the covenants
contained in this Section 11 and, consequently, agrees that, if
the Company shall fail to perform any of such
covenants, it shall pay, as liquidated damages and not as a
penalty, an amount equal to the value of the
Pledged Collateral on the date the Trustee shall demand
compliance with this Section.
(c) The Company recognizes that, by reason of the aforementioned requirements and certain prohibitions contained in the Securities Act and applicable state securities laws, the Trustee may, at its option, elect not to require the Company to register all or any part of the Pledged Collateral and may therefore be compelled, with respect to any sale of all or any part of the Pledged Collateral, to limit purchasers to those who will agree, among other things, to acquire such securities for their own account, for investment, and not with a view to the distribution or resale thereof. The Company acknowledges and agrees that any such sale may result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions and, notwithstanding such circumstances, agrees that any such sale shall be deemed to have been made in a commercially reasonable manner. The Trustee shall be under no obligation to delay the sale of any of the Pledged Collateral for the period of time necessary to permit the Company to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if the Company would agree to do so.
(d) If the Trustee determines to exercise its right to sell any or all of the Pledged Collateral, upon written request, the Company shall, from time to time, furnish to the Trustee all such information as the Trustee may request in order to determine the number of shares and other instruments included in the Pledged Collateral which may be sold by the Trustee as exempt transactions under the Act and rules of the SEC thereunder, as the same are from time to time in effect.
(e) Any cash held by the Trustee as Pledged Collateral and all cash proceeds received by the Trustee in respect of any sale of, collection from, or other realization upon all or any part of the Pledged Collateral shall be applied by the Trustee as provided in Section 6.10 of the Indenture.
(f) Notwithstanding anything to the contrary set forth herein, the Trustee shall not exercise any of the remedies set forth in this Section 11 in respect of the Pledged Collateral consisting of the Capital Stock of MES Holdings Corporation for a period of 90 days after the occurrence of an Event of Default without the prior written consent of Majority Lenders (as defined in the Revolving Credit Agreement referred to in the Indenture).
Section 12. Expenses.
The Company will upon demand pay to the Trustee the amount of any and all reasonable expenses, including, without limitation, the reasonable fees and expenses of the Trustee's counsel and of any experts and agents, which the Trustee may incur in connection with (a) the administration of this Agreement, (b) the custody or preservation of, sale of, collection from, or other realization upon, any of the Pledged Collateral, (c) the exercise or enforcement of any of the rights and remedies hereunder of the Trustee and the other Secured Parties, or (d) the failure by the Company to perform or observe any of the provisions hereof.
Section 13. Security Interest Absolute.
All rights of the Trustee and security interests hereunder, and all obligations of the Company hereunder, shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of any provision of the Indenture, the Securities or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any other term of, or any increase in the amount of, all or any of the Obligations, or any other amendment or waiver of any term of, or any consent to any departure from any requirement of, the Indenture, the Securities or any other instrument or document relating thereto;
(c) any exchange, release or non-perfection of any Lien on any other collateral, or any release or amendment or waiver of any term of any guaranty of, or consent to departure from any requirement of any guaranty of, all or any of the Obligations; or
(d) any other circumstance which might otherwise constitute a defense available to, or a discharge of, a borrower or a pledgor.
Section 14. Amendments, Etc.
No amendment or waiver of any provision of this
Agreement nor consent to any departure by the
Company herefrom shall in any event be effective unless the same
shall be in writing and signed by the
Trustee, and then such waiver or consent shall be effective only
in the specific instance and for the specific
purpose for which given.
Section 15. Addresses for Notices.
All notices and other communications provided for
hereunder shall be in writing (including
telegraphic, telex, telecopy or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or
delivered by hand, if to the Company or the Trustee, addressed to
the Company or the Trustee, as the case
may be, at its address specified in the Indenture, or, as to
either party, at such other address as shall be
designated by such party in a written notice to each other party
complying as to delivery with the terms of this
Section. All such notices and other communications shall, when
mailed, telegraphed, telexed, telecopied,
cabled or delivered, be effective four (4) Business Days after
deposit in the mails, delivered to the telegraph
company, confirmed by telex answerback, telecopied with
confirmation of receipt, delivered to the cable
company or delivered by hand to the addressee or its agent,
respectively.
Section 16. Continuing Security Interest; Transfer of Securities or Obligations.
This Pledge Agreement shall create a continuing security
interest in the Pledged Collateral and shall
(a) remain in full force and effect until indefeasible payment in
full of the Obligations, (b) be binding upon the
Company, its successors and assigns, and (c) inure, together with
the rights and remedies of the Trustee
hereunder, to the benefit of and be enforceable by the Secured
Parties and their respective successors,
transferees and assigns. Without limiting the generality of the
foregoing clause (c), any Holder may assign or
otherwise transfer any Security held by it or Obligation owing to
it to any other Person, and such other Person
shall thereupon become vested with all the rights in respect
thereof granted to such Holder herein or
otherwise with respect to such of the Securities or Obligations
so transferred or assigned. Upon the payment
in full of the Obligations, the Company shall be entitled to the
return, upon its request and at its expense, of
such of the Pledged Collateral as shall not have been sold or
otherwise applied pursuant to the terms hereof.
Section 17. Governing Law; Severability; Terms.
This Agreement shall be governed by, and be construed and interpreted in accordance with, the law of the State of New York. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity and without invalidating the remaining provisions of this Agreement. Unless otherwise defined herein or in the Indenture, terms defined in Article 9 of the UCC are used herein as therein defined.
Section 18. Waiver of Jury Trial.
The Company waives any right it may have to a trial by jury in respect of any litigation based on, or arising out of, under or in connection with, this Agreement or any course of conduct, course of dealing, verbal or written statement or other action of the Trustee or any other Secured Party.
Section 19. Conflicts.
In the event of any conflict between the terms of the Intercreditor Agreement and this Agreement, the terms of the Intercreditor Agreement shall govern.
Section 20. Section Titles.
The Section titles contained in this Agreement are and
shall be without substantive meaning or
content of any kind whatsoever and are not part of this
Agreement.
IN WITNESS WHEREOF, the Company has caused this
Agreement to be duly executed and
delivered by its duly authorized officer on the date first above
written.
EMCOR GROUP, INC.
By:
Title:
Accepted and Acknowledged:
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By:__________________________
Title:
SCHEDULE I TO PLEDGE
AGREEMENT
Attached to and forming a part of that certain Pledge Agreement,
dated December 15, 1994, by EMCOR
Group, Inc. to IBJ Schroder Bank & Trust Company, as Trustee.
Stock Certificate Number
Stock Issuer Class of Stock
No(s). of Shares
1. MES Holdings Corporation Common
1 100
2. SellCo Corporation Common
1 100
|
Original
Description Debt Certificate
Final Principal
Debt Issuer of Debt No(s).
Maturity Amount
|
NONE
SCHEDULE II TO PLEDGE
AGREEMENT
PLEDGE
AMENDMENT
This Pledge Amendment, dated ,
19__, is delivered pursuant to Section 7 of the
Pledge Agreement referred to below. The undersigned
hereby agrees that this Pledge Amendment
may be attached to the Pledge Agreement, dated December
15, 1994, between the undersigned and
IBJ Schroder Bank & Trust Company, as Trustee on behalf
of and for the ratable benefit of the
Secured Parties referred to therein and that the
Additional Shares listed on this Pledge Amendment
shall be and become part of the Pledged Collateral
referred to in the Pledge Agreement and shall
secure all Obligations of the undersigned. The terms
defined in the Pledge Agreement or Indenture
are being used herein as therein defined.
EMCOR
GROUP, INC.
By:____________________________
Title:
Stock Certificate Number
Stock Issuer Class of Stock
No(s). Par Value of Shares
|
SERIES A SUBORDINATED
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated December 15, 1994, made by EMCOR
Group, Inc. (formerly known
as JWP INC.), a Delaware corporation (the "Company"), to IBJ
Schroder Bank & Trust Company, as trustee
under the Indenture referred to below (in such capacity, the
"Trustee" and, together with the Holders (as
defined in the Indenture), the "Secured Parties").
W I T N E S S E
T H:
WHEREAS, the Company has entered into an Indenture,
dated as of December 15, 1994, with the
Trustee in respect of the Company's 7% Senior Secured Notes,
Series A, Due 1997 (said Indenture, as it may
be amended, supplemented or otherwise modified from time to time,
being the "Indenture" and capitalized
terms not defined herein but defined therein or in the
Intercreditor Agreement referred to below being used
herein as therein defined); and
WHEREAS, the Trustee has entered into an Intercreditor
Agreement dated the date hereof and
substantially in the form of Exhibit C to the Indenture (as it
may be amended, supplemented or otherwise
modified from time to time, the "Intercreditor Agreement") with
the Company and with each of United States
Trust Company of New York, as the trustee for the holders of the
Software House Obligations referred to
therein (the "Software House Indenture Trustee"), and Shawmut
Bank Connecticut, National Association, as
the trustee for the holders of the SellCo Related Obligations
referred to therein, pursuant to which, among
other things, the Lien on the Pledged Collateral (as defined in
Section 1(a) hereof) created hereby shall be
subordinated to the Senior Lien (as defined in the Intercreditor
Agreement) on the Pledged Collateral
securing the Software House Obligations; and
WHEREAS, the Pledged Collateral is Category Two Collateral under the Intercreditor Agreement; and
WHEREAS, pursuant to the Intercreditor Agreement, the Software House Indenture Trustee, as the Senior Lienor (in such capacity, the "Senior Pledgee"), has agreed to hold the Pledged Collateral as bailee for the Trustee, as junior pledgee; and
WHEREAS, the Company is the legal and beneficial owner
of (a) the shares of capital stock
described in Schedule I hereto (the "Pledged Shares") and issued
by the issuers named therein (the "Issuers"),
and (b) the Indebtedness (if any) described in said Schedule and
issued by the obligors named therein (the
"Pledged Debt"); and
WHEREAS, it is a requirement under the Indenture that
the Company shall have made the pledge
contemplated by this Agreement;
NOW, THEREFORE, in consideration of the premises, the
Company hereby agrees with the Trustee
on behalf and for the ratable benefit of the Secured Parties as
follows:
Section 1. Pledge.
(a) The Company hereby pledges to the Trustee on behalf and for the ratable benefit of the Secured Parties, and grants to the Trustee on behalf and for the ratable benefit of the Secured Parties a security inter- est in, the following (the "Pledged Collateral"):
(i) all of the Pledged Shares;
(ii) all additional shares of stock or other securities of any Issuer from time to time acquired by the Company in any manner (any such shares being "Additional Shares");
(iii) the certificates representing the shares referred to in clauses (i) and (ii) above;
(iv) all of the Pledged Debt;
(v) all indebtedness for the deferred purchase price of property from time to time owed to (A) the Company by any Person in respect of the sale by the Company of any of the Pledged Shares or Additional Shares, and (B) all indebtedness for the deferred purchase price of property from time to time owed to the Company or any of the Issuers by any other Person in respect of an Asset Sale (as defined in the Indenture) by such Issuer (any such indebtedness being "Additional Debt");
(vi) all notes or other instruments evidencing
the indebtedness referred to in clauses (iv) and
(v) above; and
(vii) all dividends, principal, interest, cash, instruments and other property or proceeds, from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the foregoing.
(b) The pledge made and the security interest granted pursuant to this Agreement, and all rights and remedies of the Trustee and the other Secured Parties hereunder and in and to the Pledged Collateral shall be subject in all respects to the terms and provisions of the Intercreditor Agreement. The Trustee, for itself and on behalf of each of the other Secured Parties, acknowledges and agrees that the Lien granted to the Secured Parties hereunder is junior and subordinate to the Senior Lien in the Pledged Collateral securing the Software House Obligations.
(c) The Trustee, by execution of the Intercreditor Agreement, appoints the Senior Pledgee to hold the Pledged Collateral, in accordance with the terms of, and subject to the conditions of, the Intercreditor Agreement.
Section 2. Security for Obligations.
This Agreement secures and the Pledged
Collateral is security for the full and prompt
payment when due (whether at stated maturity, redemption,
repurchase, by acceleration or otherwise) of, and
the performance of, all of the Company's obligations under the
Securities, the Indenture, this Agreement, and
each other instrument, document and agreement executed by the
Company in connection with any of the
foregoing, whether now or hereafter existing and whether for
principal, premium, interest (including without
limitation, interest, whether or not allowed, after the filing of
a petition initiating any proceeding under any
Bankruptcy Law), penalties, commissions, charges, expenses, fees,
indemnifications, reimbursements, liabilities,
amounts payable, or otherwise (collectively, the "Obligations").
Section 3. Delivery of Pledged Collateral.
All certificates or instruments representing or
evidencing the Pledged Collateral shall be delivered to
the Senior Pledgee, so long as the Senior Lien has not been
released, and thereafter, to the Trustee, and held
by the Senior Pledgee, so long as the Senior Lien has not been
released, and thereafter, by or on behalf of the
Trustee, pursuant hereto and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in
form and substance satisfactory to the Trustee.
After the Senior Lien has been released, the Trustee shall have
the right (a) at any time in its discretion and
without notice to the Company, to transfer to or to register in
its name or in the name of any of its nominees
any or all of the Pledged Collateral, and (b) at any time to
exchange certificates or instruments representing or
evidencing any of the Pledged Collateral for certificates or
instruments of smaller or larger denominations.
Section 4. Representations and Warranties.
The Company makes the following representations:
(a) The Pledged Shares (i) have been duly authorized and validly issued; (ii) are fully paid and non- assessable; and (iii) constitute 100% of the issued and outstanding shares of stock of the respective Issuers thereof.
(b) The Company is the legal and beneficial owner of the Pledged Collateral free and clear of any Lien, except for (i) the Lien created by this Agreement, and (ii) the Senior Lien.
(c) The pledge of the Pledged Shares and the Pledged Debt pursuant to this Agreement creates a valid and perfected security interest in the Pledged Collateral, subject only to the Senior Lien, in favor of the Trustee on behalf and for the ratable benefit of the Secured Parties securing the payment of all of the Obligations.
(d) No consent, authorization, approval, or other action by, and no notice to or filing with, any governmental authority is required either (i) for the pledge by the Company of the Pledged Collateral pursuant to this Agreement or for the due execution, delivery or performance of this Agreement by the Company, or (ii) for the exercise by the Trustee of the voting or other rights provided for in this Agreement or of the remedies in respect of the Pledged Collateral pursuant to this Agreement, except as may be required in connection with the disposition of the Pledged Collateral by laws affecting the offering and sale of securities generally.
(e) Except for certain contingent payment rights arising in connection with the sale of the assets of JWP/MEC Corp. (with respect to which the Company hereby agrees to grant a perfected Lien (subject only to the Senior Lien) on and security interest in to the Trustee for the ratable benefit of the Secured Parties within 30 days after the Issue Date pursuant to a security agreement in form and substance satisfactory to the Trustee), the Pledged Debt constitutes all of the "Series B Substitute Collateral," as defined in the Plan of Reorganization.
Section 5. Further Assurances, Etc.
(a) The Company agrees that at any time and from time to time, at the cost and expense of the Company, the Company will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that the Trustee may request, in order to perfect and protect the Lien granted or purported to be granted hereby or, subject to the provisions of the Intercreditor Agreement, to enable the Trustee to exercise and enforce its rights and remedies hereunder with respect to any Pledged Collateral.
(b) The Company agrees to defend the title to the Pledged Collateral and the Lien thereon of the Trustee against the claim of any other Person and to maintain and preserve such Lien until indefeasible payment in full of all of the Obligations.
Section 6. Voting Rights; Dividends; Etc.
(a) Subject to the provisions of the Intercreditor Agreement, as long as no Default or Event of Default shall have occurred and be continuing:
(i) The Company shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement, the Indenture, the Securities or any other instrument or document relating thereto; provided, however, that the Company shall not exercise or shall refrain from exercising any such right if such action would (A) in the reasonable good faith judgment of the Company have a material adverse effect on the value of the Pledged Collateral or any part thereof, or (B) be inconsistent with or violate any provision of this Agreement, the Securities or the Indenture.
(ii) Subject to the provisions of the Intercreditor Agreement, the Company shall be entitled to receive and retain any and all dividends, principal, and interest paid in respect of the Pledged Collateral (subject to the Company's application thereof in accordance with the Indenture), other than any and all
(A) dividends and interest paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Pledged Collateral,
(B) dividends and other distributions paid or payable in cash in respect of any Pledged Shares or Additional Pledged Shares in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise distributed in redemption of, or in exchange for, any Pledged Collateral,
all of which shall be forthwith delivered to the Trustee or to the Senior Pledgee on the Trustee's behalf to hold as Pledged Collateral and shall, if received by the Company, be received in trust for the benefit of the Secured Parties, be segregated from the other property or funds of the Company, and be forthwith delivered to the Trustee as Pledged Collateral in the same form as so received (with any necessary indorsement).
(iii) Subject to the provisions of the Intercreditor Agreement, the Trustee shall execute and deliver (or cause to be executed and delivered) to the Company all such proxies and other instruments as the Company may reasonably request for the purpose of enabling the Company to exercise the voting and other rights which it is entitled to exercise pursuant to paragraph (i) above and to receive the dividends, principal, or interest payments which it is authorized to receive and retain pursuant to paragraph (ii) above.
(b) Subject to the provisions of the Intercreditor Agreement, upon the occurrence and during the continuance of a Default or an Event of Default:
(i) Upon notice by the Trustee to the Company, all rights of the Company to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 6(a)(i) above shall cease, and all such rights shall thereupon become vested in the Trustee who shall thereupon have the sole right to exercise such voting and other consensual rights.
(ii) All rights of the Company to receive the dividends, principal, interest payments and other distributions which it would otherwise be authorized to receive and retain pursuant to Section 6(a)(ii) above shall cease, and all such rights shall thereupon become vested in the Trustee who shall thereupon have the sole right to receive and hold as Pledged Collateral such dividends, principal, interest payments and other distributions.
(iii) All dividends, principal, interest payments and other distributions which are received by the Company contrary to the provisions of paragraph (ii) of this Section 6(b) shall be received in trust for the benefit of the Trustee, shall be segregated from other funds of the Company and shall be forthwith paid over to the Trustee as Pledged Collateral in the same form as so received (with any necessary indorsement).
(iv) The Company shall, if necessary to permit
the Trustee to exercise the voting and other
rights which it may be entitled to exercise pursuant to
Section 6(b)(i) above and to receive all
dividends, principal, interest payments and
distributions which it may be entitled to receive under
Section 6(b)(ii) above, execute and deliver to the
Trustee, from time to time and upon written notice
of the Trustee, appropriate proxies, dividend payment
orders and other instruments as the Trustee
may reasonably request. The foregoing shall not in any
way limit the Trustee's power and authority
granted pursuant to Section 8 hereof.
Section 7. Transfers and Other Liens; Additional Shares and Additional Debt.
(a) The Company agrees that it will not (i) sell or otherwise dispose of, or grant any option or warrant with respect to, any of the Pledged Collateral (except, in respect of the Pledged Shares, in accordance with the terms of the Indenture), or (ii) create or permit to exist any Lien upon or with respect to any of the Pledged Collateral except for (A) the Lien created pursuant to this Agreement, and (B) the Senior Lien.
(b) The Company agrees that it will (i) cause each
Issuer not to issue any shares of stock or other
securities in addition to or in substitution for the Pledged
Shares except to the Company, (ii) pledge here-
under, immediately upon its acquisition (directly or indirectly)
thereof, to the Trustee (or, until the Senior Lien
has been released, to the Senior Pledgee) any and all Additional
Shares and any and all Additional Debt, and
(iii) promptly (and in any event within three Business Days)
deliver to the Trustee a Pledge Amendment, duly
executed by the Company, in substantially the form of Schedule II
hereto (a "Pledge Amendment"), in respect
of the Additional Shares and Additional Debt, together with all
certificates, notes or other instruments
representing or evidencing the same. The Company hereby (i)
authorizes the Trustee to attach each Pledge
Amendment to this Pledge Agreement, (ii) agrees that all
Additional Shares and all Additional Debt listed on
any Pledge Amendment delivered to the Trustee shall for all
purposes hereunder constitute Pledged Shares
and Pledged Debt, respectively, subject to the rights of the
holders of the Senior Lien, and (iii) is deemed to
have made, upon such delivery, the representations and warranties
contained in Section 4 hereof with respect
to such Pledged Collateral.
Section 8. Trustee Appointed Attorney-in-Fact and Proxy.
Subject to the provisions of the Intercreditor
Agreement, the Company hereby irrevocably constitutes
and appoints the Trustee and any officer or agent thereof, with
full power of substitution, as its true and lawful
attorney-in-fact and proxy with full irrevocable power and
authority in the place and stead of the Company and
in the name of the Company or in its own name, from time to time
in the Trustee's discretion, for the purpose
of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute and deliver
any and all documents and instruments which the Trustee may deem
necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation, to
receive, indorse and collect all instruments made
payable to the Company representing any dividend, interest
payment or other distribution or payment in
respect of the Pledged Collateral or any part thereof, to give
full discharge for the same, and to vote or grant
any consent in respect of the Pledged Shares authorized by
Section 6(b) hereof. The Company hereby ratifies,
to the extent permitted by law, all that any said attorney shall
lawfully do or cause to be done by virtue hereof.
This power, being coupled with an interest, is irrevocable until
the Obligations are paid in full.
Section 9. Trustee May Perform.
Subject to the provisions of the Intercreditor
Agreement, if the Company fails to perform any
agreement contained herein, the Trustee may itself perform, or
cause performance of, such agreement, and the
expenses of the Trustee incurred in connection therewith shall be
payable by the Company under Section 12
hereof and constitute Obligations secured hereby.
Section 10. Reasonable Care.
The Trustee shall be deemed to have exercised reasonable
care in the custody and preservation of the
Pledged Collateral in its possession if the Pledged Collateral is
accorded treatment substantially equal to that
which the Trustee accords its own property, it being understood
that neither the Trustee nor any other
Secured Party shall have responsibility for (i) ascertaining or
taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any
Pledged Collateral, whether or not the Trustee
or any other Secured Party has or is deemed to have knowledge of
any such matter, or (ii) taking any
necessary steps to preserve rights against any Person with
respect to any Pledged Collateral.
Section 11. Remedies upon Default.
Subject to the provisions of the Intercreditor Agreement, if any Event of Default shall have occurred and be continuing:
(a) The Trustee may exercise in respect of the Pledged Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party after default under the Uniform Commercial Code in effect in the State of New York at that time (the "UCC"), and the Trustee may also, without notice except as specified below, sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker's board or at any office of the Trustee or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Trustee may deem commercially reasonable. The Company agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to the Company of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Trustee shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. The Trustee may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. The Company hereby waives any claims against the Trustee arising by reason of the fact that the price at which any Pledged Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if the Trustee accepts the first offer received and does not offer such Pledged Collateral to more than one offeree.
(b) If the Trustee shall determine to exercise its right to sell all or any of the Pledged Collateral pursuant to this Section 11, the Company agrees that, upon request of the Trustee, the Company will, at its own cost and expense:
(i) execute and deliver, and use its best efforts to cause each issuer of the Pledged Collateral and its directors and officers to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts and things, as may be necessary or, in the reasonable opinion of the Trustee, advisable to register such Pledged Collateral under the provisions of the Securities Act of 1933, as from time to time amended (the "Securities Act"), and to cause the registration statement relating thereto to become effective and to remain effective for such period as prospectuses are required by law to be furnished, and to make all amendments and supplements thereto and to the related prospectus which, in the opinion of the Trustee, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission ("SEC") applicable thereto;
(ii) use its best efforts to qualify the Pledged Collateral under the state securities or "Blue Sky" laws and to obtain all necessary governmental approvals for the sale of the Pledged Collateral, as requested by the Trustee;
(iii) make available to its security holders, as soon as practicable, an earning statement which will satisfy the provisions of section 11(a) of the Securities Act; and
(iv) do or cause to be done all such other acts and things as may be necessary to make such sale of the Pledged Collateral or any part thereof valid and binding and in compliance with applicable law.
The Company further acknowledges the impossibility of
ascertaining the amount of damages which would be
suffered by the Secured Parties by reason of the failure by the
Company to perform any of the covenants
contained in this Section 11 and, consequently, agrees that, if
the Company shall fail to perform any of such
covenants, it shall pay, as liquidated damages and not as a
penalty, an amount equal to the value of the
Pledged Collateral on the date the Trustee shall demand
compliance with this Section.
(c) The Company recognizes that, by reason of the aforementioned requirements and certain prohibitions contained in the Securities Act and applicable state securities laws, the Trustee may, at its option, elect not to require the Company to register all or any part of the Pledged Collateral and may therefore be compelled, with respect to any sale of all or any part of the Pledged Collateral, to limit purchasers to those who will agree, among other things, to acquire such securities for their own account, for investment, and not with a view to the distribution or resale thereof. The Company acknowledges and agrees that any such sale may result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions and, notwithstanding such circumstances, agrees that any such sale shall be deemed to have been made in a commercially reasonable manner. The Trustee shall be under no obligation to delay the sale of any of the Pledged Collateral for the period of time necessary to permit the Company to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if the Company would agree to do so.
(d) If the Trustee determines to exercise its right to sell any or all of the Pledged Collateral, upon written request, the Company shall, from time to time, furnish to the Trustee all such information as the Trustee may request in order to determine the number of shares and other instruments included in the Pledged Collateral which may be sold by the Trustee as exempt transactions under the Act and rules of the SEC thereunder, as the same are from time to time in effect.
(e) Any cash held by the Trustee as Pledged Collateral and all cash proceeds received by the Trustee in respect of any sale of, collection from, or other realization upon all or any part of the Pledged Collateral shall be applied by the Trustee as provided in Section 6.10 of the Indenture.
Section 12. Expenses.
The Company will upon demand pay to the Trustee the amount of any and all reasonable expenses, including, without limitation, the reasonable fees and expenses of the Trustee's counsel and of any experts and agents, which the Trustee may incur in connection with (a) the administration of this Agreement, (b) the custody or preservation of, sale of, collection from, or other realization upon, any of the Pledged Collateral, (c) the exercise or enforcement of any of the rights and remedies hereunder of the Trustee and the other Secured Parties, or (d) the failure by the Company to perform or observe any of the provisions hereof.
Section 13. Security Interest Absolute.
All rights of the Trustee and security interests hereunder, and all obligations of the Company hereunder, shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of any provision of the Indenture, the Securities, the Intercreditor Agreement, or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any other term of, or any increase in the amount of, all or any of the Obligations, or any other amendment or waiver of any term of, or any consent to any departure from any requirement of, the Indenture, the Securities, the Intercreditor Agreement, or any other instrument or document relating thereto;
(c) any exchange, release or non-perfection of any Lien on any other collateral, or any release or amendment or waiver of any term of any guaranty of, or consent to departure from any requirement of any guaranty of, all or any of the Obligations; or
(d) any other circumstance which might otherwise constitute a defense available to, or a discharge of, a borrower or a pledgor.
Section 14. Amendments, Etc.
No amendment or waiver of any provision of this
Agreement nor consent to any departure by the
Company herefrom shall in any event be effective unless the same
shall be in writing and signed by the
Trustee, and then such waiver or consent shall be effective only
in the specific instance and for the specific
purpose for which given.
Section 15. Addresses for Notices.
All notices and other communications provided for
hereunder shall be in writing (including
telegraphic, telex, telecopy or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or
delivered by hand, if to the Company or the Trustee, addressed to
the Company or the Trustee, as the case
may be, at its address specified in the Indenture, or, as to
either party, at such other address as shall be
designated by such party in a written notice to each other party
complying as to delivery with the terms of this
Section. All such notices and other communications shall, when
mailed, telegraphed, telexed, telecopied,
cabled or delivered, be effective four (4) Business Days after
deposit in the mails, delivered to the telegraph
company, confirmed by telex answerback, telecopied with
confirmation of receipt, delivered to the cable
company or delivered by hand to the addressee or its agent,
respectively.
Section 16. Continuing Security Interest; Transfer of Securities or Obligations.
This Pledge Agreement shall create a continuing security
interest in the Pledged Collateral and shall
(a) remain in full force and effect until indefeasible payment in
full of the Obligations, (b) be binding upon the
Company, its successors and assigns, and (c) inure, together with
the rights and remedies of the Trustee
hereunder, to the benefit of and be enforceable by the Secured
Parties and their respective successors,
transferees and assigns. Without limiting the generality of the
foregoing clause (c), any Holder may assign or
otherwise transfer any Security held by it or Obligation owing to
it to any other Person, and such other Person
shall thereupon become vested with all the rights in respect
thereof granted to such Holder herein or
otherwise with respect to such of the Securities or Obligations
so transferred or assigned. Subject to the
provisions of the Intercreditor Agreement, upon the payment in
full of the Obligations, the Company shall be
entitled to the return, upon its request and at its expense, of
such of the Pledged Collateral as shall not have
been sold or otherwise applied pursuant to the terms hereof.
Section 17. Release of Liens.
Upon the Trustee's receipt of a written request by the Company made contemporaneously with or at any time after the receipt by the Trustee (or, if applicable, the Senior Pledgee) of all Net Cash Proceeds and Additional Debt from the Company in accordance with the terms of the Indenture in connection with the sale by the Company of any of the Pledged Shares or Additional Shares, the Trustee shall release its Lien on such Pledged Shares and Additional Shares. The Trustee shall, at the Company's expense, execute and deliver such documents and instruments as the Company may reasonably request to evidence such release.
Section 18. Governing Law; Severability; Terms.
This Agreement shall be governed by, and be construed and interpreted in accordance with, the law of the State of New York. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity and without invalidating the remaining provisions of this Agreement. Unless otherwise defined herein or in the Indenture, terms defined in Article 9 of the UCC are used herein as therein defined.
Section 19. Waiver of Jury Trial.
The Company waives any right it may have to a trial by jury in respect of any litigation based on, or arising out of, under or in connection with, this Agreement or any course of conduct, course of dealing, verbal or written statement or other action of the Trustee or any other Secured Party.
Section 20. Conflicts.
In the event of any conflict between the terms of the Intercreditor Agreement and this Agreement, the terms of the Intercreditor Agreement shall govern.
Section 21. Section Titles.
The Section titles contained in this Agreement are and
shall be without substantive meaning or
content of any kind whatsoever and are not part of this
Agreement.
IN WITNESS WHEREOF, the Company has caused this
Agreement to be duly executed and
delivered by its duly authorized officer on the date first above
written.
EMCOR
GROUP, INC.
By:
Title:
Accepted and Acknowledged:
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By:__________________________
Title:
SCHEDULE I TO PLEDGE
AGREEMENT
Attached to and forming a part of that certain Pledge Agreement,
dated December 15, 1994, by EMCOR
Group, Inc. to IBJ Schroder Bank & Trust Company, as Trustee.
Stock Certificate Number
Stock Issuer Class of Stock
No(s). of Shares
1. JWP/MEC Corp Common
15 4,705
2. University Energy
Services of California, Inc. Common
2 100
3. JWP Pacific International, Inc. Common
4 1,000
4. JWP Telecom, Inc. Common
14 50
5. JWP Energy Products, Inc. Class A Common
13 10,000
|
Original
Description Debt Certificate
Final Principal
Debt Issuer of Debt No(s).
Maturity Amount
MEC Acquisition, Inc. Promissory Note N/A
9/22/97 $3,700,000
(now known as Maris (9/22/93)
Equipment Company)
SCHEDULE II TO PLEDGE
AGREEMENT
PLEDGE
AMENDMENT
|
This Pledge Amendment, dated ,
19__, is delivered pursuant to Section 7 of the
Pledge Agreement referred to below. The undersigned
hereby agrees that this Pledge Amendment
may be attached to the Pledge Agreement, dated December
15, 1994, between the undersigned and
IBJ Schroder Bank & Trust Company, as Trustee on behalf
of and for the ratable benefit of the
Secured Parties referred to therein and that the
[Additional Shares] [and] [Additional Debt] listed on
this Pledge Amendment shall be and become part of the
Pledged Collateral referred to in the Pledge
Agreement and shall secure all Obligations of the
undersigned. The terms defined in the Pledge
Agreement or Indenture are being used herein as therein
defined.
EMCOR
GROUP, INC.
By:____________________________
Title:
Stock Certificate Number
Stock Issuer Class of Stock
No(s). Par Value of Shares
|
Original
Description Debt
Certificate Final
Principal
Debt Issuer of Debt No(s).
Maturity Amount
|
SERIES A SELLCO PLEDGE
AGREEMENT
PLEDGE AGREEMENT, dated December 15, 1994, made by
SellCo Corporation, a Delaware
corporation (the "Pledgor"), to IBJ Schroder Bank & Trust
Company, as trustee under the Indenture referred
to below (in such capacity, the "Trustee" and, together with the
Holders (as defined in the Indenture), the
"Secured Parties").
W I T N E S S E
T H:
WHEREAS, EMCOR Group, Inc. (formerly known as JWP INC.),
a Delaware corporation (the
"Company") has entered into an Indenture, dated as of December
15, 1994, with the Trustee in respect of the
Company's 7% Senior Secured Notes, Series A, Due 1997 (said
Indenture, as it may be amended,
supplemented or otherwise modified from time to time, being the
"Indenture" and capitalized terms not
defined herein but defined therein or in the Intercreditor
Agreement referred to below being used herein as
therein defined); and
WHEREAS, as set forth in the Indenture, the Pledgor has guarantied all of the Company's obligations under the Indenture and the Securities; and
WHEREAS, the Trustee has entered into an Intercreditor
Agreement dated the date hereof and
substantially in the form of Exhibit C to the Indenture (as it
may be amended, supplemented or otherwise
modified from time to time, the "Intercreditor Agreement") with
the Pledgor, the Company and the other
Trustees referred to therein; and
WHEREAS, the Pledged Collateral is Category One Collateral under the Intercreditor Agreement; and
WHEREAS, the Pledgor is the legal and beneficial owner of (a) the shares of capital stock described in Schedule I hereto (the "Pledged Shares") and issued by the issuers named therein (the "Issuers"), and (b) the Indebtedness described in said Schedule and issued by the obligors named therein (the "Pledged Debt"); and
WHEREAS, it is a requirement under the Indenture that
the Pledgor shall have made the pledge
contemplated by this Agreement;
NOW, THEREFORE, in consideration of the premises, the
Pledgor hereby agrees with the Trustee
on behalf and for the ratable benefit of the Secured Parties as
follows:
Section 1. Pledge.
(a) The Pledgor hereby pledges to the Trustee on behalf and for the ratable benefit of the Secured Parties, and grants to the Trustee on behalf and for the ratable benefit of the Secured Parties a security inter- est in, the following (the "Pledged Collateral"):
(i) all of the Pledged Shares;
(ii) all additional shares of stock or other securities of any Issuer from time to time acquired by the Pledgor in any manner (any such shares being "Additional Shares");
(iii) the certificates representing the shares referred to in clauses (i) and (ii) above;
(iv) all of the Pledged Debt;
(v) all indebtedness for the deferred purchase price of property from time to time owed to (A) the Pledgor by any Person in respect of the sale by the Pledgor of any of the Pledged Shares or Additional Shares, and (B) and all indebtedness for the deferred purchase price of property from time to time owed to the Pledgor or any of the Issuers by any other Person in respect of an Asset Sale (as defined in the Indenture) by such Issuer (any such indebtedness being "Additional Debt");
(vi) all notes or other instruments evidencing the indebtedness referred to in clauses (iv) and (v) above; and
(vii) all dividends, principal, interest, cash, instruments and other property or proceeds, from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the foregoing.
(b) The pledge made and the security interest granted pursuant to this Agreement, and all rights and remedies of the Trustee and the other Secured Parties hereunder and in and to the Pledged Collateral shall be subject in all respects to the terms and provisions of the Intercreditor Agreement.
Section 2. Security for Obligations.
This Agreement secures and the Pledged
Collateral is security for the full and prompt
payment when due (whether at stated maturity, redemption,
repurchase, by acceleration or otherwise) of, and
the performance of, all of the Pledgor's obligations under the
Securities, the Indenture, this Agreement, and
each other instrument, document and agreement executed by the
Pledgor in connection with any of the
foregoing, whether now or hereafter existing and whether for
principal, premium, interest (including without
limitation, interest, whether or not allowed, after the filing of
a petition initiating any proceeding under any
Bankruptcy Law), penalties, commissions, charges, expenses, fees,
indemnifications, reimbursements, liabilities,
amounts payable, or otherwise (collectively, the "Obligations").
Section 3. Delivery of Pledged Collateral.
All certificates or instruments representing or
evidencing the Pledged Collateral shall be delivered to
and held by or on behalf of the Trustee pursuant hereto and shall
be in suitable form for transfer by delivery,
or shall be accompanied by duly executed instruments of transfer
or assignment in blank, all in form and
substance satisfactory to the Trustee. The Trustee shall have
the right, at any time in its discretion and
without notice to the Pledgor, to transfer to or to register in
its name or in the name of any of its nominees
any or all of the Pledged Collateral. In addition, the Trustee
shall have the right at any time to exchange certi-
ficates or instruments representing or evidencing any of the
Pledged Collateral for certificates or instruments
of smaller or larger denominations.
Section 4. Representations and Warranties.
The Pledgor makes the following representations:
(a) The Pledged Shares (i) have been duly authorized and validly issued; (ii) are fully paid and non- assessable; and (iii) constitute 100% of the issued and outstanding shares of stock of the respective Issuers thereof owned by the Pledgor.
(b) The Pledgor is the legal and beneficial owner of the Pledged Collateral free and clear of any Lien, except for (i) the Lien created by this Agreement, (ii) the Lien created by the Software House SellCo Pledge Agreement, (iii) the Lien created by the SellCo Subordinated Pledge Agreement, and (iv) the Lien referred to in Section 4.08(p) of the Indenture.
(c) The pledge of the Pledged Shares and the Pledged Debt pursuant to this Agreement creates a valid and perfected first priority security interest in the Pledged Collateral (other than the Pledged Shares referred to in Section 4(d)), in favor of the Trustee on behalf and for the ratable benefit of the Secured Parties securing the payment of all of the Obligations, subject only to the Lien referred to in Section 4.08(p) of the Indenture.
(d) The Pledgor has informed the Trustee that the certificates representing the Pledged Shares issued by the Issuers listed on Exhibit A hereto are unavailable for delivery to the Trustee on the Issue Date. Each of the Issuers listed on Exhibit A hereto constitute Insignificant Subsidiaries. The Pledgor agrees to use commercially reasonable efforts to deliver such certificates to the Trustee hereunder within 90 days of the Issue Date. From and after the delivery of such certificates, the pledge of the Pledged Shares represented thereby pursuant to this Agreement will create a valid and perfected first priority security interest in such Pledged Shares, in favor of the Trustee on behalf and for the ratable benefit of the Secured Parties securing the payment of all of the Obligations.
(e) No consent, authorization, approval, or other action by, and no notice to or filing with, any governmental authority is required either (i) for the pledge by the Pledgor of the Pledged Collateral pursuant to this Agreement or for the due execution, delivery or performance of this Agreement by the Pledgor, or (ii) for the exercise by the Trustee of the voting or other rights provided for in this Agreement or of the remedies in respect of the Pledged Collateral pursuant to this Agreement, except as may be required in connection with the disposition of the Pledged Collateral by laws affecting the offering and sale of securities generally.
(e) The Pledged Debt constitutes all of the outstanding indebtedness for the deferred purchase price of property owed to the Pledgor and each of the Issuers in respect of Asset Sales (as defined in the Indenture) by the Pledgor and the Issuers.
Section 5. Further Assurances, Etc.
(a) The Pledgor agrees that at any time and from time to time, at the cost and expense of the Pledgor, the Pledgor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that the Trustee may request, in order to perfect and protect the Lien granted or purported to be granted hereby or to enable the Trustee to exercise and enforce its rights and remedies hereunder with respect to any Pledged Collateral.
(b) The Pledgor agrees to defend the title to the Pledged Collateral and the Lien thereon of the Trustee against the claim of any other Person and to maintain and preserve such Lien until indefeasible payment in full of all of the Obligations.
Section 6. Voting Rights; Dividends; Etc.
(a) As long as no Default or Event of Default shall have occurred and be continuing:
(i) The Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement, the Indenture, the Securities or any other instrument or document relating thereto; provided, however, that the Pledgor shall not exercise or shall refrain from exercising any such right if such action would (A) in the reasonable good faith judgment of the Pledgor have a material adverse effect on the value of the Pledged Collateral or any part thereof, or (B) be inconsistent with or violate any provision of this Agreement, the Securities or the Indenture.
(ii) The Pledgor shall be entitled to receive and retain any and all dividends, principal, and interest paid in respect of the Pledged Collateral (subject to the Pledgor's application thereof in accordance with the Indenture), other than any and all
(A) dividends and interest paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Pledged Collateral,
(B) dividends and other distributions paid or payable in cash in respect of any Pledged Shares or Additional Pledged Shares in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise distributed in redemption of, or in exchange for, any Pledged Collateral,
all of which shall be forthwith delivered to the Trustee to hold as Pledged Collateral and shall, if received by the Pledgor, be received in trust for the benefit of the Secured Parties, be segregated from the other property or funds of the Pledgor, and be forthwith delivered to the Trustee as Pledged Col- lateral in the same form as so received (with any necessary indorsement).
(iii) The Trustee shall execute and deliver
(or cause to be executed and delivered) to the
Pledgor all such proxies and other instruments as the
Pledgor may reasonably request for the purpose
of enabling the Pledgor to exercise the voting and other
rights which it is entitled to exercise pursuant
to paragraph (i) above and to receive the dividends,
principal, or interest payments which it is
authorized to receive and retain pursuant to paragraph
(ii) above.
(b) Upon the occurrence and during the continuance of a Default or an Event of Default:
(i) Upon notice by the Trustee to the Pledgor, all rights of the Pledgor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 6(a)(i) above shall cease, and all such rights shall thereupon become vested in the Trustee who shall thereupon have the sole right to exercise such voting and other consensual rights.
(ii) All rights of the Pledgor to receive the dividends, principal, interest payments and other distributions which it would otherwise be authorized to receive and retain pursuant to Section 6(a)(ii) above shall cease, and all such rights shall thereupon become vested in the Trustee who shall thereupon have the sole right to receive and hold as Pledged Collateral such dividends, principal, interest payments and other distributions.
(iii) All dividends, principal, interest payments and other distributions which are received by the Pledgor contrary to the provisions of paragraph (ii) of this Section 6(b) shall be received in trust for the benefit of the Trustee, shall be segregated from other funds of the Pledgor and shall be forthwith paid over to the Trustee as Pledged Collateral in the same form as so received (with any necessary indorsement).
(iv) The Pledgor shall, if necessary to permit
the Trustee to exercise the voting and other
rights which it may be entitled to exercise pursuant to
Section 6(b)(i) above and to receive all
dividends, principal, interest payments and
distributions which it may be entitled to receive under
Section 6(b)(ii) above, execute and deliver to the
Trustee, from time to time and upon written notice
of the Trustee, appropriate proxies, dividend payment
orders and other instruments as the Trustee
may reasonably request. The foregoing shall not in any
way limit the Trustee's power and authority
granted pursuant to Section 8 hereof.
Section 7. Transfers and Other Liens; Additional Shares and Additional Debt.
(a) The Pledgor agrees that it will not (i) sell or otherwise dispose of, or grant any option or warrant with respect to, any of the Pledged Collateral (except, in respect of the Pledged Shares, in accordance with the terms of the Indenture), or (ii) create or permit to exist any Lien upon or with respect to any of the Pledged Collateral except for (A) the Lien created pursuant to this Agreement, (B) the Lien created pursuant to the Software House SellCo Pledge Agreement, (C) the Lien created pursuant to the SellCo Subordinated Pledge Agreement, and (D) the Lien referred to in Section 4.08(p) of the Indenture.
(b) The Pledgor agrees that it will (i) cause each
Issuer not to issue any shares of stock or other
securities in addition to or in substitution for the Pledged
Shares except to the Pledgor, (ii) pledge hereunder,
immediately upon its acquisition (directly or indirectly)
thereof, any and all Additional Shares and any and all
Additional Debt, and (iii) promptly (and in any event within
three Business Days) deliver to the Trustee a
Pledge Amendment, duly executed by the Pledgor, in substantially
the form of Schedule II hereto (a "Pledge
Amendment"), in respect of the Additional Shares and Additional
Debt, together with all certificates, notes or
other instruments representing or evidencing the same. The
Pledgor hereby (i) authorizes the Trustee to
attach each Pledge Amendment to this Pledge Agreement, (ii)
agrees that all Additional Shares and all
Additional Debt listed on any Pledge Amendment delivered to the
Trustee shall for all purposes hereunder
constitute Pledged Shares and Pledged Debt, respectively, and
(iii) is deemed to have made, upon such
delivery, the representations and warranties contained in Section
4 hereof with respect to such Pledged
Collateral.
Section 8. Trustee Appointed Attorney-in-Fact and Proxy.
The Pledgor hereby irrevocably constitutes and appoints
the Trustee and any officer or agent thereof,
with full power of substitution, as its true and lawful
attorney-in-fact and proxy with full irrevocable power and
authority in the place and stead of the Pledgor and in the name
of the Pledgor or in its own name, from time
to time in the Trustee's discretion, for the purpose of carrying
out the terms of this Agreement, to take any
and all appropriate action and to execute and deliver any and all
documents and instruments which the
Trustee may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without
limitation, to receive, indorse and collect all instruments made
payable to the Pledgor representing any
dividend, interest payment or other distribution or payment in
respect of the Pledged Collateral or any part
thereof, to give full discharge for the same, and to vote or
grant any consent in respect of the Pledged Shares
authorized by Section 6(b) hereof. The Pledgor hereby ratifies,
to the extent permitted by law, all that any
said attorney shall lawfully do or cause to be done by virtue
hereof. This power, being coupled with an
interest, is irrevocable until the Obligations are paid in full.
Section 9. Trustee May Perform.
If the Pledgor fails to perform any agreement contained herein, the Trustee may itself perform, or cause performance of, such agreement, and the expenses of the Trustee incurred in connection therewith shall be payable by the Pledgor under Section 12 hereof and constitute Obligations secured hereby.
Section 10. Reasonable Care.
The Trustee shall be deemed to have exercised reasonable
care in the custody and preservation of the
Pledged Collateral in its possession if the Pledged Collateral is
accorded treatment substantially equal to that
which the Trustee accords its own property, it being understood
that neither the Trustee nor any other
Secured Party shall have responsibility for (i) ascertaining or
taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any
Pledged Collateral, whether or not the Trustee
or any other Secured Party has or is deemed to have knowledge of
any such matter, or (ii) taking any
necessary steps to preserve rights against any Person with
respect to any Pledged Collateral.
Section 11. Remedies upon Default.
If any Event of Default shall have occurred and be continuing:
(a) The Trustee may exercise in respect of the Pledged Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party after default under the Uniform Commercial Code in effect in the State of New York at that time (the "UCC"), and the Trustee may also, without notice except as specified below, sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker's board or at any office of the Trustee or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Trustee may deem commercially reasonable. The Pledgor agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to the Pledgor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Trustee shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. The Trustee may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. The Pledgor hereby waives any claims against the Trustee arising by reason of the fact that the price at which any Pledged Col- lateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if the Trustee accepts the first offer received and does not offer such Pledged Collateral to more than one offeree.
(b) If the Trustee shall determine to exercise its right to sell all or any of the Pledged Collateral pursuant to this Section 11, the Pledgor agrees that, upon request of the Trustee, the Pledgor will, at its own cost and expense:
(i) execute and deliver, and use its best efforts to cause each issuer of the Pledged Collateral and its directors and officers to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts and things, as may be necessary or, in the reasonable opinion of the Trustee, advisable to register such Pledged Collateral under the provisions of the Securities Act of 1933, as from time to time amended (the "Securities Act"), and to cause the registration statement relating thereto to become effective and to remain effective for such period as prospectuses are required by law to be furnished, and to make all amendments and supplements thereto and to the related prospectus which, in the opinion of the Trustee, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission ("SEC") applicable thereto;
(ii) use its best efforts to qualify the Pledged Collateral under the state securities or "Blue Sky" laws and to obtain all necessary governmental approvals for the sale of the Pledged Collateral, as requested by the Trustee;
(iii) make available to its security holders, as soon as practicable, an earning statement which will satisfy the provisions of section 11(a) of the Securities Act; and
(iv) do or cause to be done all such other acts and things as may be necessary to make such sale of the Pledged Collateral or any part thereof valid and binding and in compliance with applicable law.
The Pledgor further acknowledges the impossibility of
ascertaining the amount of damages which would be
suffered by the Secured Parties by reason of the failure by the
Pledgor to perform any of the covenants
contained in this Section 11 and, consequently, agrees that, if
the Pledgor shall fail to perform any of such
covenants, it shall pay, as liquidated damages and not as a
penalty, an amount equal to the value of the
Pledged Collateral on the date the Trustee shall demand
compliance with this Section.
(c) The Pledgor recognizes that, by reason of the aforementioned requirements and certain prohibitions contained in the Securities Act and applicable state securities laws, the Trustee may, at its option, elect not to require the Pledgor to register all or any part of the Pledged Collateral and may therefore be compelled, with respect to any sale of all or any part of the Pledged Collateral, to limit purchasers to those who will agree, among other things, to acquire such securities for their own account, for investment, and not with a view to the distribution or resale thereof. The Pledgor acknowledges and agrees that any such sale may result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions and, notwithstanding such circumstances, agrees that any such sale shall be deemed to have been made in a commercially reasonable manner. The Trustee shall be under no obligation to delay the sale of any of the Pledged Collateral for the period of time necessary to permit the Pledgor to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if the Pledgor would agree to do so.
(d) If the Trustee determines to exercise its right to sell any or all of the Pledged Collateral, upon written request, the Pledgor shall, from time to time, furnish to the Trustee all such information as the Trustee may request in order to determine the number of shares and other instruments included in the Pledged Collateral which may be sold by the Trustee as exempt transactions under the Act and rules of the SEC thereunder, as the same are from time to time in effect.
(e) Any cash held by the Trustee as Pledged Collateral and all cash proceeds received by the Trustee in respect of any sale of, collection from, or other realization upon all or any part of the Pledged Collateral shall be applied by the Trustee as provided in Section 6.10 of the Indenture.
Section 12. Expenses.
The Pledgor will upon demand pay to the Trustee the amount of any and all reasonable expenses, including, without limitation, the reasonable fees and expenses of the Trustee's counsel and of any experts and agents, which the Trustee may incur in connection with (a) the administration of this Agreement, (b) the custody or preservation of, sale of, collection from, or other realization upon, any of the Pledged Collateral, (c) the exercise or enforcement of any of the rights and remedies hereunder of the Trustee and the other Secured Parties, or (d) the failure by the Pledgor to perform or observe any of the provisions hereof.
Section 13. Security Interest Absolute.
All rights of the Trustee and security interests hereunder, and all obligations of the Pledgor hereunder, shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of any provision of the Indenture, the Securities or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any other term of, or any increase in the amount of, all or any of the Obligations, or any other amendment or waiver of any term of, or any consent to any departure from any requirement of, the Indenture, the Securities or any other instrument or document relating thereto;
(c) any exchange, release or non-perfection of any Lien on any other collateral, or any release or amendment or waiver of any term of any guaranty of, or consent to departure from any requirement of any guaranty of, all or any of the Obligations; or
(d) any other circumstance which might otherwise constitute a defense available to, or a discharge of, a borrower or a pledgor.
Section 14. Amendments, Etc.
No amendment or waiver of any provision of this Agreement nor consent to any departure by the Pledgor herefrom shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.
Section 15. Addresses for Notices.
All notices and other communications provided for
hereunder shall be in writing (including
telegraphic, telex, telecopy or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or
delivered by hand, if to the Pledgor or the Trustee, addressed to
the Pledgor or the Trustee, as the case may
be, at its address specified in the Indenture, or, as to either
party, at such other address as shall be designated
by such party in a written notice to each other party complying
as to delivery with the terms of this Section.
All such notices and other communications shall, when mailed,
telegraphed, telexed, telecopied, cabled or
delivered, be effective four (4) Business Days after deposit in
the mails, delivered to the telegraph company,
confirmed by telex answerback, telecopied with confirmation of
receipt, delivered to the cable company or
delivered by hand to the addressee or its agent, respectively.
Section 16. Continuing Security Interest; Transfer of Securities or Obligations.
This Pledge Agreement shall create a continuing security
interest in the Pledged Collateral and shall
(a) remain in full force and effect until indefeasible payment in
full of the Obligations, (b) be binding upon the
Pledgor, its successors and assigns, and (c) inure, together with
the rights and remedies of the Trustee
hereunder, to the benefit of and be enforceable by the Secured
Parties and their respective successors,
transferees and assigns. Without limiting the generality of the
foregoing clause (c), any Holder may assign or
otherwise transfer any Security held by it or Obligation owing to
it to any other Person, and such other Person
shall thereupon become vested with all the rights in respect
thereof granted to such Holder herein or
otherwise with respect to such of the Securities or Obligations
so transferred or assigned. Upon the payment
in full of the Obligations, the Pledgor shall be entitled to the
return, upon its request and at its expense, of
such of the Pledged Collateral as shall not have been sold or
otherwise applied pursuant to the terms hereof.
Section 17. Governing Law; Severability; Terms.
This Agreement shall be governed by, and be construed and interpreted in accordance with, the law of the State of New York. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity and without invalidating the remaining provisions of this Agreement. Unless otherwise defined herein or in the Indenture, terms defined in Article 9 of the UCC are used herein as therein defined.
Section 18. Release of Liens.
Upon the Trustee's receipt of a written request by the
Pledgor made contemporaneously with or at
any time after the receipt by the Trustee of all Net Cash
Proceeds and Additional Debt from the Pledgor in
accordance with the terms of the Indenture in connection with the
sale by the Pledgor of any of the Pledged
Shares or Additional Shares, the Trustee shall release its Lien
on such Pledged Shares and Additional Shares.
The Trustee shall, at the Pledgor's expense, execute and deliver
such documents and instruments as the
Pledgor may reasonably request to evidence such release.
Section 19. Waiver of Jury Trial.
The Pledgor waives any right it may have to a trial by jury in respect of any litigation based on, or arising out of, under or in connection with, this Agreement or any course of conduct, course of dealing, verbal or written statement or other action of the Trustee or any other Secured Party.
Section 20. Conflicts.
In the event of any conflict between the terms of the Intercreditor Agreement and this Agreement, the terms of the Intercreditor Agreement shall govern.
Section 21. Section Titles.
The Section titles contained in this Agreement are and
shall be without substantive meaning or
content of any kind whatsoever and are not part of this
Agreement.
IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be duly executed and delivered by its duly authorized officer on the date first above written.
SELLCO
CORPORATION
By:
Title:
Accepted and Acknowledged:
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By:__________________________
Title:
SCHEDULE I TO PLEDGE
AGREEMENT
Attached to and forming a part of that certain Pledge Agreement,
dated December 15, 1994, by SellCo
Corporation to IBJ Schroder Bank & Trust Company, as Trustee.
Stock Issuer Class of Stock Stock CertificateNo(s). Number of Shares
A to Z Equipment Corp. Common 6 100
Afgo Engineering Corporation Common 14 2
Afgo Engineering Corp. of
Washington Common 12 3
American Cable Products, Inc. Common 6 30
Antwerp Education Center
N.v.
AZCO Inc. Common 2A 1,000
Brandt Engineering Company
of Arkansas, Inc. Common 004 3,000
Brandt Service Company Common 003 1,000
Businessland Canada Ltd.
Businessland (Hong Kong)
Limited
Case/Acme Systems, Inc. Common 10 150
Computer Maintenance
Corporation Common 49 332,640
Drake & Scull France SARL
E.M.A. International Inc. Common 13 502
Fort Corp. Common 4 100
General Energy Development
Inc. Common 3 100
Gone Inc. Common 3 10,000
Guzovsky/JWP Electrical Inc. Common 2 100
Intec Business Phones Inc. Common 3 1,000
ISYS Security Systems, Inc. Common 3 100
Jamaica Water Securities Corp. Common 2 100
JWP Voc 1, Inc. Common 3 100
JWP Voc 2, Inc. Common 21 45
JWP Asset Management Inc. Common 2 100
JWP Brandt Engineering Co.,
Inc. Common 5 100
JWP Communications Inc. Common 3 100
JWP Controls Inc. Common 4 100
JWP Controls Holding, Inc. Common 3 100
JWP Credit Corp. Common 2 100
JWP E.C. Corp. Common 16 120
JWP Environmental
Composting Technologies, Inc. Common 2 1,000
JWP Equipment Services Inc. Common 3 100
JWP Espana SA
JWP France SARL
JWP Guzovsky Electrical Corp. Common 8 4,425
JWP/HCCII Corp. Common A-3 100
JWP of Hartford, Inc. Common 6 1,724
JWP Information Services, Inc. Common 1 100
JWP Information Services
SARL
JWP/IS Network Integration
Services Inc. Common 8 1,000
JWP Mechanical Services of
New York, Inc. Common 6 50
JWP Merger Sub Inc. Common 3 100
JWP New England Inc. Common 2 1,000
JWP/SHI Corp. Common 4 100
JWP Technical Services Corp. Common 3 1,000
Kerby Saunders, Inc. Common C5 300
Kerby Saunders, Inc. Preferred P9 360
Kerby Saunders-Warkol, Inc. Common 4 100
Marlon of Texas, Inc. Common 4 1,000
Metalair Industries, Inc. Common 7 2,000
Micro Avenue
MicroCom
North American Heating &
Air Conditioning Company Common 2 100
Photo-Scan Management
Systems, Inc. Common 2 431,107
Sivea Benelux
SLR Constructors Inc. Common 3 100
Superior Engineering
Corporation Class A
VotingCommon 11 33,803
Superior Engineering
Corporation Class B
Non-Voting Common 60 168,978
Sutter Hill Industries, Inc. Common 11-C 110,000
Teletime Limited
University Cogeneration, Inc. Common 2 10,000
University Mechanical
Contractors, Inc. Common 22 1,500
University Nuclear Systems,
Inc. Common 4 1,000
Wachtel, Duklauer & Fein
Incorporated (New Jersey) Common 3 90
Wachtel, Duklauer & Fein
Incorporated (New York) Common 17 242.8
Walker Engineering, Inc. Common 7 950,000
Worldwide Communications,
Inc. Common 7 124.61538
JWP Unrestricted Sub 3 Inc. Common 2 1,000
JWP Unrestricted Sub 9 Inc. Common 3 100
JWP Unrestricted Sub 12 Inc. Common 3 1
|
Issuer Description of Debt Debt Certificate No(s). Final Maturity Automatic Mechanical Services, Inc. Promissory Note (7/30/93) N/A IGYS Systems, Inc. Secured Note (2/5/92) N/A KSW, Inc. Promissory Note(1/20/94) N/A |
SCHEDULE II TO PLEDGE AGREEMENT
PLEDGE AMENDMENT
This Pledge Amendment, dated , 19__, is
delivered pursuant to Section 7 of the Pledge
Agreement referred to below. The undersigned hereby agrees that
this Pledge Amendment may be attached
to the Pledge Agreement, dated December 15, 1994, between the
undersigned and IBJ Schroder Bank & Trust
Company, as Trustee on behalf of and for the ratable benefit of
the Secured Parties referred to therein and
that the [Additional Shares] [and] [Additional Debt] listed on
this Pledge Amendment shall be and become
part of the Pledged Collateral referred to in the Pledge
Agreement and shall secure all Obligations of the
undersigned. The terms defined in the Pledge Agreement or
Indenture are being used herein as therein
defined.
SELLCO CORPORATION
By:____________________________
Title:
Stock Certificate Number
Stock Issuer Class of Stock No(s).
Par Value of Shares
Description Debt Certificate Final Principal
Issuer of Debt No(s). Maturity Amount
|
INTERCREDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT (this "Agreement") is
entered into as of this 15th day of
December, 1994 among (a) IBJ SCHRODER BANK & TRUST COMPANY, as
the Series A Indenture
Trustee under the Series A Indenture referred to below and for
the benefit of the holders of the Series A
Notes referred to below, (b) UNITED STATES TRUST COMPANY OF NEW
YORK, as the Software
House Indenture Trustee under the Software House Indenture
referred to below and for the benefit of the
holders of the Software House Notes referred to below, (c)
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, as the SellCo Indenture Trustee under the
SellCo Indenture referred to below
and for the benefit of the holders of the SellCo Notes referred
to below, (d) EMCOR GROUP, INC.
(formerly known as JWP INC.), a Delaware corporation (the
"Company"), (e) SELLCO CORPORATION, a
Delaware corporation, all of the capital stock of which is owned
by the Company ("Sellco"), and (f) MES
HOLDINGS CORPORATION, a Delaware corporation, all of the capital
stock of which is owned by the
Company ("MES"). Capitalized terms used in this Agreement shall
have the meanings set forth in Section 1
below. All other terms contained in this Agreement shall, unless
the context indicates otherwise, have the
meanings provided therefor by the Uniform Commercial Code to the
extent the same are defined therein.
RECITALS
A. (1) The Company, the Guarantors and the Series A Indenture Trustee have entered into the Series A Indenture, (2) the Company and the Series A Indenture Trustee have entered into the Series A Senior Pledge Agreement and the Series A Subordinated Pledge Agreement, (3) SellCo and the Series A Indenture Trustee have entered into the Series A SellCo Pledge Agreement and (4) the Company and Guarantors will incur Series A Obligations under the Series A Indenture and the Series A Notes, the Company will incur Series A Obligations under the Series A Senior Pledge Agreement and the Series A Subordinated Pledge Agreement and SellCo will incur Series A Obligations under the Series A SellCo Pledge Agreement.
B. (1) The Company, the Guarantors and the
Software House Indenture Trustee have entered
into the Software House Indenture, (2) the Company and the
Software House Indenture Trustee have entered
into the Software House Senior Pledge Agreement and the Software
House Subordinated Pledge Agreement,
(3) SellCo and the Software House Indenture Trustee have entered
into the Software House SellCo Pledge
Agreement, and (4) the Company and the Guarantors will incur
Software House Obligations under the
Software House Indenture and the Software House Notes, the
Company will incur Software House Obligations
under the Software House Senior Pledge Agreement and the Software
House Subordinated Pledge Agreement,
and SellCo will incur Software House Obligations under the
Software House SellCo Pledge Agreement.
C. (1) SellCo and the SellCo Indenture Trustee have entered into the SellCo Indenture and the SellCo Subordinated Pledge Agreement, and (2) SellCo will incur SellCo Obligations thereunder and under the SellCo Notes.
D. This Agreement sets forth the agreement of the parties as to the relative priority of their respective Liens on the Category One Collateral and the Category Two Collateral and certain other rights, priorities and interests among themselves with respect thereto.
NOW THEREFORE, in consideration of the foregoing and the
mutual covenants herein contained
the parties agree as follows:
1. Definitions. As used herein the following terms shall have the meanings indicated.
"Agreement" means this Agreement as modified or amended from time to time in accordance with the terms hereof.
"Avoided Transfer" has the meaning set forth in Section 6.2(a) hereof.
"Bankruptcy Code" means Title 11 of the United States Code (11 U.S.C. 101 et seq.), as amended from time to time and any successor statute.
"Business Day" means any day other than Saturday, Sunday
and a day that is a legal holiday under the
laws of the State of New York or on which banking institutions in
the State of New York are required or
authorized by law or other governmental action to close.
"Category One Collateral" means the "Pledged Collateral"
as defined in the Series A Senior Pledge
Agreement, the Software House Subordinated Pledge Agreement, the
Series A SellCo Pledge Agreement, the
Software House SellCo Pledge Agreement and the SellCo
Subordinated Pledge Agreement.
"Category Two Collateral" means the "Pledged Collateral"
as defined in the Software House Senior
Pledge Agreement and the Series A Subordinated Pledge Agreement.
"Collateral" means the Category One Collateral and the Category Two Collateral.
"Effective Date" has the meaning set forth in the Plan of Reorganization.
"Guarantor" means SellCo and MES as guarantors pursuant
to the Series A Indenture and the
Software House Indenture.
"Indenture Documents" means the Series A Documents, the
Software House Documents and the
SellCo Documents.
"Insolvency or Liquidation Proceeding" means (a) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding relative to the Company, SellCo or MES or to any of their respective assets, or (b) any liquidation, dissolution, reorganization or winding up of the Company, SellCo or MES whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or any other marshalling of assets and liabilities of the Company, SellCo or MES.
"Lien" means any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement,
security interest, encumbrance, lien, preference, priority or
other security agreement or other preferential
arrangement whatsoever, including, without limitation, any right
of setoff, any conditional sale or other title
retention agreement, the interest of a lessor under a lease, any
financing lease having substantially the same
economic effect as any of the foregoing and the filing of any
financing statement (other than a financing
statement filed by a "true" lessor pursuant to Section 9-408 of
the Uniform Commercial Code or other
comparable law of any jurisdiction) naming the owner of the asset
to which such Lien relates as debtor;
provided, none of the foregoing shall be a "Lien" for purposes of
this Agreement if it arises or results solely
from the exercise by a Secured Party or a Trustee of rights or
remedies as an unsecured creditor of the
Company, SellCo or MES and does not arise or result from a
consensual agreement or arrangement between
or among the Company, SellCo or MES, on the one hand, and any
such Secured Party or a Trustee, on the
other hand.
"Obligations" means with respect to any Indenture
Document, the full and prompt payment when due
(whether at stated maturity, redemption, repurchase, by
acceleration or otherwise) of, and the performance of,
all of the obligations under such Indenture Document of each
Obligor party to such Indenture Document,
whether now or hereafter existing and whether for principal,
premium, interest, fees, expenses or otherwise,
and shall include, without limitation, in the case of all Senior
Obligations, all interest accrued or accruing (or
which would, absent the commencement of an Insolvency or
Liquidation Proceeding, accrue) after the
commencement of an Insolvency or Liquidation Proceeding in
accordance with and at the rate specified in the
Indenture Documents governing said Obligations whether or not the
claim for such interest is allowed as a
claim in such Insolvency or Liquidation Proceeding; and to the
extent any payment with respect to any of the
Senior Obligations (whether by or on behalf of the Company,
SellCo or MES, as proceeds of security,
enforcement or any right of setoff or otherwise) is declared to
be fraudulent or preferential, set aside or
required to be paid to a trustee, receiver or similar Person,
then such payment or part thereof originally
intended to be satisfied shall be deemed to be reinstated and
outstanding as if such payment had not occurred.
"Obligor" means:
(a) with respect to the Series A Indenture, the Series A Notes, the Software House Indenture and the Software House Notes, the Company and the Guarantors;
(b) with respect to the SellCo Indenture and the SellCo Notes, SellCo;
(c) with respect to the Series A Senior Pledge Agreement, the Series A Subordinated Pledge Agreement, the Software House Senior Pledge Agreement and the Software House Subordinated Pledge Agreement, the Company; and
(d) with respect to the Series A SellCo Pledge Agreement, the Software House SellCo Pledge Agreement and the SellCo Subordinated Pledge Agreement, SellCo.
"paid in full" and "payment in full" means with respect
to any Senior Obligations, payment in full
thereof in cash (or otherwise to the written satisfaction of the
holders thereof) and termination of the
Indenture Documents with respect to thereto.
"Person" means any person, individual, sole proprietorship, partnership, joint venture, corporation, unincorporated organization, association, institution, entity, party, including any government and any political subdivision, agency or instrumentality thereof.
"Plan of Reorganization" means the Third Amended Joint
Plan of Reorganization of the Company and
SellCo under Chapter 11 of the Bankruptcy Code (Chapter 11 Case
No. 94 B 46404 (JHG)), as amended, the
terms of which have been confirmed pursuant to Section 1129 of
the Bankruptcy Code.
"Pledge Agreement" means any of the Series A Senior
Pledge Agreement, the Series A Subordinated
Pledge Agreement, the Series A SellCo Pledge Agreement, the
Software House Senior Pledge Agreement, the
Software House Subordinated Pledge Agreement, the Software House
SellCo Pledge Agreement or the SellCo
Subordinated Pledge Agreement.
"Recovery" has the meaning set forth in Section 6.2(a) hereof.
"Relevant Secured Parties" means (a) with respect to the
Series A Indenture Trustee, the Series A
Secured Parties, (b) with respect to the Software House Indenture
Trustee, the Software House Secured
Parties, and (c) with respect to the SellCo Indenture Trustee,
the SellCo Secured Parties.
"Secured Party" means a Series A Secured Party, a Software House Secured Party, or a SellCo Secured Party.
"SellCo Documents" means the SellCo Indenture, the SellCo Notes and the SellCo Subordinated Pledge Agreement.
"SellCo Indenture" means that certain Indenture, dated
as of the Effective Date, among SellCo and the
SellCo Indenture Trustee, in respect of the SellCo Notes, as the
same may from time to time be amended,
renewed, supplemented or otherwise modified.
"SellCo Indenture Trustee" means the then acting Trustee
under the SellCo Indenture and any
successor thereto exercising substantially the same rights and
powers, or if there is no acting Trustee under the
SellCo Indenture, holders of SellCo Notes holding a majority in
principal amount of outstanding SellCo
Obligations.
"SellCo Notes" means the 12% Subordinated Contingent Payment Notes, due 2004, issued by SellCo under the SellCo Indenture.
"SellCo Obligations" means the Obligations of SellCo with respect to the SellCo Documents.
"SellCo Secured Parties" means at any time the SellCo Trustee and the holders of SellCo Notes at such time.
"SellCo Subordinated Pledge Agreement" means the Pledge
Agreement dated the Effective Date
between SellCo and the SellCo Indenture Trustee for the benefit
of the SellCo Secured Parties, and any
document or instrument under which any Lien is granted by SellCo
in any Category One Collateral to secure
the SellCo Obligations or under which rights or remedies with
respect to any such Lien are governed, as the
same may from time to time be amended, renewed, extended,
supplemented or modified.
"Senior Lien" means: (a) In the case of the Category
One Collateral: (i) as between (A) the Series A
Secured Parties on the one hand and (B) the Software House
Secured Parties on the other hand, the Lien of
the Series A Indenture Trustee in the Category One Collateral,
and (ii) as between (A) the Series A Secured
Parties and the Software House Secured Parties on the one hand
and (B) any SellCo Secured Party on the
other hand, the Lien of the Series A Indenture Trustee and of the
Software House Indenture Trustee in the
Category One Collateral; and (b) in the case of the Category Two
Collateral, the Lien therein of the Software
House Indenture Trustee.
"Senior Lienor" means at any time as to any Collateral, each Trustee having a Senior Lien at such time in such Collateral.
"Senior Obligation Holder" means any holder of all or a portion of the Senior Obligations.
"Senior Obligations" means at any time as to any Collateral, the Obligations secured at such time by a Senior Lien in such Collateral pursuant to Section 2.
"Series A Documents" means the Series A Indenture, the Series A Notes, the Series A Senior Pledge Agreement, the Series A Subordinated Pledge Agreement and the Series A SellCo Pledge Agreement.
"Series A Indenture" means that certain Indenture, dated
as of the Effective Date, among the
Company, the Guarantors and the Series A Indenture Trustee, in
respect of the Series A Notes, as the same
may from time to time be amended, renewed, supplemented or
otherwise modified.
"Series A Indenture Trustee" means the then acting Trustee under the Series A Indenture and any successor thereto exercising substantially the same rights and powers, or if there is no acting Trustee under the Series A Indenture, holders of Series A Notes holding a majority in principal amount of outstanding Series A Obligations.
"Series A Notes" means the 7% Senior Secured Notes, Series A, due 1997, issued by the Company under the Series A Indenture.
"Series A Obligations" means the Obligations of the Obligors with respect to the Series A Documents.
"Series A Secured Parties" means at any time the Series
A Indenture Trustee and the holders of
Series A Notes at such time.
"Series A SellCo Pledge Agreement" means the Pledge
Agreement dated the Effective Date between
SellCo and the Series A Indenture Trustee for the benefit of the
Series A Secured Parties, and any document
or instrument under which any Lien on Category One Collateral is
granted by SellCo to secure the Series A
Obligations or under which rights or remedies with respect to any
such Lien are governed, as the same may
from time to time be amended, renewed, extended, supplemented or
modified.
"Series A Senior Pledge Agreement" means the Pledge
Agreement dated the Effective Date between
the Company and the Series A Note Trustee for the benefit of the
Series A Secured Parties, and any
document or instrument under which any Lien on the Category One
Collateral is granted by the Company to
secure the Series A Obligations or under which rights or remedies
with respect to any such Lien are governed,
as the same may from time to time be amended, renewed, extended,
supplemented or modified.
"Series A Subordinated Pledge Agreement" means the
Pledge Agreement dated the Effective Date
between the Company and the Series A Indenture Trustee for the
benefit of the Series A Secured Parties, and
any document or instrument under which any Lien is granted by the
Company in any Category Two Collateral
to secure the Series A Obligations or under which rights or
remedies with respect to any such Lien are
governed, as the same may from time to time be amended, renewed,
extended, supplemented or modified.
"Software House Documents" means the Software House
Indenture, the Software House Notes, the
Software House Senior Pledge Agreement, the Software House
Subordinated Pledge Agreement and the
Software House SellCo Pledge Agreement.
"Software House Indenture" means that certain Indenture,
dated as of the Effective Date, among the
Company, the Guarantors and the Software House Indenture Trustee,
in respect of the Software House Notes,
as the same may from time to time be amended, renewed,
supplemented or otherwise modified.
"Software House Indenture Trustee" means the then acting
Trustee under the Software House
Indenture and any successor thereto exercising substantially the
same rights and powers, or if there is no acting
Trustee under the Software House Indenture, holders of Software
House Notes holding a majority in principal
amount of outstanding Software House Obligations.
"Software House Notes" means the 7% Senior Secured Notes, Series B, due 1997, issued by the Company under the Software House Indenture.
"Software House Obligations" means the Obligations of the Obligors with respect to the Software House Documents.
"Software House Secured Parties" means at any time the Software House Indenture Trustee and the holders of the Software House Notes at such time.
"Software House SellCo Pledge Agreement" means the
Pledge Agreement dated the Effective Date
between SellCo and the Software House Indenture Trustee for the
benefit of the Software House Secured
Parties, and any document or instrument under which any Lien is
granted by SellCo in any Category One
Collateral to secure the Software House Obligations or under
which rights or remedies with respect to any
such Lien are governed, as the same may be from time to time
amended, renewed, extended, supplemented or
modified.
"Software House Senior Pledge Agreement" means the
Pledge Agreement dated the Effective Date
between the Company and the Software House Indenture Trustee for
the benefit of the Software House
Secured Parties, and any document or instrument under which any
Lien is granted by the Company in any
Category Two Collateral to secure the Software House Obligations
or under which rights or remedies with
respect to any such Lien are governed, as the same may from time
to time be amended, renewed, extended,
supplemented or modified.
"Software House Subordinated Pledge Agreement" means the
Pledge Agreement dated the Effective
Date between the Company and the Software House Indenture Trustee
for the benefit of the Software House
Secured Parties, and any document or instrument under which any
Lien is granted by the Company in any
Category One Collateral to secure the Software House Obligations
or under which rights or remedies with
respect to any such Lien are governed, as the same may from time
to time be amended, renewed, extended,
supplemented or modified.
"Trustee" means the Series A Indenture Trustee, the Software House Indenture Trustee, and the SellCo Indenture Trustee.
"Uniform Commercial Code" means the Uniform Commercial
Code of the State of New York, as
amended.
2. Lien Priorities
2.1 Subordination of Liens. Notwithstanding the date, manner or order of grant, attachment or perfection of any Liens granted to any Secured Party in the Collateral, and notwithstanding any provision of the Uniform Commercial Code, or any applicable law or decision, or any provision of any of the Indenture Documents or any other circumstance whatsoever, each Trustee, for itself and on behalf of each Relevant Secured Party, hereby agrees:
(a) Category One Collateral. With respect to the Category One Collateral:
(i) The Lien of the Series A Indenture Trustee and Series A Secured Parties in the Category One Collateral, now or hereafter held, shall be a senior and prior Lien therein to secure the Series A Obligations.
(ii) Any Lien of the Software House Indenture Trustee and Software House Secured Parties in the Category One Collateral, now or hereafter held by the Software House Secured Parties, regardless of how acquired, whether by grant, statute, operation of law, subrogation or otherwise, shall be junior and subordinate to all Liens in the Category One Collateral securing the Series A Obligations, and all Liens in the Category One Collateral securing the Series A Obligations shall be and remain senior to all Liens in the Category One Collateral securing the Software House Obligations for all purposes of this Agreement, whether or not subordinated to any Lien securing any other indebtedness of any Obligor in any Insolvency or Liquidation Proceeding.
(iii) Any Lien of the Sellco Indenture Trustee or of any SellCo Secured Parties in the Category One Collateral, now or hereafter held by either such Trustee or any such SellCo Secured Party, regardless of how acquired, whether by grant, statute, operation of law, subrogation or otherwise, shall be junior and subordinate to all Liens in the Category One Collateral securing the Series A Obligations and all Liens in the Collateral One Collateral securing the Software House Obligations; and all Liens in the Category One Collateral securing the Series A Obligations or the Software House Obligations shall be and remain senior to all Liens in the Category One Collateral securing any SellCo Obligations for all purposes of this Agreement, whether or not subordinated to any Liens securing any other indebtedness of any Obligor in any Insolvency or Liquidation Proceeding.
(b) Category Two Collateral. With respect to the Category Two Collateral:
(i) The Lien of the Software House Indenture Trustee and Software House Secured Parties in the Category Two Collateral, now or hereafter held, shall be a senior and prior Lien therein to secure the Software House Obligations.
(ii) Any Lien of the Series A Indenture Trustee and Series A Secured Parties in the Category Two Collateral now or hereafter held by the Series A Secured Parties regardless of how acquired, whether by grant, statute, operation of law, subrogation or otherwise, shall be junior and subordinate to all Liens in the Category Two Collateral securing the Software House Obligations; and all Liens in the Category Two Collateral securing the Software House Obligations shall be and remain senior to all Liens in the Category Two Collateral securing the Series A Obligations for all purposes of this Agreement, whether or not subordinated to any Lien securing any other indebtedness of any Obligor in any Insolvency or Liquidation Proceeding.
2.2 Prohibition on Contesting Liens; No New Liens. Each Trustee, for itself and on behalf of each Relevant Secured Party, agrees that it shall not (and hereby waives any right to) contest or support any other Person in contesting, in any proceeding (including, without limitation, any Insolvency or Liquidation Proceeding), the priority or the validity or enforceability of a Senior Lien held by any other Secured Party in any Collateral.
3. Enforcement.
3.1 No Exercise of Remedies. The provisions of
this Section 3.1 are subject to the provisions of
Section 5.3 below.
(a) Category One Collateral. With respect to the Category One Collateral:
(i) Unless and until the Series A Obligations have been paid in full, neither the Software House Indenture Trustee nor the Software House Secured Parties shall assert any right or remedy in respect of the Category One Collateral or any Lien therein held by the Series A Indenture Trustee or the Series A Secured Parties or any of them (including, without limitation, under or in respect of the Software House Subordinated Pledge Agreement or the Software House SellCo Pledge Agreement) except as expressly permitted by this Agreement. The Software House Indenture Trustee, for itself and on behalf of each Software House Secured Party, agrees not to take or receive from or on behalf of any Obligor, directly or indirectly, in cash or other property or by setoff or in any other manner (whether pursuant to any enforcement, collection, execution, levy or foreclosure proceeding or otherwise) any Category One Collateral or any proceeds thereof, unless and until all Series A Obligations shall have been paid in full. Without limiting the generality of the foregoing, unless and until the Series A Obligations have been paid in full, the sole right of the Software House Indenture Trustee and the Software House Secured Parties with respect to the Category One Collateral is to hold a Lien therein pursuant to the Software House Subordinated Pledge Agreement and the Software House SellCo Pledge Agreement for the period and to the extent granted therein and to receive a share of the proceeds thereof, if any, after payment in full of the Series A Obligations. Notwithstanding anything to the contrary in this Agreement (including Section 5.3), none of the Software House Indenture Trustee or Software House Secured Parties shall assert or exercise any right or remedy (A) unless it would be entitled to assert or exercise such right or remedy if it held no Lien, or (B) if any right of or benefit to the Series A Secured Parties is restricted or impaired to a greater extent than if the Software House Indenture Trustee or Software House Secured Parties held no Lien.
(ii) Unless and until all Series A Obligations and all Software House Obligations have been paid in full, neither the SellCo Indenture Trustee nor any SellCo Secured Party shall assert any right or remedy in respect of the Category One Collateral or any Lien therein held by the Series A Indenture Trustee or the Series A Secured Parties or the Software House Indenture Trustee or the Software House Secured Parties or any of them (including without limitation under or in respect of the SellCo Subordinated Pledge Agreement) except as expressly permitted by this Agreement. The SellCo Indenture Trustee, on behalf of itself and the SellCo Secured Parties, agrees not to take or receive from or on behalf of any Obligor, directly or indirectly, in cash or other property or by setoff or in any other manner (whether pursuant to any enforcement, collection, execution, levy or foreclosure proceeding or otherwise) any Category One Collateral or any proceeds thereof, unless and until all Series A Obligations and Software House Obligations shall have been paid in full. Without limiting the generality of the foregoing, unless and until the Series A Obligations and the Software House Obligations have been paid in full, the sole right of the SellCo Indenture Trustee and any SellCo Secured Party with respect to any Category One Collateral is to hold a Lien therein pursuant to the SellCo Subordinated Pledge Agreement for the period and to the extent granted therein and to receive a share in the proceeds thereof, if any, after payment in full of the Series A Obligations and the Software House Obligations. Notwithstanding anything to the contrary contained in this Agreement (including Section 5.3), neither the SellCo Indenture Trustee nor any SellCo Secured Party shall assert or exercise any right or remedy (A) unless it would be entitled to assert or exercise such right or remedy if it held no Lien, or (B) if any right of or benefit to the Series A Secured Parties or Software House Secured Parties is restricted or impaired to a greater extent than if such Trustee or SellCo Secured Parties held no Lien.
(b) Category Two Collateral. With respect to the Category Two Collateral, unless and until all Software House Obligations have been paid in full, neither the Series A Indenture Trustee nor any Series A Secured Parties shall assert any right or remedy in respect of the Category Two Collateral or any Lien therein held by the Software House Indenture Trustee or the Software House Secured Parties or any of them (including without limitation under or in respect of the Series A Subordinated Pledge Agreement) except as expressly permitted by this Agreement. The Series A Indenture Trustee, on behalf of itself and the Series A Secured Parties, agrees not to take or receive from or on behalf of the Company, directly or indirectly, in cash or other property or by setoff or in any other manner (whether pursuant to any enforcement, collection, execution, levy or foreclosure proceeding or otherwise) any Category Two Collateral or any proceeds thereof, unless and until all Software House Obligations shall have been paid in full. Without limiting the generality of the foregoing, unless and until the Software House Obligations have been paid in full, the sole right of the Series A Indenture Trustee and the Series A Secured Parties with respect to any Category Two Collateral is to hold a Lien therein pursuant to the Series A Subordinated Pledge Agreement for the period and to the extent granted therein and to receive a share in the proceeds thereof, if any, after payment in full of the Software House Obligations. Notwithstanding anything to the contrary contained in this Agreement (including Section 5.3), neither the Series A Indenture Trustee nor any Series A Secured Party shall assert or exercise any rights or remedy (i) unless it would be entitled to assert or exercise such right or remedy if it held no Lien, or (ii) if any right or benefit to the Software House Secured Parties is restricted or impaired to a greater extent than if the Series A Trustee or Series A Secured Parties held no Lien.
3.2 Cooperation. With respect to any Collateral, each Trustee, for itself and on behalf of each Relevant Secured Party, agrees that, unless and until all Senior Obligations secured by such Collateral have been paid in full, it will not commence, or join with any creditor other than the Trustee or Senior Obligation Holders in commencing any enforcement, collection, execution, levy or foreclosure proceeding with respect to any Lien held by it in such Collateral or proceeds thereof.
4. Proceeds; No Setoff; Payments Over. Subject to the provisions of Section 5.3, with respect to any Collateral in which any Trustee or Secured Party has a Senior Lien, until payment in full of all Senior Obligations secured thereby, no Trustee or Secured Party other than the Senior Lienor with respect to such Collateral shall exercise any right of setoff or counterclaim with respect to any such Collateral or with respect to any proceeds thereof, and all proceeds of such Collateral shall be paid to such Senior Lienor for application to such Senior Obligations. Subject to the provisions of Section 5.3, any proceeds of Collateral received by any Trustee or any Secured Party and any other cash or other property received by any Trustee or any Secured Party in contravention of this Agreement shall be segregated and held in trust and paid over to the Senior Lienor with respect to such Collateral for the benefit of the Senior Obligation Holders secured thereby in the same form as received, with any necessary endorsements or as a court of competent jurisdiction may otherwise direct. With respect to any Collateral, the Senior Lienor with respect thereto is hereby authorized to make any such endorsements as the agent for each other Trustee and each Secured Party. This authorization is coupled with an interest and is irrevocable.
5. Other Agreements.
5.1 Releases. With respect to any Collateral, if the Senior Lienor releases with respect thereto any of its Liens in any part of such Collateral in connection with the sale, lease, exchange, transfer or other disposition thereof in accordance with the terms of the Indenture Documents governing such Liens or for application of proceeds to the Senior Obligations secured thereby, the Liens, if any, of each other Trustee and/or the Secured Parties shall be automatically and unconditionally and simultaneously released and such Trustees and Secured Parties shall execute and deliver to the applicable Obligor such termination statements, releases and other documents as the Senior Lienor or such Obligor may request to effectively confirm such release. Notwithstanding the foregoing, if not applied to the Senior Obligations, the Trustees' and Secured Parties' Lien granted pursuant to the Pledge Agreements shall, subject to all of the provisions of this Agreement, continue in the proceeds of any sale, lease, exchange or other disposition of Collateral.
5.2 Amendments to Pledge Agreements. Without the prior written consent of each Senior Lienor, no Pledge Agreement shall be amended, modified or supplemented.
5.3 Rights as Unsecured Creditors. Notwithstanding anything to the contrary in this Agreement (but subject to the last sentence of each of Sections 3.1(a)(i), 3.1(a)(ii) and 3.1(b)), each Trustee and the Secured Parties may exercise rights and remedies as an unsecured creditor against any Obligor in accordance with the terms of the Indenture Documents. Nothing in this Agreement shall prohibit the receipt by any Trustee or any Secured Party of scheduled payments of interest and principal due under any Indenture so long as such receipt is not the direct or indirect result of the exercise by such Trustee or any Secured Party of rights or remedies as a secured creditor or enforcement of any Lien held by any of them.
5.4 Bailee for Perfection. (a) The Series A Indenture Trustee agrees to hold the certificates, notes and other instruments representing or evidencing (i) the Pledged Collateral (as defined in the Series A Senior Pledge Agreement and the Software House Subordinated Pledge Agreement) and (ii) the Pledged Collateral (as defined in the Series A SellCo Pledge Agreement, the Software House SellCo Pledge Agreement and the SellCo Subordinated Pledge Agreement) included in the Category One Collateral (such Pledged Collateral referred to in clauses (i) and (ii) above being collectively the "Category One Instruments") in its possession as bailee for the Software House Indenture Trustee and, to the extent the same constitute Collateral under the SellCo Subordinated Pledge Agreement, for the SellCo Indenture Trustee, respectively, and any assignee, solely for the purpose of perfecting the security interest granted in such Category One Instruments pursuant to the Software House Subordinated Pledge Agreement, the Software House SellCo Pledge Agreement and the SellCo Subordinated Pledge Agreement, subject to the terms and conditions of this Section 5.4; and the Software House Indenture Trustee agrees to hold the certificates, notes and other instruments representing or evidencing the Pledged Collateral (as defined in the Software House Senior Pledge Agreement and the Series A Subordinated Pledge Agreement) included in the Category Two Collateral (the "Category Two Instruments") in its possession as bailee for the Series A Indenture Trustee and any assignee solely for the purpose of perfecting the security interest granted in the Category Two Instruments pursuant to the Series A Subordinated Pledge Agreement, subject to this Section 5.4 (each of the Series A Indenture Trustee and the Software House Indenture Trustee, in its capacity as a bailee pursuant to this subsection (a) or pursuant to subsection (f) below, being herein referred to as a "Bailee").
(b) Until the Series A Obligations are paid in full, the Series A Indenture Trustee shall be entitled to deal with the Category One Instruments in accordance with the terms of the Series A Indenture, the Series A Senior Pledge Agreement and the Series A SellCo Pledge Agreement as if the Lien of the other Trustees under the other Pledge Agreements did not exist, and the rights of such other Trustees shall at all times be subject to the terms of this Agreement and to the Series A Indenture Trustee's rights under the Series A Indenture, the Series A Senior Pledge Agreement and the Series A SellCo Pledge Agreement; and until the Software House Obligations are paid in full, the Software House Indenture Trustee shall be entitled to deal with the Category Two Instruments in accordance with the terms of the Software House Indenture and the Software House Senior Pledge Agreement as if the Lien of the Series A Indenture Trustee under the Series A Subordinated Pledge Agreement did not exist, and the rights of the Series A Indenture Trustee shall at all times be subject to the terms of this Agreement and to the Software House Indenture Trustee's rights under the Software House Indenture and the Software House Senior Pledge Agreement.
(c) No Bailee pursuant to this Section 5.4 shall
have any obligation whatsoever to any Trustee or
any Secured Party to assure that any Collateral is genuine or
owned by any Obligor or to preserve right or
benefits of any Person except as expressly set forth in this
Section 5.4. The duties or responsibilities of a
Bailee hereunder shall be limited to solely holding Pledged
Shares as provided herein as Bailee for purposes
of perfecting a Lien. A Bailee (i) shall not be obligated to
recognize and shall not have any liability or
responsibility arising under any other instrument to which it is
not a party; (ii) may rely upon any instrument
believed by it to be genuine and sufficient and properly
presented and shall not be liable or responsible for any
action taken or omitted in accordance with the provisions
thereof; (iii) shall not be liable or responsible for
any act it may do or omit to do except in the case of willful
misconduct or gross negligence; (iv) in case any
Pledged Shares shall be attached, garnished or levied upon any
order of court, or the delivery thereof shall be
stayed or enjoined by any order of court, or any other order,
judgment or decree shall be made or entered by
any court affecting such property, or any part thereof, or any of
its acts, is expressly authorized in its sole
discretion to obey and comply with all writs, orders, judgments
or decrees so entered or issued, whether with
or without jurisdiction, and in case it obeys and complies with
any such writ, order, judgment or decree it shall
not be liable to any Trustee or to any other Person by reason of
such compliance notwithstanding such writ,
order, judgment or decree being subsequently reversed, modified,
annulled, set aside or vacated; (v) shall in no
event be liable for its failure to ascertain the terms and
conditions of or to comply with any agreement or other
document in connection with the transactions contemplated by the
Indenture Documents; (vi) shall not be
responsible or liable for any forgery or fraudulent
impersonations of any Person; and (vii) shall not be required
to make any determination with respect to a controversy which may
arise between a Trustee or any Person
with respect to the transactions contemplated by the Indenture
Documents and may await the settlement and
such controversy by legal proceedings or otherwise, as it may
require and in such event, it shall not be liable
for interest or damage.
(d) A Bailee shall not be under any obligation to institute or defend any action, suit or other proceeding or take any other action against any Person in connection with any Collateral or Indenture Document. A Bailee shall be entitled to rely upon any writing or other document, telecopy or telegram believed by it to be genuine and correct and to have been signed, sent or made by the proper Person. A Bailee may consult counsel with respect to any question arising hereunder or in connection herewith and such Bailee shall not be liable for any action taken or omitted to be taken in good faith upon advice of such counsel.
(e) A Bailee shall not have, by reason of any Pledge Agreement or this Agreement or any other document, a fiduciary relationship in respect of any Trustee or Secured Party.
(f) A Bailee may deem and treat the Trustee under an Indenture as the pledgee under a Pledge Agreement and the holder of any Lien in the Category One Instruments and Category Two Instruments for all purposes and may require reasonable evidence of authority by any Person purporting to act on behalf of such Trustee. Upon payment in full of the Series A Obligations, the Series A Indenture Trustee shall deliver possession of the Category One Instruments then in its possession to the Software House Indenture Trustee or as otherwise ordered by a court, and the Software House Indenture Trustee agrees, from and after its receipt of such Category One Instruments, and to the extent the same constitute Collateral securing the SellCo Obligations, to hold the same in its possession, as Bailee for the SellCo Indenture Trustee, as the case may be, for the purpose set forth in subsection (a) above, and each such Trustee agrees that the provisions set forth in this Section 5.4 with respect to the Series A Indenture Trustee, as Bailee with respect to the Category One Instruments, shall be applicable to the Software House Indenture Trustee, as Bailee with respect to the Category One Instruments. Upon payment in full of the Series B Obligations, the Series B Indenture Trustee shall deliver possession of the Category Two Instruments then in its possession to the Series A Indenture Trustee or as otherwise ordered by a court.
6. Insolvency or Liquidation Proceedings.
6.1 Filing of Claims. The Trustees and the Secured
Parties may file proofs of claim and other
pleadings and motions with respect to the Collateral in which
they hold a Lien in an Insolvency or Liquidation
Proceeding, subject to the limitations contained in this
Agreement and only if consistent with the terms hereof
and the limitations on the Trustees and the Secured Parties
imposed hereby. If a proper claim or proof of
debt has not been filed in the form required in such proceeding
at least 30 days prior to the expiration of the
time for filing such claims, the Senior Lienor with respect to
such Collateral shall have the right (but not the
duty) to file an appropriate claim for and on behalf of the other
Trustees and Secured Parties and any of
them. Each Senior Lienor is hereby granted an irrevocable power
of attorney, coupled with an interest, to file
such claims in the name of the other Trustees and Secured Parties
or its own name, as provided in this
Section 6.1.
6.2 Preference Issues. (a) If, as a result of (i) the existence of the Senior Lien of a Senior Lienor or Senior Obligation Holders on any Collateral and (ii) the application of Section 550 of the Bankruptcy Code, such Senior Lienor or Senior Obligation Holder would, but for the provisions of this Section 6.2, be required in any Insolvency or Liquidation Proceeding to turn over or otherwise pay to the estate of an Obligor any amount ("Recovery") representing or constituting a transfer avoidable as to any other Trustee or any other holder of any Obligation (the "Avoided Transfer") which Avoided Transfer, but for the application of section 550 of the Bankruptcy Code, would not have been recoverable from such Senior Lienor or Senior Obligation Holder, then the Lien of such other Trustee and other holder of any Obligation in such Collateral shall be automatically and without the necessity of any act, be assigned to, and be junior and subordinate to the rights of, the estate in any such Insolvency or Liquidation Proceeding to the extent of such Recovery, and such other Trustee and other holder of any Obligation disclaim the benefit of any Lien which, but for the provisions of this Section 6.2, would result in any such Avoided Transfer.
(b) If and to the extent the foregoing provisions of Section 6.2(a) are not effective, for any reason whatsoever, to prevent payment of the Recovery, or any part thereof, by the Senior Lienor or Senior Obligation Holder, the provisions of this Section 6.2(b) shall apply. The amount of the Senior Obligations will increase by the amount of the Recovery (or part thereof) paid by the Senior Lienor or Senior Obligation Holder, and the Senior Lienor and such Senior Obligation Holder shall be entitled to be paid in full such amount from the proceeds of the Collateral in which they have a Senior Lien before any other Trustee or Secured Party is entitled to any proceeds thereof.
(c) If and to the extent the foregoing provisions of Section 6.2(a) and (b) are not effective, for any reason whatsoever, to prevent payment of the Recovery, or any part thereof, by the Senior Lienor or Senior Obligation Holder, the provisions of this Section 6.2(c) shall apply. The Senior Lienor and such Senior Obligation Holder shall be entitled to receive payment in full of all amounts which, but for the Avoided Transfer, they would have received (including, without limitation, interest at the contract rate provided in their Indenture Documents) before any of the other Secured Parties or Trustees shall be entitled to receive any direct or indirect payment or distribution with respect to their Obligations or any claim which is the equivalent of or a substitute therefor. Any payment or distribution to which any such Trustee or Secured Party would, but for the provisions of this Section 6.2(c), be entitled to receive, shall be paid directly to the Senior Lienor for the benefit of the Senior Obligation Holders, and, if any such Trustee or Secured Party shall receive any such payment or distribution, it shall hold the same in trust for the benefit of the Senior Obligation Holders and pay the same over (without regard to counterclaim or setoff) to the Senior Lienor for the benefit of the Senior Obligation Holders in the same form as received (with any necessary endorsements). Subject to the provisions of Section 8.5 hereof, the Secured Parties shall be entitled to rights of subrogation with respect to amounts paid to Senior Obligation Holders under this Section 6.2(c).
6.3 Relief from the Stay and Adequate Protection. With respect to each item of Collateral, each Trustee holding a lien junior to a Senior Lien on such item hereby appoints the Senior Lienor holding the most senior Lien on such item as its attorney in fact (which appointment is coupled with an interest) to seek relief from or termination of any stay or injunction in any Insolvency or Liquidation Proceeding or to seek "adequate protection," as such term is used under the Bankruptcy Code, or any other relief in such Insolvency or Liquidation Proceeding in the name of the Trustee holding such junior Lien. No holder of such junior Lien shall seek such relief with respect to such item of Collateral without the consent of the Senior Lienor holding the most senior Lien on such item of Collateral. In the event that the debtor in an Insolvency or Liquidation proceeding makes any payment or transfers any property of any nature for the purpose of satisfying its obligation to provide "adequate protection" to any holder of such junior Lien, the Senior Lienor holding the most senior Lien in such item of Collateral shall be entitled to receive such property on account of the Senior Obligations secured by such Senior Lien.
7. Reliance; Waivers; etc.
7.1 Reliance. The consent by the Trustees and Secured Parties to the execution and delivery of each Pledge Agreement and the grant to the Trustees of a Lien in the applicable Collateral and all loans and other extensions of credit made as of and after the date hereof by the Secured Parties to an Obligor shall be deemed to have been given and made in reliance upon this Agreement. Each Trustee, for itself and on behalf of the Relevant Secured Parties, expressly waives all notice of the acceptance of and reliance on this Agreement by any other Trustee or Secured Party.
7.2 No Warranties or Liability. Each Trustee, for itself and on behalf of the Relevant Secured Parties, acknowledges and agrees that they have not made any representation or warranty with respect to the execution, validity, legality, completeness, collectability or enforceability of any of the Indenture Documents. The Secured Parties will be entitled to manage and supervise their respective loans and extensions of credit to an Obligor in accordance with law and their usual practices, modified from time to time as they deem appropriate and the Senior Obligation Holders may manage their loans and extensions of credit without regard to any rights or interest that the holders of other Obligations may have in the Collateral, in which the Senior Obligation Holders have a Senior Lien. No Senior Lienor or Senior Obligation Holder, on the one hand, and each other Trustee and the other Secured Parties, on the other hand, shall have any duty to the other to act or refrain from acting in a manner which allows, or results in, the occurrence or continuance of an event of default or default under any of their respective agreements with any Obligor (including the relevant Indenture Documents), regardless of any knowledge thereof which they may have or be charged with.
7.3 No Waiver of Subordination Provisions. (a) No right of a Senior Lienor or Senior Obligation Holder, or any of them to enforce subordination as provided in this Agreement shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of any Obligor or by any act or failure to act by any Senior Lienor or Senior Obligation Holder, or by any noncompliance by any Person with the terms, provisions and covenants of this Agreement or of any of the Indenture Documents, regardless of any knowledge thereof which the Senior Lienor or and Senior Obligation Holder, or any of them, may have or be otherwise charged with.
(b) Without in any way limiting the generality of the foregoing paragraph, so long as any Trustee is a Senior Lienor with respect to any Collateral, such Trustee and the Senior Obligations Holders holding Senior Obligations secured by such Collateral, or any of them, may, at any time, and from time to time, without the consent of, or notice to, any other Trustee or Secured Party, without incurring any liabilities to such Trustees or Secured Parties, and without impairing or releasing the subordination and other benefits provided in this Agreement (even if any right of subrogation or other right or remedy of any Secured Parties or Trustees is affected, impaired or extinguished thereby) do any one or more of the following:
(i) change the manner, place or terms of payment or change or extend the time of payment of, or renew, exchange, amend, increase or alter, the terms of any of such Senior Obligations or any Lien in any Collateral or guaranty thereof or any liability of the Company or any guarantor, or any liability incurred directly or indirectly in respect thereof (including, without limitation, any increase in or extension of the Senior Obligations, without any restriction as to the amount, tenor or terms of any such increase or extension), or otherwise amend, renew, exchange, extend, modify, supplement in any manner any Senior Liens held by the Senior Lienor, the Senior Obligations or any of the Indenture Documents relating thereto;
(ii) sell, exchange, release, surrender, realize upon, enforce or otherwise deal with in any manner and in any order any part of such Collateral or any liability of any Obligor or any guarantor to such Senior Lienor or holder of such Senior Obligation, or any liability incurred directly or indirectly in respect thereof;
(iii) settle or compromise any Senior Obligation or any other liability of any Obligor or any guarantor or any security therefor or any liability incurred directly or indirectly in respect thereof and apply any sums by whomsoever paid and however realized to any liability (including, without limitation, the Senior Obligations) in any manner or order; and
(iv) exercise or delay in or refrain from exercising any right or remedy against any Obligor or any Collateral or any guarantor or any other Person, elect any remedy, and otherwise deal freely with each Obligor and such Collateral and any guarantor or any holder of any liability of any Obligor or any guarantor to such holder or any liability incurred directly or indirectly in respect thereof.
(c) So long as any Trustee is a Senior Lienor with a Senior Lien in any Collateral, each other Trustee agrees for itself and on behalf of each Relevant Secured Party, that the Senior Lienor and the Senior Obligation Holders with respect to such Collateral shall have no liability to and any other Trustee or Secured Party, and each such other Trustee hereby waives, for itself and on behalf of each Relevant Secured Party, any claim against any such Senior Lienor or Senior Obligation Holder arising out of any and all actions which such Senior Lienor or Senior Obligation Holders may take or permit or omit to take with respect to (i) their Indenture Documents, (ii) collection of the Senior Obligations, or (iii) such Collateral. Each such Trustee agrees, for itself and on behalf of each Relevant Secured Party, that such Senior Lienor and Senior Obligation Holders have no duty to them in respect of the maintenance or preservation of such Collateral or any rights of any Person therein.
(d) So long as any Trustee is a Senior Lienor with a Senior Lien in any Collateral, each other Trustee, for itself and on behalf of each Relevant Secured Party, agrees not to assert and hereby waives, to the fullest extent permitted by law, any right to demand, request, plead or otherwise assert or otherwise claim the benefit of, any marshalling, appraisement, valuation or other similar right that may otherwise be available under applicable law or any other similar rights a junior secured creditor may have under applicable law.
8. Miscellaneous.
8.1 Conflicts. In the event of any conflict between the provisions of this Agreement and the provisions of the Indenture Documents, the provisions of this Agreement shall govern.
8.2 Continuing Nature of Subordination. This Agreement shall continue effective until all Senior Obligations shall have been paid in full in cash. Each Trustee, on behalf of itself and each Relevant Secured Party, hereby waives any right it may have under applicable law to revoke this Agreement or any of the provisions of this Agreement.
8.3 Amendments; Waivers. No amendment, modification or waiver of any of the provisions of this Agreement by any Trustee or Secured Party shall be deemed to be made unless the same shall be in writing signed on behalf of the party making the same or its authorized agent and each waiver, if any, shall be a waiver only with respect to the specific instance involved and shall in no way impair the rights of the parties making such waiver or the obligations of the other parties to such party in any other respect or at any other time.
8.4 Information Concerning Financial Condition of the Company. No Trustee or Secured Party shall have any duty to advise any other Trustee or Secured Party of information known to it or them regarding (a) the financial condition of the Obligors and all endorsers and/or guarantors of the Obligations or (b) any other circumstances bearing upon the risk of nonpayment of the Obligations. In the event any Trustee or Secured Party, in its or their sole discretion, undertakes at any time or from time to time to provide any such information to any other Trustee or any Secured Party, it or they shall be under no obligation (i) to provide any such information on any subsequent occasion, (ii) to undertake any investigation not a part of its regular business routine, or (iii) to disclose any information which, pursuant to accepted or reasonable commercial finance practices, such party wishes to maintain confidential.
8.5 Subrogation. No payment or distribution to any Senior Lienor or Senior Obligation Holder shall entitle any other Trustee or holder of any other Obligation to exercise any right of subrogation until all Senior Obligations have been paid in full.
8.6 Application of Payments. All payments received by a Senior Lienor or Senior Obligation Holder may be applied, reversed, and reapplied, in whole or in part, to such part of the Senior Obligations as such Senior Lienor or Senior Obligation Holders in their sole discretion, deem appropriate. Each Trustee, for itself and on behalf of the Relevant Secured Parties, assents to any extension or postponement of the time of payment of the Senior Obligations or any part thereof and to any other indulgence with respect thereto, to any substitution, exchange or release of any security which may at any time secure any part of the Senior Obligations and to the addition or release of any other Person primarily or secondarily liable therefor.
8.7 Consent to Jurisdiction; Waivers. THE PARTIES HERETO CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN NEW YORK, NEW YORK, WAIVE PERSONAL SERVICE OF ANY AND ALL PROCESS, AND CONSENT THAT ALL SUCH SERVICE MAY BE MADE BY REGISTERED MAIL DIRECTED TO SUCH PARTY AS PROVIDED IN SECTION 8.8 BELOW FOR SUCH PARTY. SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED THREE (3) DAYS AFTER THE SAME SHALL BE POSTED AS AFORESAID. THE PARTIES HERETO WAIVE TRIAL BY JURY, ANY OBJECTION TO ANY ACTION INSTITUTED HEREUNDER BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO THE VENUE OF ANY ACTION INSTITUTED HEREUNDER.
8.8 Notices. All notices to the Series A Secured Parties, the Software House Secured Parties or the SellCo Secured Parties permitted or required under this Agreement may be sent to the Series A Indenture Trustee, the Software House Indenture Trustee and the SellCo Indenture Trustee, respectively. Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and may be personally served, telecopied, telexed or sent by courier service or United States mail and shall be deemed to have been given when delivered in person or by courier service, upon receipt of a telecopy or telex or four (4) Business Days after deposit in the United States mail (registered or certified, with postage prepaid and properly addressed). For the purposes hereof, the addresses of the parties hereto (until notice of a change thereof is delivered as provided in this Section 8.8) shall be as set forth below each party's name on Schedule 1 hereto, or, as to each party, at such other address as may be designated by such party in a written notice to all of the other parties.
8.9 Further Assurances. The Trustees and the Secured Parties shall take such further action and shall execute and deliver to the Senior Lienors such additional documents and instruments (in recordable form, if requested) as the Senior Lienors may reasonably request to effectuate the terms of and the subordination contemplated by this Agreement.
8.10 Governing Law. This Agreement has been delivered and accepted at and shall be deemed to have been made at New York, New York and shall be interpreted, and the rights and liabilities of the parties bound hereby determined, in accordance with the internal laws and decisions (as opposed to the conflict of laws provisions) of the State of New York.
8.11 Binding on Parties, Successors and Assigns. Any and all agreements, waivers, representations and obligations of the Trustees made or incurred under this Agreement shall bind each of the Relevant Secured Parties and by their acceptance of the benefits of their Pledge Agreement and the Plan of Reorganization each Secured Party agrees to be bound hereby. This Agreement shall be binding upon and inure to the benefit of the Trustees and the Secured Parties and their respective successors and assigns.
8.12 Specific Performance. Each Senior Lienor may demand specific performance of this Agreement. Each of the Trustees, for itself and on behalf of the Relevant Secured Parties, hereby irrevocably waives any defense based on the adequacy of a remedy at law and any other defense which might be asserted to bar the remedy of specific performance in any action which may be brought by a Senior Lienor.
8.13 Section Titles; Time Periods. The section titles contained in this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of this Agreement. In the computation of time periods, unless otherwise specified, the word "from" means "from and including" and the each of the phrases "to" and "until" means "to and including".
8.14 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be an original and all of which shall together constitute one and the same document.
8.15 Authorization. By his signature, each Person executing this Agreement on behalf of a party hereto represents and warrants to the other parties hereto that he is duly authorized to do so.
8.16 No Third Party Beneficiaries. This Agreement and the rights and benefits hereof shall inure to benefit of the Senior Lienors and the Senior Obligation Holders and their successors and assigns and no other Person, including without limitation, the Company as debtor in possession and any trustee for the estate created by the commencement of an Insolvency or Liquidation Proceeding, shall have or be entitled to assert rights or benefits hereunder.
8.17 Effectiveness. This Agreement shall become effective as of the Effective Date and when executed and delivered by the parties hereto. This Agreement shall be effective both before and after the commencement of any Insolvency or Liquidation Proceeding. All references to the Company shall include the Company as debtor in possession and any receiver or Trustee for the Company in any Insolvency or Liquidation Proceeding.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first
written above.
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By:
Title:
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By:
Title:
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, as Trustee
By:
Title:
Each of the undersigned, EMCOR GROUP, INC., SELLCO
CORPORATION and MES
HOLDINGS CORPORATION, hereby (a) acknowledges receipt of a copy
of the foregoing Intercreditor
Agreement this 15th day of December, 1994 and agrees to take no
action and to refrain from taking any action
which is inconsistent with the terms thereof, (b) irrevocably
authorizes and directs the Senior Lienors to
deliver all certificates, notes and other instruments
representing or evidencing Category One Instruments or
Category Two Instruments in their possession to the applicable
Trustee pursuant to Section 5 above upon
payment in full of the Senior Obligations secured by the Senior
Lien of such Senior Lienor and termination of
the relevant Indenture Documents, and (c) agrees that such
Intercreditor Agreement shall be binding on it and
on all successors and assigns of the undersigned.
EMCOR GROUP, INC.
By:
Title:
SELLCO CORPORATION
By:
Title:
MES HOLDINGS CORPORATION
By:
Title:
Schedule 1
Addresses
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: Corporate Trust and Agency Administration
Telecopier No.: (212) 858-2952
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Department B
Telecopier No.: (212) 852-1626
Shawmut Bank Connecticut, National Association
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
Telecopier No.: (203) 986-7920
EXHIBIT 4.16
EMCOR GROUP, INC.
(Formerly Known as JWP INC.), as Issuer,
MES HOLDINGS CORPORATION, as Guarantor
and
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, as Trustee
INDENTURE
Dated as of December 15, 1994
$62,827,225
11% Series C Notes, Due 2001
CROSS-REFERENCE TABLE*
Trust Indenture Act Section Indenture Section 310(a)(1) . . . . . . . . . . . . . . . . . . 7.10 (a)(2) . . . . . . . . . . . . . . . . . 7.10 (a)(3) . . . . . . . . . . . . . . . . . N.A. (a)(4) . . . . . . . . . . . . . . . . . N.A. (b). . . . . . . . . . . . . . . . . . . 7.08; 7.10; 12.02 (c). . . . . . . . . . . . . . . . . . . N.A. 311(a). . . . . . . . . . . . . . . . . . . . 7.11 (b). . . . . . . . . . . . . . . . . . . 7.11 (c). . . . . . . . . . . . . . . . . . . N.A. 312(a). . . . . . . . . . . . . . . . . . . . 2.05 (b). . . . . . . . . . . . . . . . . . . 12.03 (c). . . . . . . . . . . . . . . . . . . 12.03 313(a). . . . . . . . . . . . . . . . . . . . 7.06 (b)(1) . . . . . . . . . . . . . . . . . 7.06 (b)(2) . . . . . . . . . . . . . . . . . 7.06 (c). . . . . . . . . . . . . . . . . . . 7.06; 12.02 (d). . . . . . . . . . . . . . . . . . . 7.06 314(a). . . . . . . . . . . . . . . . . . . . 4.03; 4.04; 12.02 (b). . . . . . . . . . . . . . . . . . . N.A. (c)(1) . . . . . . . . . . . . . . . . . 12.04 (c)(2) . . . . . . . . . . . . . . . . . 12.04 (c)(3) . . . . . . . . . . . . . . . . . N.A. (d). . . . . . . . . . . . . . . . . . . N.A. (e). . . . . . . . . . . . . . . . . . . 12.05 (f). . . . . . . . . . . . . . . . . . . N.A. 315(a). . . . . . . . . . . . . . . . . . . . 7.01(b) (b). . . . . . . . . . . . . . . . . . . 7.05; 12.02 (c). . . . . . . . . . . . . . . . . . . 7.01(a) (d). . . . . . . . . . . . . . . . . . . 7.01(c) (e). . . . . . . . . . . . . . . . . . . 6.11 316(a)(last sentence) . . . . . . . . . . . . 2.09 (a)(1)(A). . . . . . . . . . . . . . . . 6.05 (a)(1)(B). . . . . . . . . . . . . . . . 6.04 (a)(2) . . . . . . . . . . . . . . . . . N.A. (b). . . . . . . . . . . . . . . . . . . 6.07 (c). . . . . . . . . . . . . . . . . . . 6.05 317(a)(1) . . . . . . . . . . . . . . . . . . 6.08 (a)(2) . . . . . . . . . . . . . . . . . 6.09 (b). . . . . . . . . . . . . . . . . . . 2.04 318(a). . . . . . . . . . . . . . . . . . . . 12.01 |
N.A. means not applicable.
* This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture.
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.1. Definitions . . . . . . . . . . . . . . 1
Section 1.2. Incorporation by Reference of
Trust Indenture Act . . . . . . . . . 21
Section 1.3. Rules of Construction . . . . . . . . . 21
ARTICLE 2
THE SECURITIES
Section 2.1. Form and Dating . . . . . . . . . . . . 22
Section 2.2. Execution and Authentication. . . . . . 22
Section 2.3. Registrar and Paying Agent. . . . . . . 23
Section 2.4. Paying Agent to Hold Money in Trust . . 24
Section 2.5. Holder Lists. . . . . . . . . . . . . . 24
Section 2.6. Transfer and Exchange . . . . . . . . . 25
Section 2.7. Replacement Securities. . . . . . . . . 26
Section 2.8. Outstanding Securities. . . . . . . . . 26
Section 2.9. Treasury Securities . . . . . . . . . . 27
Section 2.10. Temporary Securities. . . . . . . . . . 27
Section 2.11. Cancellation. . . . . . . . . . . . . . 28
Section 2.12. Defaulted Interest. . . . . . . . . . . 28
Section 2.13. CUSIP Numbers . . . . . . . . . . . . . 28
ARTICLE 3
REDEMPTION
Section 3.1. Notices to Trustee. . . . . . . . . . . 29
Section 3.2. Selection of Securities to Be
Redeemed. . . . . . . . . . . . . . . 29
Section 3.3. Notice of Redemption. . . . . . . . . . 29
Section 3.4. Effect of Notice of Redemption. . . . . 31
Section 3.5. Deposit of Redemption Price . . . . . . 31
Section 3.6. Securities Redeemed in Part . . . . . . 31
Section 3.7. Optional Redemption . . . . . . . . . . 31
ARTICLE 4
COVENANTS
Section 4.1. Payment of Securities . . . . . . . . . 32
Section 4.2. Maintenance of Office or Agency . . . . 32
Section 4.3. SEC Reports; Reports to Security-
holders 33
Section 4.4. Compliance Certificate. . . . . . . . . 34
Section 4.5. Stay, Extension and Usury Laws. . . . . 35
Section 4.6. Limitation on Restricted Payments . . . 35
Section 4.7. Limitations on Transactions with
Affiliates. . . . . . . . . . . . . . . 36
Section 4.8. Limitation on Liens . . . . . . . . . . 37
Section 4.9. Limitation on Additional Indebted-
ness and Capital Stock. . . . . . . . . 39
Section 4.10. Limitation on Investments and
Advances. . . . . . . . . . . . . . . 44
Section 4.11. Maintenance of Coverage Ratios. . . . . 45
Section 4.12. Corporate Existence . . . . . . . . . . 46
Section 4.13. Change of Control . . . . . . . . . . . 47
Section 4.14. Maintenance of Properties . . . . . . . 49
Section 4.15. Payment of Taxes and Other Claims . . . 49
Section 4.16. Maintenance of Insurance. . . . . . . . 49
Section 4.17. Compliance With Law . . . . . . . . . . 50
Section 4.18. Books and Records . . . . . . . . . . . 50
Section 4.19. Employee Benefit Plans; ERISA . . . . . 50
Section 4.20. Maintenance of Consolidated Tangible
Net Worth . . . . . . . . . . . . . . 51
Section 4.21. Performance Guaranties. . . . . . . . . 51
Section 4.22. No Material Changes in the
Nature of Business. . . . . . . . . . 51
ARTICLE 5
MERGERS AND ACQUISITIONS
Section 5.1. Mergers, Acquisitions, Etc.. . . . . . 52
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.1. Events of Default. . . . . . . . . . . 53
Section 6.2. Acceleration . . . . . . . . . . . . . 56
Section 6.3. Other Remedies . . . . . . . . . . . . 57
Section 6.4. Waiver of Past Defaults. . . . . . . . 58
Section 6.5. Control by Majority. . . . . . . . . . 58
Section 6.6. Limitation on Suits. . . . . . . . . . 59
Section 6.7. Rights of Holders to Receive Payment . 59
Section 6.8. Collection Suit by Trustee . . . . . . 59
Section 6.9. Trustee May File Proofs of Claim . . . 60
Section 6.10. Priorities . . . . . . . . . . . . . . 60
Section 6.11. Undertaking for Costs. . . . . . . . . 61
ARTICLE 7
TRUSTEE
Section 7.1. Duties of Trustee. . . . . . . . . . . 61
Section 7.2. Rights of Trustee. . . . . . . . . . . 63
Section 7.3. Individual Rights of Trustee . . . . . 63
Section 7.4. Trustee's Disclaimer . . . . . . . . . 64
Section 7.5. Notice of Defaults . . . . . . . . . . 64
Section 7.6. Reports by Trustee to Holders. . . . . 64
Section 7.7. Compensation and Indemnity . . . . . . 64
Section 7.8. Replacement of Trustee . . . . . . . . 65
Section 7.9. Successor Trustee by Merger, Etc.. . . 67
Section 7.10. Eligibility; Disqualification. . . . . 67
Section 7.11. Preferential Collection of Claims
Against Company. . . . . . . . . . . 68
ARTICLE 8
DISCHARGE OF INDENTURE
Section 8.1. Termination of Company's Obligations . 68
Section 8.2. Application of Trust Money . . . . . . 71
Section 8.3. Repayment to the Company . . . . . . . 71
Section 8.4. Reinstatement. . . . . . . . . . . . . 71
ARTICLE 9
AMENDMENTS
Section 9.1. Without Consent of Holders . . . . . . 72
Section 9.2. With Consent of Holders. . . . . . . . 72
Section 9.3. Compliance with Trust Indenture Act. . 74
Section 9.4. Revocation and Effect of Consents. . . 74
Section 9.5. Notation on or Exchange of Securities. 74
Section 9.6. Trustee to Sign Amendments, Etc. . . . 75
ARTICLE 10
GUARANTY OF SECURITIES
Section 10.1. Guaranty . . . . . . . . . . . . . . . 75
Section 10.2. Obligations of the Guarantor
Unconditional. . . . . . . . . . . . 76
Section 10.3. Execution and Delivery of Guaranty . . 77
Section 10.4. Limitations of Guaranties. . . . . . . 77
ARTICLE 11
SUBORDINATION
Section 11.1. Agreement to Subordinate . . . . . . . 78
Section 11.2. Liquidation; Dissolution; Bankruptcy . 78
Section 11.3. Default on Senior Indebtedness . . . . 79
Section 11.4. Acceleration of Securities . . . . . . 82
Section 11.5. When Distribution Must be Paid Over. . 82
Section 11.6. Notice by Company or Guarantor . . . . 82
Section 11.7. Subrogation. . . . . . . . . . . . . . 83
Section 11.8. Relative Rights. . . . . . . . . . . . 83
Section 11.9. Subordination May Not be Impaired. . . 83
Section 11.10. Distribution or Notice to
Representative . . . . . . . . . . . 85
Section 11.11. Rights of Trustee and Paying Agent . . 85
Section 11.12. Authorization to Effect Subordina-
tion 86
Section 11.13. Miscellaneous. . . . . . . . . . . . . 86
ARTICLE 12
MISCELLANEOUS
Section 12.1. Trust Indenture Act Controls . . . . . 87
Section 12.2. Notices. . . . . . . . . . . . . . . . 87
Section 12.3. Communication by Holders with Other
Holders. . . . . . . . . . . . . . . 88
Section 12.4. Certificate and Opinion as to
Conditions Precedent . . . . . . . . 88
Section 12.5. Statements Required in Certificate
or Opinion . . . . . . . . . . . . . 89
Section 12.6. Rules by Trustee and Agents. . . . . . 89
Section 12.7. Legal Holidays . . . . . . . . . . . . 89
Section 12.8. Duplicate Originals. . . . . . . . . . 90
Section 12.9. Governing Law. . . . . . . . . . . . . 90
Section 12.10. No Adverse Interpretation of Other
Agreements . . . . . . . . . . . . . 90
Section 12.11. Successors . . . . . . . . . . . . . . 90
Section 12.12. Severability . . . . . . . . . . . . . 90
Section 12.13. Counterpart Originals. . . . . . . . . 90
Section 12.14. Table of Contents, Headings, Etc.. . . 90
SIGNATURES
Exhibit A Form of Security
|
INDENTURE, dated as of December 15, 1994, among EMCOR Group, Inc. (formerly known as JWP INC.), a Delaware corporation (the "Company"), MES HOLDINGS CORPORATION, a Delaware corporation (the "Guarantor") and SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Company's 11% Series C Notes, Due 2001 (the "Securities"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.1. Definitions.
"Accountants' Certificate" means a certificate from Deloitte and Touche or from other independent certified public accountants of national standing.
"Affiliate" of any specified Person means any other Person, directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Agent" means any Registrar, Paying Agent co-registrar or co-paying agent.
"Asset Sale" has the meaning ascribed thereto in
Section 4.10.
"Bankruptcy Law" has the meaning set forth in Section 6.01(b).
"Bankruptcy Plan" means the Third Amended Joint Plan of Reorganization of the Company and SellCo under Chapter 11 of the Bankruptcy Code (Chapter 11 Case No. 94 B 46404 (JHG)) as amended, supplemented or otherwise modified from time to time.
"Board of Directors" of a Person means the board of directors of such Person or any committee of such board of directors duly authorized to act hereunder.
"Business Day" means any day other than a Legal Holiday.
"Capital Expenditures" means, for any Person for any period, the aggregate (without duplication) of (a) all expen- ditures by such Person, except interest capitalized during construction, during such period for property, plant or equipment, including, without limitation, renewals, improve- ments, replacements and capitalized repairs, that would be reflected as additions to property, plant or equipment on a consolidated balance sheet of such Person prepared in conformity with GAAP, and (b) the principal amount of all Indebtedness incurred or assumed in connection with any such additions to property, plant and equipment. For the purpose of this definition, the purchase price of equipment which is acquired simultaneously with the trade-in of existing equipment owned by such Person or with insurance proceeds shall be included in Capital Expenditures only to the extent of the gross amount of such purchase price less the credit granted by the seller of such equipment being traded in at such time or the amount of such proceeds, as the case may be.
"Capital Lease" means, as to any Person, any lease of property, real or personal, in respect of which the present value of the minimum rental commitment would be capitalized on a balance sheet of such Person in accordance with GAAP.
"Capital Lease Obligation" means, as to any Person, the amount of the liability in respect of a Capital Lease which would at such time be required to be capitalized on a balance sheet of such Person in accordance with GAAP.
"Capital Stock" means any and all shares, interests, participations, rights or other equivalents (however designated) of any Person.
"Change of Control" means an event whereby any Person or group (as such term is defined in Rule 13d-5 of the Exchange Act) of related Persons, other than the Specified Holders, shall acquire beneficial ownership, directly or indirectly, of more than 50% of the outstanding voting stock of the Company.
"Change of Control Offer" has the meaning set forth in
Section 4.13(a).
"Change of Control Payment Date" has the meaning set forth in Section 4.13(a).
"Claim" means any claim arising from the rescission of the purchase of the Securities, for damages arising from the purchase of the Securities or for reimbursement or contribution on account of such claim.
"Code" means the Internal Revenue Code of 1986 (or any successor legislation thereto), as amended from time to time.
"Company" means EMCOR Group, Inc. (formerly known as JWP INC.), a Delaware corporation, and its successors.
"Comstock" means, so long as it is a Subsidiary of the Company, Comstock Canada, Ltd., a Canadian limited partnership, and its successors.
"Consolidated Cash Interest Expense" means, for any period, total accrued interest expense (including the interest component of Capital Lease obligations) of the Operating Com- panies on a consolidated basis during such period, including, without limitation, all commissions, discounts and other fees and charges (to the extent such commissions, fees and charges are included in "interest" under GAAP) owed with respect to letters of credit, and net costs under interest rate contracts, but excluding, however, (a) amortization of debt discount, (b) interest paid in property other than cash, (c) any other interest expense not payable in cash, (d) interest on $16,000,000 principal amount of the Securities and (e) com- mitment fees payable under the Revolving Credit Agreement and the Dynalectric Revolving Credit Agreement, all as determined in conformity with GAAP.
"Consolidated EBIT" for any period means Consolidated Net Income (Loss) for such period increased (to the extent already deducted therefrom) by the sum, on a consolidated basis, of (a) all income tax expense for such period to the extent included in Consolidated Net Income (Loss), and (b) all interest expense for such period to the extent included in Consolidated Net Income (Loss).
"Consolidated Fixed Charge Coverage Ratio" at any date
means the ratio of (a) Consolidated EBIT plus depreciation and
amortization of the Operating Companies less any Capital
Expenditures of the Operating Companies for the applicable
quarters immediately preceding such determination date (the
"Reference Period") to (b) the sum of (i) Consolidated Cash
Interest Expense incurred by the Operating Companies calculated
on a pro forma basis for the Reference Period, (ii) (A) for the
Reference Period from January 1, 1995 through December 31, 1995,
stated interest on the Securities (excluding interest on
$16,000,000 principal amount of the Securities), the Series A
Notes and the Series B Notes accreted during the period from
October 1, 1995 through December 31, 1995, (B) for the Reference
Period from April 1, 1995 through March 31, 1996, stated
interest on the Securities (excluding interest on $16,000,000
principal amount of the Securities), the Series A Notes and the
Series B Notes accreted from October 1, 1995 through March 31,
1996, (C) for the Reference Period from July 1, 1995 through
June 30, 1996, stated interest on the Securities (excluding
interest on $16,000,000 principal amount of the Securities), the
Series A Notes and the Series B Notes accreted from October 1,
1995 through June 30, 1996, (D) for the Reference Period from
October 1, 1995 through September 30, 1996, and for each
Reference Period thereafter, stated interest on the Securities
(excluding interest on $16,000,000 principal amount of the
Securities), the Series A Notes and the Series B Notes accreted
during such Reference Period, and (iii) cash dividends
(including on any preferred stock) paid by the Operating Com-
panies during the Reference Period to a Person other than an
Operating Company. For purposes of this definition, the factors
set forth in (a) and (b) above (other than cash dividends) shall
be calculated after giving effect on a pro forma basis (as if
the same occurred at the beginning of the Reference Period) to
(i) the acquisition by any Operating Company of any Person
which, as a result of such acquisition, becomes a wholly-owned
Subsidiary or the acquisition of assets constituting a business
by any Operating Company during such Reference Period and (ii)
any Asset Sales by an Operating Company (excluding gains or
losses recognized from such Asset Sales) occurring during the
Reference Period. In calculating cash interest expense for
purposes of determining the denominator of this ratio, interest
on Indebtedness of any Operating Company determined on a
fluctuating basis, to the extent such interest is covered by an
agreement relating to an interest swap obligation, shall be
deemed to accrue at the rate per annum resulting after giving
effect to the operation of such agreement.
"Consolidated Net Income (Loss)" means, for any
period, the aggregate of the net income (loss) of the Operating
Companies for such period, determined on a consolidated basis in
accordance with GAAP, provided that there shall be excluded from
such net income (to the extent otherwise included therein) (a)
any gain or loss realized upon the sale or other disposition
(including without limitation dispositions pursuant to sale-
leaseback transactions and costs related to closings of
operations, if incurred) of any real property or equipment of
the Operating Companies which is not sold or otherwise disposed
of in the ordinary course of business or of any Capital Stock of
any Person owned by any Operating Company, (b) the net income
(loss) of any such Person accounted for by the equity method of
accounting (other than a venture permitted under
Section 4.10(k)), except to the extent of the amount of divi-
dends or distributions paid to an Operating Company, and (c) the
net income (loss) of any other Person acquired by any Operating
Company in a pooling of interests transaction for any period
prior to the date of such acquisition.
"Consolidated Tangible Net Worth" means, as at any date of determination, the consolidated tangible net worth of the Operating Companies, determined on a consolidated basis in accordance with GAAP.
"Corporate Trust Office" shall be at the address of the Trustee specified in Section 12.02 or such other address as the Trustee may give notice to the Company.
"Custodian" has the meaning set forth in Section 6.01(b).
"Default" means any event that is, or after notice or passage of time or both would be, an Event of Default.
"Defender" means (a), so long as it is a Subsidiary of the Company, Defender Indemnity Ltd., a Vermont corporation, and its successors and (b) any other Domestic MES Subsidiary conducting insurance-related services for the Company and its Subsidiaries similar to those conducted by Defender Indemnity Ltd.
"Disqualified Stock" means any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the maturity date of the Securities.
"Domestic MES Subsidiaries" means each of the Subsidiaries of the Guarantor other than the Foreign MES Sub- sidiaries.
"Dynalectric Companies" means, for so long as it is a Subsidiary of the Company, each of the following: Dynalectric Company, Dynalectric Company of Nevada, Inc., Dyn Specialty Contracting, Inc., Contra Costa Electric, Inc., JWP Systems/Kirkwood Electric Company, Inc., B&B Contracting & Supply Company, and their respective successors.
"Dynalectric Revolving Credit Agreement" means the Credit Agreement, dated as of December 14, 1994, by and among the Company, the Dynalectric Companies named therein and the other parties thereto and their respective successors and assigns, and any refinancings, replacements or renewals thereof permitted by Section 4.09.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.
"ERISA Affiliate" means any trade or business (whether or not incorporated) which is a member of a controlled group of which the Company or any of its Subsidiaries is a member or which is under common control with the Company or any of its Subsidiaries within the meaning of Section 414 of the Code and the regulations promulgated and rulings issued thereunder.
"ERISA Event" means (a) a Reportable Event, with
respect to a Title IV Plan or a Multiemployer Plan (other than
a Reportable Event not subject to the provision for 30-day
notice to the PBGC), or an event described in Section 4068 of
ERISA; (b) the withdrawal of the Company or any of its Sub-
sidiaries or any ERISA Affiliate from a Title IV Plan subject to
Section 4063 of ERISA during a plan year in which it was a
"substantial employer," as such term is defined in Section
4001(a)(2) of ERISA, or the incurrence of liability by the
Company or any of its Subsidiaries or any ERISA Affiliate under
Section 4064 of ERISA upon the termination of a Title IV Plan
subject to Section 4063 of ERISA; (c) the complete or partial
withdrawal of the Company, any of its Subsidiaries or any ERISA
Affiliate from any Multiemployer Plan; (d) the filing of a
notice of intent to terminate a Title IV Plan pursuant to
Section 4041(a)(2) of ERISA or the treatment of a plan amendment
as a termination under Section 4041 of ERISA; (e) the
institution of proceedings to terminate a Title IV Plan or
Multiemployer Plan by the PBGC under Title IV of ERISA; (f) the
failure to make required contributions to a Qualified Plan; or
(g) any other event or condition which might constitute grounds
under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Title IV Plan or
Multiemployer Plan, other than PBGC premiums due but not
delinquent under Section 4007 of ERISA.
"Event of Default" has the meaning set forth in
Section 6.01(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Foreign MES Subsidiary" means Comstock, each U.K. Subsidiary, each Middle East Subsidiary, each Malaysian Sub- sidiary, U2, and any other Subsidiary of any MES Company per- mitted hereunder, incorporated and organized in a jurisdiction other than the United States of America, and each of their respective Subsidiaries.
"GAAP" means Generally Accepted Accounting Principles as in effect on the Issue Date.
"Generally Accepted Accounting Principles" means generally accepted accounting principles in the United States of America as in effect from time to time set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board, or in such other statements by such other entity as may be in general use by significant segments of the accounting profession, which are applicable to the circumstances as of the date of determination.
"Guarantor" means MES Holdings Corporation, a Delaware corporation, and its successors.
"Guaranty" or "guaranty" means, as applied to any obligation, (a) a guaranty (other than (i) by endorsement of negotiable instruments for collection in the ordinary course of business, and (ii) a Performance Guaranty), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of any part or all of such obligation including, without limitation, the Guaranty pursuant to Article 10 hereof, and (b) an agreement, direct or indirect, contingent or otherwise, the practical effect of which is to assure in any way the payment or per- formance (or payment of damages in the event of nonperformance) of any part or all of such obligation, including, without limiting the foregoing, the payment of amounts drawn down by letters of credit, but excluding any Performance Guaranty. The amount of a guaranty shall be deemed to be the maximum amount of the obligation guarantied for which the guarantor could be held liable under such guaranty.
"Holder" means a Person in whose name a Security is registered.
"Imprest Accounts" means bank and other deposit accounts maintained by the Company or any of its Subsidiaries which are subject to Liens of the type described in clause (f) of the definition of the term "Permitted Liens".
"Indebtedness" means, when used with reference to any Person, any indebtedness, contingent or otherwise, in respect of borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof) or evidenced by bonds (other than bonds constituting Performance Guaranties), notes, debentures or similar instru- ments or obligations to provide cash collateral for or to cover or to reimburse for drawings under letters of credit or rep- resenting the balance deferred and unpaid of the purchase price of any property (except any such balance that constitutes a trade payable), and shall also include, without limitation (but without duplication), (a) any Capital Lease Obligations of such Person, (b) (to the extent not otherwise included in this definition) Guaranties of items which would be included within this definition (regardless of whether such items would appear upon such balance sheet), and (c) all Indebtedness referred to above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including, without limitation, accounts and general intangibles) owned by such Person even though such Person has not assumed or become liable for the payment of such Indebtedness; provided, however, that for purposes of computing Indebtedness outstanding at any time, such items shall be excluded to the extent that they would otherwise be eliminated as intercompany items in consolidation.
"Indenture" means this Indenture as amended, sup- plemented or otherwise modified from time to time.
"Insignificant Subsidiary" means, at any date of
determination, any Subsidiary of SellCo that (a) has not for the
90-day period ending on such date carried on any active trade or
business or owned the Capital Stock of any Subsidiary that,
during such period, carried on any active trade or business, and
(b) has total liabilities (including contingent liabilities
estimated by the Board of Directors of such Subsidiary in good
faith) that exceed its total assets.
"Insurance Related Letter of Credit Obligations" means, at any time, the sum of (a) the maximum aggregate amount then available to be drawn under all Insurance Related Letters of Credit outstanding at such time (assuming the occurrence of, and compliance with, all conditions for drawing) plus (b) the aggregate amount of unpaid reimbursement obligations resulting from drawings under Insurance Related Letters of Credit.
"Insurance Related Letters of Credit" means standby letters of credit issued for the account of Defender or the Company in the ordinary course of business to secure its payment obligations under workers' compensation and liability insurance policies underwritten by Defender or such other underwriter in respect of the Company and its Subsidiaries and their respective employees and businesses.
"Interest Deferral Period" has the meaning set forth in Section 2.02(d).
"Interest Deferral Securities" has the meaning set forth in Section 2.02(d).
"Investment" means, when used with reference to any Person, any direct or indirect advances, loans or other extensions of credit or capital contributions by such Person to (by means of transfers of property to others or payments for property or services for the account or use of others, or otherwise), or purchases or acquisitions by such Person of Capital Stock, bonds, notes, debentures or other securities or instruments issued by, any other Person.
"IRS" means the Internal Revenue Service, or any successor thereto.
"Issue Date" means December 15, 1994.
"JWS" means, so long as it is a Subsidiary of the Company, Jamaica Water Supply Company, a New York Corporation and its successors.
"JWSC" means, (a) so long as it is a subsidiary of the Company, Jamaica Water Securities Corp., a New York corporation, and its successors and (b) so long as it is a Subsidiary of the Company, the immediate parent corporation, if any, of Jamaica Water Securities Corp., and its successors.
"Legal Holiday" has the meaning set forth in Section 12.07.
"Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, security interest, lien, charge, encumbrance or other preferential arrangement of any kind intended to assure payment of any Indebtedness or other obligation or to assure any performance by any Person (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest).
"Malaysian Subsidiaries" means, so long as such corporation is a Subsidiary of the Company, (a) the corporation to be organized by the Company or any Subsidiary of the Company in Malaysia in connection with the operation and maintenance of power plants in Malaysia, and (b) if organized by a Subsidiary of the Company, the immediate parent corporation of such corporation so long as the principal asset of such parent corporation is such corporation, each of such corporation's Subsidiaries, and their respective successors.
"Management Stock Option Plan" means the Company's Management Stock Option Plan, dated as of the Issue Date.
"Material Adverse Change" means a material adverse change in any of (a) the condition (financial or otherwise), business, performance, prospects, operations or properties of the Company or of the Operating Companies taken as one enter- prise; (b) the legality, validity or enforceability of this Indenture, the Securities or any other document executed in connection with any of the foregoing; (c) the ability of the Company or the Guarantor to repay their respective obligations under the Securities or this Indenture or to perform their respective obligations under the Securities or this Indenture; or (d) the rights and remedies of the Trustee or the Holders of Securities under the Securities or this Indenture.
"Material Adverse Effect" means an effect that results in or causes, or has a reasonable likelihood of resulting in or causing, a Material Adverse Change.
"MES Companies" means the Guarantor and each of its Subsidiaries.
"Middle East Subsidiaries" means, so long as such Persons are Subsidiaries of the Company, Lunar Drake & Scull (UAE), a United Arab Emirates corporation, Drake & Scull Assarain, an Omani corporation, Drake & Scull (Cayman Islands) Ltd., a Cayman Islands corporation, JWP-Nesma Ltd., a Saudi Arabia corporation, JWP (Cayman Islands), Ltd., a Cayman Islands corporation, and their respective successors.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which the Company or any of its Subsidiaries or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five-year plan years made or accrued an obligation to make contributions on behalf of participants who are or were employed by any of them.
"Obligations" means, with respect to any Indebtedness,
any principal, premium, interest (including without limitation,
interest, whether or not allowed, after the filing of a petition
initiating any proceeding referred to in Section 6.01(a)(vii) or
(viii)), penalties, commissions, charges, expenses, fees,
indemnifications, reimbursements, and other liabilities or
amounts payable under or in respect of the documentation
governing such Indebtedness.
"Obligors" means, collectively, the Company and the Guarantor, and "Obligor" means any of the Obligors singly.
"OECD" means the Organization for Economic Cooperation and Development.
"Offer Price" has the meaning set forth in Section 4.13(a).
"Officer" means the Chairman of the Board, the President, the Chief Financial Officer, the Treasurer, the Assistant Treasurer, any Vice President, the Secretary, the Assistant Secretary or the Controller of an Obligor, as the context requires.
"Officers' Certificate" means a certificate signed by two Officers of the Company, delivered to the Trustee, and which shall include the statements set forth in Section 12.05.
"Operating Companies" means the Company, individually, each of the MES Companies and each of the Dynalectric Companies.
"Opinion of Counsel" means a written opinion from independent legal counsel who is acceptable to the Trustee. The counsel may not be an employee of, or counsel to, the Company or the Trustee.
"Paying Agent" has the meaning set forth in Section 2.03(a).
"Payment Securities" means the Securities issued under this Indenture as of the Issue Date and those issued after the Issue Date pursuant to Section (III)(F)(3)(i) of the Bankruptcy Plan.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto.
"Pension Plan" means an employee pension benefit plan,
as defined in Section 3(2) of ERISA (other than a Multiemployer
Plan), which is not an individual account plan as defined in
Section 3(34) of ERISA, and which the Company, any of its
Subsidiaries or, if a Title IV Plan, any ERISA Affiliate
maintains, contributes to or has an obligation to contribute to
on behalf of participants who are or were employed by any of
them.
"Performance Guaranties" means, in respect of the Company or any of its Subsidiaries, contingent obligations arising from the issuance of performance guaranties, assurances, indemnities, bonds, letters of credit or similar agreements in the ordinary course of business in respect of the contracts (other than for borrowed money) of the Company, any of the Subsidiaries of the Company, or Unique Construction for the benefit of surety companies or for the benefit of others to induce such others to forgo the issuance of a surety bond in their favor.
"Permitted Investments" means (a) securities issued or directly and fully guarantied or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) with a maturity not more than one year from the date of acquisition; (b) time deposits and certificates of deposit of any domestic commercial bank of recognized standing having capital and surplus of at least $500,000,000 or a commercial bank organized under the laws of any other country that is a member of the OECD and having total assets of at least $500,000,000, in either case, the outstanding short-term securities of which are rated at least A-1 by Standard & Poor's Corporation or at least P-1 by Moody's Investors Service, Inc., or carry an equivalent rating by a nationally recognized rating agency if both of the two named rating agencies cease publishing ratings of investments, which time deposits or certificates of deposit mature not more than one year from the date of acquisition; (c) commercial paper and demand notes rated at least A-1 or the equivalent thereof by Standard & Poor's Corporation or at least P-1 or the equivalent thereof by Moody's Investors Service, Inc. and maturing within one year after the date of acquisition; (d) debt securities issued by any State of the United States of America or any political subdivision thereof rated at least A- or the equivalent thereof by Standard & Poor's Corporation or A3 or the equivalent thereof by Moody's Investors Service, Inc. and maturing within one year after the date of acquisition and (e) a money market fund registered under the Investment Company Act of 1940, as from time to time amended, the portfolio of which is limited to United States government obligations and United States agency obligations.
"Permitted Liens" means, with respect to any Person,
(a) pledges or deposits by such Person under workmen's com-
pensation laws, unemployment insurance laws or similar legis-
lation, or good faith deposits in connection with bids, tenders,
contracts (other than for borrowed money) or leases to which
such Person is a party, or deposits to secure public or
statutory obligations of such Person or deposits of cash or
United States Government bonds to secure surety or appeal bonds
to which such Person is a party, or deposits as security for
contested taxes or import duties or for the payment of rent; (b)
Liens arising by operation of law in favor of materialmen,
mechanics, warehousemen, carriers, lessors, bankers or other
similar Persons incurred in the ordinary course of business
which secure its obligations (other than for borrowed money) to
such Person; provided that (i) the Person incurring such Lien is
not in default with respect to such payment obligation to such
other Person, or (ii) the Person incurring such Lien is in good
faith and by appropriate proceedings diligently contesting such
obligation and adequate provision is made for the payment
thereof in accordance with Generally Accepted Accounting
Principles; (c) Liens for taxes, assessments or other govern-
mental charges not yet subject to penalties for nonpayment or
which are being contested in good faith and by appropriate
proceedings, if adequate reserves, as may be required by Gen-
erally Accepted Accounting Principles, shall have been made
therefor; (d) Liens in favor of issuers of surety bonds issued
pursuant to the request of and for the account of such Person or
any Person guarantying such surety bonds in the ordinary course
of its business; (e) survey exceptions, encumbrances, easements
or reservations of, or rights of others for, rights of way,
sewers, electric lines, telegraph and telephone lines and other
similar purposes, or zoning or other restrictions as to the use
of real properties or Liens incidental to the conduct of the
business of such Person or to the ownership of its properties;
and (f) Liens consisting of restrictions regarding the
disbursement or withdrawal of funds deposited by a Subsidiary of
the Company in bank accounts maintained by such Subsidiary in
the ordinary course of business consistent with past practice,
which accounts are (i) maintained in connection with specific
construction projects or contracts from which payments and
disbursements with respect to such projects or contracts are to
be made or (ii) required by customers of such Subsidiary to be
excluded from the Company's or such Subsidiary's cash management
system.
"Person" means any individual, corporation, limited liability company, partnership, joint venture, trust, unin- corporated organization or government or any agency or political subdivision thereof.
"Plan" means an employee benefit plan, as defined in
Section 3(3) of ERISA, which the Company or any of its Sub-
sidiaries maintains, contributes to or has an obligation to
contribute to on behalf of participants who are or were employed
by any of them.
The "principal" of a debt security means the principal of the security plus the premium, if any, on the security.
"Qualified Plan" means an employee pension benefit plan, as defined in Section 3(2) of ERISA, which is intended to be tax-qualified under Section 401(a) of the Code, and which the Company, any of its Subsidiaries or any ERISA Affiliate maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them.
"Quarter" means a fiscal quarterly period of the Company or any of its Subsidiaries.
"Registrar" has the meaning set forth in Section 2.03(a).
"Reportable Event" means any of the events described in Section 4043(b)(1), (2), (3), (5), (6), (8) or (9) of ERISA.
"Representative" means the indenture trustee or other trustee, agent or representative for any Senior Indebtedness.
"Restricted Debt Prepayment" means any purchase,
redemption, defeasance (including, but not limited to, in-
substance or legal defeasance), prepayment, other acquisition or
retirement for value, or payment (other than (a) a required
scheduled or mandatory payment or redemption or required payment
on demand; (b) payments under the Revolving Credit Agreement,
the Dynalectric Revolving Credit Agreement or other revolving
credit facilities of the Operating Companies permitted herein;
(c) payments made by a Subsidiary of the Company, to the Company
or to another Subsidiary of the Company in respect of
intercompany Indebtedness permitted hereunder; or (d) payments
permitted under Section 4.09(xxxi)), directly or indirectly, by
the Company or any of its Subsidiaries, of Indebtedness of the
Company or any of its Subsidiaries, other than in respect of the
Securities, the Series A Notes, the Series B Notes, or the
SellCo Subordinated Notes.
"Restricted Investment" means any direct or indirect Investment by the Company or any Subsidiary of the Company in any Affiliate of the Company, other than investments permitted pursuant to Section 4.10.
"Restricted Payment" means any (a) Stock Payment by the Company or a Subsidiary of the Company, (b) Restricted Investment, or (c) Restricted Debt Prepayment. Notwithstanding the foregoing, Restricted Payments shall not include tax pay- ments by a Subsidiary of the Company to the Company or to another Subsidiary of the Company that is the parent entity of such Subsidiary, or payments of dividends or other distributions by a Subsidiary of the Company so long as such dividends or distributions are made pro rata to all shareholders of the same class in respect of which such dividend or distribution is made.
"Revolving Credit Agent" means the Agent, as defined in the Revolving Credit Agreement.
"Revolving Credit Agreement" means the Revolving Credit Agreement, dated as of December 14, 1994, by and among the Company, the Guarantor and the other parties thereto and their respective successors and assigns, and any refinancings, replacements or renewals thereof permitted by Section 4.09.
"Rohr Indebtedness" means the Indebtedness of Uni- versity Cogeneration Inc. owed to Connecticut General Insurance Company and outstanding on the Issue Date.
"Sea Cliff" means, so long as it is a Subsidiary of the Company, Sea Cliff Water Company, a New York corporation, and its successors.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Security" means any Payment Security or any Interest Deferral Security.
"SellCo" means SellCo Corporation, a Delaware cor- poration, and its successors.
"SellCo Companies" means SellCo, each of the Sub- sidiaries of SellCo and each of the Series B Subsidiaries.
"SellCo Intercompany Note" means the promissory note of the Company in favor of SellCo, dated the Issue Date, in an aggregate principal amount of $5,464,133.78, which promissory note shall be payable after the payment in full of the Secu- rities and prior to the date on which the SellCo Subordinated Notes are redeemed and canceled or deemed to have been redeemed and canceled pursuant to Section 3.09 of the SellCo Subordinated Indenture, but in no event earlier than the fifth anniversary of the "Issue Date" (as defined in the SellCo Subordinated Indenture).
"SellCo Subordinated Indenture" means the Indenture, dated the Issue Date, between SellCo, as issuer and Shawmut Bank Connecticut, National Association, as trustee, pursuant to which SellCo issued the SellCo Subordinated Notes.
"SellCo Subordinated Indenture Trustee" means the "Trustee," as defined in the SellCo Subordinated Indenture.
"SellCo Subordinated Notes" means SellCo's 12% Sub- ordinated Notes, Due 2004, issued by SellCo pursuant to the SellCo Subordinated Indenture in an aggregate principal amount not exceeding $46,000,000 plus the Additional Interest Amount (as defined in the Bankruptcy Plan) in respect thereof, together with any pay-in-kind interest accrued thereon pursuant to the terms thereof.
"SellCo Subordinated Pledge Agreement" has the meaning ascribed thereto in the Series A Indenture.
"Senior Indebtedness" means (a) the Indebtedness of
the Company arising under the Series A Notes and the Series A
Indenture and all Obligations with respect thereto, (b) the
Indebtedness of the Company arising under the Series B Notes and
the Series B Indenture and all Obligations with respect thereto,
(c) the Indebtedness of the Guarantor arising under its guaranty
of the Indebtedness of the Company under the Series A Notes and
the Series A Indenture and all Obligations with respect thereto,
(d) the Indebtedness of the Guarantor arising under its guaranty
of the Indebtedness of the Company under the Series B Notes and
the Series B Indenture and all Obligations with respect thereto,
and (e) Indebtedness of the Company incurred pursuant to the
Revolving Credit Agreement in an aggregate amount not in excess
of (x) $100,000,000 minus (y) the outstanding amount of
Indebtedness of the Company incurred under the Dynalectric
Revolving Credit Agreement. The Senior Indebtedness described
in clauses (a), (b), (c), (d) and (e) above shall continue to
constitute Senior Indebtedness for all purposes of this
Indenture, and the provisions of Article 11 hereof shall
continue to apply to such Senior Indebtedness, notwithstanding
that such Senior Indebtedness or any claim in respect thereof
may be disallowed, avoided or subordinated pursuant to any
Bankruptcy Law or other applicable insolvency law or equitable
principles (i) as a claim for unmatured interest, or (ii) as a
fraudulent transfer or conveyance.
"Series A Indenture" means the Indenture, dated the Issue Date, between the Company, as issuer, MES and SellCo, as guarantors, and IBJ Schroder Bank & Trust Company, as trustee, pursuant to which the Company issued the Series A Notes.
"Series A Indenture Trustee" means the "Trustee", as defined in the Series A Indenture.
"Series A Notes" means the Company's 7% Senior Secured Notes, Due 1997, issued by the Company pursuant to the Series A Indenture in an aggregate principal amount not exceeding $71,000,000, together with any pay-in-kind interest accrued thereon pursuant to the terms thereof.
"Series A SellCo Pledge Agreement" has the meaning ascribed thereto in the Series A Indenture.
"Series A Senior Pledge Agreement" has the meaning ascribed thereto in the Series A Indenture.
"Series A Subordinated Pledge Agreement" has the meaning ascribed thereto in the Series A Indenture.
"Series B Indenture" means the Indenture, dated the Issue Date, among the Company, as issuer, the Guarantor and Sellco, as guarantors, and United States Trust Company of New York, as trustee, pursuant to which the Company issued the Series B Notes.
"Series B Indenture Trustee" means the "Trustee," as defined in the Series B Indenture.
"Series B Notes" means the Company's 7% Senior Secured Notes, Series B, Due 1997, issued by the Company pursuant to the Series B Indenture in an aggregate principal amount not exceeding $11,357,000 plus the Additional Interest Amount (as defined in the Bankruptcy Plan), together with any pay-in-kind interest accrued thereon pursuant to the terms thereof.
"Series B Subsidiaries" means, so long as such Persons are Subsidiaries of the Company, JWP/MEC Corp., a Pennsylvania corporation, University Energy Services of California Inc., a California corporation (and, if organized by the Company, a direct Subsidiary of the Company so long as (a) the principal asset of such Subsidiary is the Capital Stock of University Energy Services of California, Inc. and (b) the Capital Stock of such Subsidiary is pledged to the Series A Indenture Trustee under the Series A Subordinated Pledge Agreement), JWP Pacific International Inc., a Delaware corporation, Telecom and JWP Energy Products, Inc., an Idaho corporation, each of the Sub- sidiaries of such corporations, and their respective successors.
"Software House SellCo Pledge Agreement" has the meaning ascribed thereto in the Series A Indenture.
"Software House Senior Pledge Agreement" has the meaning ascribed thereto in the Series A Indenture.
"Software House Subordinated Pledge Agreement" has the meaning ascribed thereto in the Series A Indenture.
"Specified Holder" means a Holder to which one or more Securities is issued on the Issue Date.
"Stock Payment" means:
(a) with respect to a Person, any dividend, either in cash or in property (except dividends payable in common stock of such Person), on, or the making by such Person of any other distribution in respect of, its Capital Stock, now or hereafter outstanding, or the redemption, repurchase, retirement or other acquisition for value by such Person, directly or indirectly, of its Capital Stock or any warrants, rights or options to purchase or acquire shares of any class of its Capital Stock, now or hereafter outstanding; and
(b) with respect to any Subsidiary, any such dividend (except dividends payable in common stock of such Subsidiary) or distribution in respect of, or any such redemption, repurchase, retirement or other acquisition of, its Capital Stock or the Capital Stock of any Person of which it is a Subsidiary or any warrants, rights, or options to purchase or acquire shares of any class of its Capital Stock or the Capital Stock of any Person of which it is a Subsidiary, now or hereafter outstanding.
"Subsidiary" of a Person means (a) any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors, under the ordinary circumstances, shall at the time be owned or controlled, directly or indirectly, by such Person, by such Person and one or more of its Subsidiaries or by one or more of its Subsidiaries; (b) any other Person the power to direct the policies, management or affairs of which is contractually held by such Person, or by such Person and one or more of its Sub- sidiaries or by one or more of its Subsidiaries; or (c) any other Person of which at least a majority of voting interest, under ordinary circumstances, is at the time, directly or indirectly, owned or controlled by such Person, or by such Person and one or more of its Subsidiaries or by one or more of its Subsidiaries. Notwithstanding the foregoing, for purposes of this Indenture, (i) none of JWP Information Services, Inc., Antwerp Education Center N.V., Microcom N.V., Sivea Benelux, Micro Avenue or JWP Information Systems S.A.R.L. shall be deemed Subsidiaries of the Company or any of its Subsidiaries, and (ii) any Middle East Subsidiary and any Malaysian Subsidiary and its respective Subsidiaries shall be deemed Subsidiaries of the Company and certain of its Subsidiaries so long as the Company, individually or together with any other Subsidiaries of the Company, owns or controls Capital Stock entitling it to cast at least one-third of the votes entitled to be cast at the election of directors of such Middle East Subsidiary or such Malaysian Subsidiary, respectively.
"Telecom" means JWP Telecom, Inc., a Delaware cor- poration, and its successors.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA, except as provided in Sections 9.01 and 9.03 hereof.
"Title IV Plan" means a Pension Plan, other than a Multiemployer Plan, which is covered by Title IV of ERISA.
"Trustee" means Shawmut Bank Connecticut, National Association, until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder.
"Trust Officer" means any officer within the corporate trust administration (or any successor group) of the Trustee, including any Vice President, Assistant Vice President, Secretary, Assistant Secretary or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred at the Trustee's Corporate Trust Office because of his/her knowledge of and familiarity with the particular subject.
"U.K. Subsidiaries" means, so long as such Persons are Subsidiaries of the Company, JWP U.K. Ltd., a United Kingdom corporation, and each of its Subsidiaries (other than any Middle East Subsidiary or any Malaysian Subsidiary) and their respective successors.
"Unique Construction" means Unique Construction Company, an Illinois corporation, and its successors.
"Unrestricted Cash Coverage Ratio" at any date means
the ratio of (a) Consolidated EBIT (other than Consolidated EBIT
attributable to the Foreign MES Subsidiaries) plus depreciation
and amortization of the Operating Companies (other than
depreciation and amortization attributable to the Foreign MES
Subsidiaries) plus any cash received by any of the Operating
Companies (other than the Foreign MES Subsidiaries) from any
Water Company or any Foreign MES Subsidiary during the
applicable quarters immediately preceding such determination
date less any Capital Expenditures of the Operating Companies
(other than Capital Expenditures of Foreign MES Subsidiaries not
funded by the Company) for the applicable quarters immediately
preceding such determination date (the "Reference Period"), to
(b) the sum of (i) Consolidated Cash Interest Expense incurred
by the Operating Companies (other than the Foreign MES
Companies) calculated on a pro forma basis for the Reference
Period, and (ii) cash dividends (including on any preferred
stock) paid by the Operating Companies (other than the Foreign
MES Companies) during the Reference Period to a Person other
than an Operating Company (other than the Foreign MES
Companies). For purposes of this definition, the factors set
forth in (a) and (b) above (other than cash dividends) shall be
calculated after giving effect on a pro forma basis (as if the
same occurred at the beginning of the Reference Period) to (i)
the acquisition by any Operating Company of any Person which, as
a result of such acquisition, becomes a wholly-owned Subsidiary
or the acquisition of assets constituting a business by any
Operating Company during such Reference Period and (ii) any
Asset Sales by an Operating Company (excluding gains or losses
recognized from such Asset Sales) occurring during the Reference
Period. In calculating cash interest expense for purposes of
determining the denominator of this ratio interest on
Indebtedness of any Operating Company determined on a
fluctuating basis, to the extent such interest is covered by an
agreement relating to an interest swap obligation, shall be
deemed to accrue at the rate per annum resulting after giving
effect to the operation of such agreement.
"U.S. Government Obligations" has the meaning set forth in Section 8.01.
"U2" means, so long as it is a Subsidiary of the Company, University Mechanical Contractors, Inc., a Washington corporation, and its successors.
"Water Company" means, so long as it is a Subsidiary of the Company, each of JWS, JWSC, and Sea Cliff, and their respective successors.
"Withdrawal Liability" means, at any time, the
aggregate amount of the liabilities, if any, pursuant to Section
4201 of ERISA, and any increase in contributions pursuant to
Section 4243 of ERISA with respect to all Multiemployer Plans.
Section 1.2. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Securities means the Company or any other obligor on the Securities (including each Guarantor).
All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them.
Section 1.3. Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the plural include the singular; and
(e) provisions apply to successive events and transactions.
ARTICLE 2
THE SECURITIES
Section 2.1. Form and Dating.
The Securities, and the Trustee's certificate of authentication in respect thereof, shall be substantially in the form of Exhibit A, the terms of which are incorporated in and made a part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject or usage. Each Payment Security shall be dated the Issue Date. Each Interest Deferral Security shall be dated the date of its authentication. The Securities shall be issuable only in registered form and only in denominations of $100 and integral multiples thereof.
Section 2.2. Execution and Authentication.
(a) An Officer of the Company shall sign the Secu-
rities for the Company by manual or facsimile signature. Such
signature shall be attested to by the Secretary of the Company.
The Company's seal shall be reproduced on the Securities. The
Guarantor shall execute its Guaranty in the manner set forth in
Section 10.03. If an Officer whose signature is on a Security
no longer holds that office at the time the Security is
authenticated, the Security shall nevertheless be valid.
(b) A Security shall not be valid until authenticated by the manual signature of a Trust Officer on behalf of the Trustee. The signature of such Trust Officer shall be conclusive evidence that the Security has been authenticated under this Indenture.
(c) The Trustee shall, from time to time, authenticate Payment Securities for original issue up to the aggregate principal amount stated in paragraph 4 of the Securities, upon a written order of the Company signed by two Officers, which order shall set forth the amount and the date of the Securities to be authenticated. The aggregate principal amount of Securities outstanding at any time may not exceed, except as provided in Section 2.07, $62,827,225, plus the aggregate principal amount of Interest Deferral Securities issued pursuant to paragraph 2 of the Securities.
(d) Interest on the Payment Securities shall accrue commencing on the Issue Date. As provided in Paragraph 2 of the Securities, the Company is required on each interest payment date occurring during the 18-month period commencing on the Issue Date (the "Interest Deferral Period"), in lieu of the payment of interest in cash on the outstanding Securities, to pay interest on the outstanding Securities through the issuance of additional Securities (the "Interest Deferral Securities") in an aggregate principal amount equal to the interest that would be payable with respect to the outstanding Securities if such interest were paid in cash. On each interest payment date during the Interest Deferral Period, the Trustee or authenticating agent shall authenticate Interest Deferral Securities for issuance to each Holder of Securities on the preceding record date, as shown by the records of the Registrar, in the amount required to pay such interest (which shall be determined based on the aggregate amount of Securities held by each Holder as shown by the records of the Trustee). Each issuance of Interest Deferral Securities shall be made pro rata, except that the Company shall pay cash to any Holder to the extent necessary to avoid issuing Interest Deferral Securities in denominations which are not integral multiples of $100. From and after the expiration of the Interest Deferral Period, interest on the Securities will be paid in cash on each interest payment date.
(e) The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Securities. Unless limited by the term of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenti- cating agent has the same rights as an Agent to deal with any obligor or an Affiliate of any obligor.
Section 2.3. Registrar and Paying Agent.
(a) The Company shall maintain or cause to be maintained an office or agency where Securities may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Securities may be presented or surrendered for payment ("Paying Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent, Registrar or co-registrar without notice to any Holder. The Company shall notify the Trustee of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent, Registrar or co-registrar, except as otherwise provided in this Indenture.
(b) The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which shall incorporate the provisions of the TIA. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall give prompt written notice to the Trustee of the name and address of any such Agent. If the Company fails to maintain a Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee shall act as such, and shall be entitled to appropriate compensation in accordance with Section 7.07.
(c) The Company initially appoints the Trustee as Registrar, Paying Agent and agent for service of notices and demands in connection with the Securities.
Section 2.4. Paying Agent to Hold Money in Trust.
Not later than each date on which principal and interest on the Securities is due and payable (other than by issuance of Interest Deferral Securities), the Company (or any other obligor on the Securities) shall deposit with the Paying Agent, in immediately available funds, money sufficient to pay such principal and interest. The Company (and any other obligor on the Securities) shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Securities (whether such money has been paid to it by the Company or any other obligor on the Securities), and shall notify the Trustee of any default by the Company (or any other obligor on the Securities) in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company) shall have no further liability for the money delivered to the Trustee. If the Company acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent.
Section 2.5. Holder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of
the names and addresses of the Holders and shall otherwise
comply with TIA Section 312(a). If the Trustee is not the Registrar,
the Company shall cause to be furnished to the Trustee at least
fifteen Business Days before each interest payment date and at
such other times as the Trustee may request in writing, within
30 days of such request, a list in such form and as of such date
as the Trustee may reasonably require of the names and addresses
of the Holders and the Company shall otherwise comply with TIA
Section 312(a).
Section 2.6. Transfer and Exchange.
(a) When Securities are presented to the Registrar or a co-registrar with a request to register, transfer or exchange them for an equal principal amount of Securities of other authorized denominations, the Registrar shall register the transfer or make the exchange if its requirements for such transactions are met; provided, however, that any Security presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar and the Trustee duly executed by the Holder thereof or his attorney duly authorized in writing. To permit registrations of transfers and exchanges, the Company shall issue and the Trustee shall authenticate Securities which the Holder making the transfer or exchange is entitled to receive at the Registrar's written request, subject to such rules as the Trustee may reasonably require.
(b) The Company shall not be required (i) to issue, register the transfer of or exchange Securities during a period beginning at the opening of business on a Business Day 15 days before the day of any selection of Securities for redemption under Section 3.02 and ending at the close of business on the day of selection, (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part or (iii) to register the transfer or exchange of a Security between the record date and the next succeeding interest payment date.
(c) No service charge shall be made to the Holder for
any registration of transfer or exchange (except as otherwise
expressly permitted herein), but the Company may require payment
of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than
such transfer tax or similar governmental charge payable upon
exchanges (without a transfer to another Person) pursuant to
Section 2.10, 3.06 or 9.05 in which event the Company shall be
responsible for the payment of any such taxes).
(d) Prior to due presentment for registration of transfer of any Security, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary.
Section 2.7. Replacement Securities.
(a) If any mutilated Security is surrendered to the Trustee, or the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, then, in the absence of notice to the Company or Trustee that such Security has been acquired by a bona fide purchaser, the Company shall issue and the Trustee, upon the written order of the Company signed by two Officers, shall authenticate a replacement Security of like tenor and principal amount, bearing a number not contemporaneously outstanding, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or stolen Security, if the Trustee's require- ments for replacement of Securities are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent or any authenticating agent from any loss that any of them may suffer if a Security is replaced. The Company and the Trustee may charge for their expenses in replacing a Security.
(b) Every replacement Security is an additional obligation of the Company and the Guarantor, and shall be entitled to the benefits of this Indenture equally and pro- portionately with any and all other Securities issued hereunder.
(c) The provisions of this Section 2.07 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.
Section 2.8. Outstanding Securities.
(a) The Securities outstanding at any time are all the Securities authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those redeemed or purchased by the Company pursuant to Article 3, and those described in this Section as not outstanding. If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser.
(b) If the principal amount of any Security is considered paid under Section 4.01, it ceases to be outstanding and interest on it ceases to accrue.
(c) A Security ceases to be outstanding if the Company or one of its Subsidiaries holds the Security.
Section 2.9. Treasury Securities.
(a) In determining whether the Holders of the required principal amount of Securities have given or concurred in any request, demand, authorization, notice, direction, waiver or consent, Securities owned by an Affiliate of the Company (other than a Specified Holder) shall be disregarded and considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such request, demand, authorization, notice, direction, waiver or consent, only Securities that a Trust Officer knows are so owned shall be so disregarded.
(b) In determining whether the Holders of the
required principal amount of Securities have (i) directed the
time, method or place of conducting any proceeding for any
remedy available to the Trustee hereunder, or exercising any
trust or power conferred upon the Trustee; (ii) consented to the
waiver of any past Event of Default and its consequences; or
(iii) consented to the postponement of any interest payment,
Securities owned by a Specified Holder shall be disregarded and
considered as though not outstanding only if such Specified
Holder is an Affiliate of the Company, except that for the
purposes of determining whether the Trustee shall be protected
in relying on any such direction or consent, only Securities
that a Trust Officer knows are so owned shall be so disregarded.
Section 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may prepare and, upon written request from the Company signed by two Officers of the Company, the Trustee shall authenticate temporary Securities. Temporary Securities shall be in any authorized denomination substantially in the form of definitive Securities and with other variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee, upon receipt of the written order of the Company signed by two Officers, shall authenticate definitive Securities in exchange for temporary Securities. Until such exchange, temporary Securities shall be entitled to the same rights, benefits and privileges as definitive Securities.
Section 2.11. Cancellation.
The Company at any time may deliver Securities pre- viously authenticated hereunder to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee shall cancel all Securities surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall destroy canceled Securities (subject to the record-retention requirement of the Exchange Act) and certification of their destruction shall be delivered to the Company unless the Company shall direct that canceled Securities be returned to it. The Company may not reissue or issue new Securities to replace Securities that it has redeemed or paid or that have been delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Securities, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, which date shall be at least five Business Days prior to the payment date, in each case at the rate provided in the Securities and in Section 4.01 hereof (which interest shall be paid during the Interest Deferral Period in the form of Interest Deferral Securities). The Company shall, with the consent of the Trustee, fix or cause to be fixed each such special record date and payment date. At least 15 days before a special record date, the Company (or the Trustee in the name of and at the expense of the Company) shall mail to the Holders and to the Trustee (unless the Trustee mailed such notice on behalf of the Company) a notice that states the special record date, the related payment date and the amount of such interest to be paid.
Section 2.13. CUSIP Numbers.
The Company, in issuing the Securities, may use "CUSIP" numbers (if then generally in use), and the Trustee shall use CUSIP numbers in notices of redemption or exchange as a convenience to the Holders; provided, however, that any such notice shall state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of redemption or exchange, and that reliance may be only on the other identification numbers printed on the Securities, and any redemption shall not be affected by any defect in or omission of such numbers.
ARTICLE 3
REDEMPTION
Section 3.1. Notices to Trustee.
If the Company elects to redeem Securities pursuant to the optional redemption provisions of Section 3.07, it shall furnish to the Trustee, at least 45 days but not more than 60 days (unless a shorter period shall be agreed to in writing by the Trustee) before a redemption date, an Officers' Certificate setting forth the Section of this Indenture and/or Paragraph of the Securities pursuant to which the redemption shall occur, the redemption date, the principal amount of Securities to be redeemed and the redemption price.
Section 3.2. Selection of Securities to Be Redeemed.
(a) If less than all of the Securities are to be redeemed (other than pursuant to a repurchase thereof pursuant to Section 4.13 below), the Trustee shall select the Securities to be redeemed by lot or by a method that complies with applicable legal and stock exchange requirements, if any, taking into account the provisions of clause (b) of this Section 3.02. The particular Securities to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Securities not previously called for redemption.
(b) The Trustee shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Security selected for partial redemption, the principal amount thereof to be redeemed. Securities and por- tions of them selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Securities of a Holder are to be redeemed, the entire outstanding amount of Securities held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption.
Section 3.3. Notice of Redemption.
(a) At least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed a notice of redemption, by first-class mail, postage prepaid, to each Holder whose Securities are to be redeemed at the Holder's last address, as it shall appear on the register of the Securities. A copy of such notice shall be mailed to the Trustee in the same manner and on the same day that notice is mailed to the Holders.
(b) The notice shall identify the Securities to be redeemed and shall state:
(i) the redemption date;
(ii) the redemption price;
(iii) if any Security is being redeemed in part, the portion of the principal amount of such Security to be redeemed and that, after the redemption date, upon sur- render of such Security, a new Security or Securities in principal amount equal to the unredeemed portion will be issued;
(iv) the name and address of the Paying Agent;
(v) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price;
(vi) that, unless the Company defaults in making such redemption payment, interest on Securities called for redemption ceases to accrue on and after the redemption date;
(vii) the paragraph of the Securities and/or
Section of this Indenture pursuant to which the Securities
called for redemption are being redeemed; and
(viii) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Securities.
At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided that the Company shall deliver to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the text of the information to be stated in such notice as provided in this Section 3.03(b), and the Trustee shall have no responsibility whatsoever with regard to such notice being accurate or correct.
Section 3.4. Effect of Notice of Redemption.
Once notice of redemption is mailed, Securities called for redemption become due and payable on the redemption date at the redemption price set forth in the Security or this Indenture, as the case may be.
Section 3.5. Deposit of Redemption Price.
(a) No later than the redemption date, the Company shall deposit in immediately available funds with the Trustee or with the Paying Agent (or, if the Company or a Subsidiary of the Company is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued interest on all Securities to be redeemed on that date. The Trustee or the Paying Agent shall return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest on, all Securities to be redeemed.
(b) If the Company complies with clause (a) of this
Section 3.05, interest on the Securities to be redeemed will
cease to accrue on the applicable redemption date, whether or
not such Securities are presented for payment. If any Security
called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with
the preceding paragraph, interest will be paid on the unpaid
principal from the redemption date until such principal is paid
and to the extent lawful on any interest not paid on such unpaid
principal, in each case at the rate provided in the Securities
and in Section 4.01 hereof.
Section 3.6. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the Company shall issue and the Trustee shall authenticate for the Holder at the expense of the Company a new Security equal in principal amount to the unredeemed portion of the Security surrendered.
Section 3.7. Optional Redemption.
The Company may redeem all or any portion of the
Securities, at a redemption price of (i) 107% of the principal
amount thereof for redemptions occurring on or after December
15, 1994 and prior to December 15, 1995, (ii) 106% of the
principal amount thereof for redemptions occurring on or after
December 15, 1995 and prior to December 15, 1996, (iii) 105% of
the principal amount thereof for redemptions occurring on or
after December 15, 1996 and prior to December 15, 1997, (iv)
104% of the principal amount thereof for redemptions occurring
on or after December 15, 1997 and prior to December 15, 1998,
(v) 103% of the principal amount thereof for redemptions
occurring on or after December 15, 1998 and prior to December
15, 1999, (vi) 102% of the principal amount thereof for
redemptions occurring on or after December 15, 1999 and prior to
December 15, 2000, and (vii) 101% of the principal amount
thereof for redemptions occurring on or after December 15, 2000
and prior to December 15, 2001, together in each case with
accrued interest to the date of such redemption on the principal
amount of Securities redeemed. Notwithstanding the foregoing,
the Company may not redeem any Securities until all of the
Company's Indebtedness outstanding under the Series A Notes and
the Series B Notes shall have been paid in full. Any redemption
pursuant to this Section 3.07 shall be made pursuant to the
provisions of Sections 3.01 through 3.06.
ARTICLE 4
COVENANTS
Section 4.1. Payment of Securities.
(a) The Company shall pay the principal of and interest on the Securities on the dates and in the manner provided in the Securities and this Indenture. Principal and interest shall be considered paid on the date due if the Paying Agent holds on such date money deposited by the Company in immediately available funds (or in the case of interest due other than in cash, Interest Deferral Securities), designated for and sufficient to pay all principal and interest then due.
(b) The Company shall pay interest (including post- petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 2% per annum in excess of the then applicable interest rate on the Securities to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace period) at the same rate to the extent lawful.
Section 4.2. Maintenance of Office or Agency.
(a) The Company shall maintain in the Borough of Manhattan, The City of New York, an office or agency (which may be an office of the Trustee, Registrar or co-registrar) where Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, sur- renders, notices and demands may be made or served at the Corporate Trust Office of the Trustee.
(b) The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.
(c) The Company hereby designates the Corporate Trust Office of Shawmut Trust Company in the Borough of Manhattan, the City of New York, as one such office or agency of the Company in accordance with Section 2.03.
Section 4.3. SEC Reports; Reports to Securityholders.
(a) The Company shall file with the Trustee and mail
to the Holders, within 15 days after it files them with the SEC,
copies of the annual and quarterly reports and of the
information, documents and other reports (or copies of such
portions of any of the foregoing as the SEC may by rules and
regulations prescribe) that the Company is required to file with
the SEC pursuant to Section 13 or 15(d) of the Exchange Act.
The Company also shall comply with the provisions of TIA
Section 314(a).
(b) From and after the date at which audited
financial statements of the Company are prepared for the Com-
pany's 1993 fiscal year, so long as any of the Securities are
outstanding, the Company shall prepare (A) for the first three
Quarters of each fiscal year (commencing with the first Quarter
after the Issue Date), quarterly reports (containing information
including, but not limited to, unaudited combined or
consolidated financial statements) and (B) for each fiscal year
commencing with the 1994 fiscal year, an annual report (con-
taining audited financial statements and an opinion thereon by
the Company's independent certified public accountants) in
substantially the form which it would be required to file under
Section 13 of the Exchange Act if it had a class of securities
listed on a national securities exchange. The Company shall
cause a copy of such reports to be mailed to the Trustee and to
each of the Holders of the Securities within 50 days after the
close of each of the first three Quarters of each fiscal year
(commencing with the first Quarter commencing after the Issue
Date) and within 95 days after the close of each fiscal year
commencing with the 1994 fiscal year, at such Holder's address
appearing on the register of the Securities.
Section 4.4. Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 105 days after the end of each fiscal year of the Company commencing with the 1994 fiscal year and within 60 days after the end of each Quarter commencing with the first Quarter commencing after the Issue Date, a certificate of the principal executive officer, the principal financial officer or the principal accounting officer of the Company stating, as to the officer signing such certificate, that a review of the activ- ities of the Company and its Subsidiaries during the preceding fiscal period has been made under the supervision of such signing officer with a view to determining whether each of the Company and such Subsidiaries has kept, observed, performed and fulfilled its obligations under this Indenture and that to the best of his knowledge no Default or Event of Default has occurred, and setting forth in reasonable detail each of the calculations performed by the Company in respect of the cove- nants set forth in Sections 4.09(viii) (if Indebtedness has been incurred in such fiscal year under such section), 4.11, 4.13 (if a Change of Control has occurred during such fiscal year) and 4.20, and, if the signer has knowledge of any such Default or Event of Default specifying each such Default or Event of Default and the nature thereof and what action the Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the annual reports delivered to the Trustee and the Holders pursuant to Section 4.03(b) above shall be accompanied by a written statement of the Company's independent public accountants (who shall be Deloitte and Touche or another firm of established national reputation) that in the course of the regular audit of the business of the Company and its Subsidiaries, which audit was conducted by such accountants in accordance with generally accepted auditing standards, such accountants have obtained no knowledge that a Default or Event of Default has occurred and is continuing, or, if in the opinion of such accountants, a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any Default or Event of Default.
(c) The Company shall deliver to the Trustee, immediately upon an Officer having knowledge of (i) any Event of Default, (ii) the fact that any Indebtedness of the Company or any Subsidiary of the Company in an amount in excess of $500,000 has been or could be declared due and payable before its maturity because of the occurrence of any default (or any event which, with notice or the lapse of time, or both, shall constitute such default) under such Indebtedness, or (iii) the occurrence of any event requiring the performance by the Company or any of its Subsidiaries under any Performance Guaranty, an Officers' Certificate specifying such Event of Default or Default or other event and what action the Company is taking or proposes to take with respect thereto.
Section 4.5. Stay, Extension and Usury Laws.
Each Obligor covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim, and shall resist any and all efforts to be compelled to take the benefit or advantage of, any stay or extension law or any usury law or other law which would prohibit or forgive any Obligor from paying all or any portion of the principal of and/or interest on the Securities as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture; and (to the extent that it may lawfully do so) each Obligor hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.
Section 4.6. Limitation on Restricted Payments.
(a) The Company shall not, and shall not permit the Guarantor, any Domestic MES Subsidiary, any Dynalectric Company or any SellCo Company to, directly or indirectly, make any Restricted Payment, unless at the time of such Restricted Payment:
(i) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and
(ii) such Restricted Payment, together with the aggregate of all other Restricted Payments made by the Company, the Guarantor, the Domestic MES Subsidiaries and the SellCo Companies after the date hereof (but not including Restricted Payments permitted by clause (b)), does not exceed 50% of Consolidated Net Income for the period (taken as one accounting period) from the date hereof to the end of the Company's most recently ended fiscal quarter.
(b) Notwithstanding anything to the contrary con- tained herein, the provisions of clause (a) of this Section 4.06 shall not prohibit:
(i) the purchase, redemption, retirement or other acquisition by any Water Company of any of its shares of preferred stock or Indebtedness pursuant to any sinking fund or other mandatory retirement requirement in respect thereof or the optional repurchase or repayment thereof if the proceeds used therefor are not available for the payment of dividends by such Water Company;
(ii) Acquisitions permitted under Section 5.01; or
(iii) renewals, extensions or replacements of Indebtedness permitted by Section 4.09(xxxi) hereof.
Section 4.7. Limitations on Transactions with Affiliates.
The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, enter into or renew any transaction (including without limitation the purchase, sale, lease, or exchange of any property or the rendering of any service) with any Affiliate of the Company or of any Subsidiary (other than a transaction between the Company, the Guarantor, any Domestic MES Subsidiary or any Dynalectric Company and the Guarantor, any Domestic MES Subsidiary, any Dynalectric Company or the Company); provided, however, that this Section 4.07 shall not be violated by (a) the payment of reasonable and customary directors' fees to directors who are not employees of the Company or such Subsidiary; (b) the incurrence of Indebtedness and the making of Investments permitted in Sections 4.09 and 4.10; (c) payments by the Company in respect of the Securities, the Series A Notes, or the Series B Notes, in each case in accordance with the terms thereof; (d) payments by SellCo in respect of the SellCo Subordinated Notes in accordance with the terms thereof; (e) payments by the Guarantor and SellCo pursuant to their respective guaranties of the Series A Notes and the Series B Notes; (f) payments by the Guarantor pursuant to the Guaranty set forth in Article 10 hereof; (g) the making of Restricted Payments permitted in Section 4.06; (h) Performance Guaranties permitted under Section 4.21, or (i) any other transaction directly or indirectly with or for the benefit of any Affiliate of the Company or any of its Subsidiaries on a basis no less favorable to the Company or such Subsidiary as would be obtained in a comparable arm's length transaction with a Person not an Affiliate (as determined by a majority of the disinterested members of the board of directors of the Company or such Subsidiary).
Section 4.8. Limitation on Liens.
The Company shall not, and shall not permit any of its Subsidiaries to, create, assume or suffer to exist any Lien upon any of its assets, now owned or hereafter acquired, except:
(a) Liens arising under (i) the Series A Senior Pledge Agreement, the Series A Subordinated Pledge Agreement, the Series A SellCo Pledge Agreement, the Software House Senior Pledge Agreement, the Software House Subordinated Pledge Agreement, the Software House SellCo Pledge Agreement and the SellCo Subordinated Pledge Agreement, each as in effect on the Issue Date, and (ii) each of the other "Collateral Documents" (as defined in the Series A Indenture, Series B Indenture and the SellCo Subordinated Indenture);
(b) Liens on the assets of the Company (other than
(i) the Capital Stock of the Guarantor, the Series B Subsid-
iaries, the Water Companies, SellCo and the Subsidiaries of
SellCo and (ii) the Series A Substitute Collateral and the
Series B Substitute Collateral, as such terms are defined in the
Bankruptcy Plan) and any of the MES Companies (i) arising under
or pursuant to the Revolving Credit Agreement and the
Dynalectric Revolving Credit Agreement, securing Indebtedness
incurred thereunder in an aggregate principal amount outstanding
not in excess of $100,000,000 and (ii) securing the obligations
of any of the MES Companies under Performance Guaranties;
(c) Liens securing Indebtedness permitted under
Section 4.09(viii);
(d) Permitted Liens;
(e) Liens on the assets of the Operating Companies securing obligations (other than for borrowed money) in an aggregate amount not in excess of $15,000,000 at any time outstanding;
(f) Liens on the insurance policies of the Company, the Guarantor, any Domestic MES Subsidiary or any Dynalectric Company arising in connection with the deferred payment or financing thereof in the ordinary course of business;
(g) Liens consisting of cash collateral deposits made by the Company, the Guarantor, any MES Subsidiary, any Dynalectric Company or Defender in the ordinary course of business in connection with the Company's, the Guarantor's, any MES Subsidiary's or any Dynalectric Company's insurance program consistent with past practices;
(h) Liens incurred by Defender in respect of its pledge of promissory notes made by the Company in favor of Defender, securing Defender's obligations under Insurance Related Letter of Credit Obligations;
(i) purchase money mortgages or pledges or other purchase money Liens upon any property acquired by the Company or any of its Subsidiaries (other than the Water Companies) after the Issue Date acquired or held by such company in the ordinary course of business and securing solely the purchase price of such property or Indebtedness incurred solely for the purpose of financing the acquisition of such property (but only to the extent the Indebtedness secured by such Liens shall otherwise be permitted under Section 4.09) in an aggregate principal amount which does not exceed (i) $15,000,000 in the aggregate, in the case of the Operating Companies, and (ii) $1,500,000 in the aggregate, in the case of the SellCo Companies (other than the Water Companies);
(j) Liens existing on the Issue Date;
(k) Liens (including purchase money mortgages or pledges or purchase money Liens) on the assets of the Water Companies, securing Indebtedness permitted by Section 4.09(xvi);
(l) Liens on the assets of Foreign MES Subsidiaries, securing Indebtedness permitted under Section 4.09 incurred by any Foreign MES Subsidiary;
(m) Liens existing on any property of a corporation at the time such corporation becomes a Subsidiary of the Com- pany, which Liens were not created, incurred or assumed in contemplation thereof; provided, however, that no such Lien shall extend to or cover any other property of the Company or any Subsidiary;
(n) Liens on the common stock or assets of the
Dynalectric Companies securing (i) indebtedness incurred under
and pursuant to the Dynalectric Revolving Credit Agreement and
(ii) obligations of the Dynalectric Companies under Performance
Guaranties;
(o) Liens on the assets of any of the MES Companies in favor of any surety company providing surety bonds to any of the MES Companies to secure obligations of the MES Companies in respect of any or all such bonds;
(p) Liens on up to $15,000,000 of the proceeds received in respect of the sale by the Company or a Water Company of the common stock or assets of a Water Company, securing Indebtedness under the Revolving Credit Agreement and the Dynalectric Revolving Credit Agreement;
(q) Liens on the tangible personal property of the Company to be located at the Company's executive offices at 101 Merritt Seven Corporate Park, Norwalk, Connecticut, to secure Indebtedness to the State of Connecticut or any agency or instrumentality thereof in an aggregate amount at any time outstanding not in excess of $200,000; and
(r) any extension, renewal or replacement (or suc- cessive extensions, renewals or replacements) of Liens permitted by this Section 4.08 without any increase in the amount of Indebtedness secured thereby or in the assets subject to such Lien.
Section 4.9. Limitation on Additional Indebtedness and Capital Stock.
The Company shall not, and shall not permit any of its Subsidiaries to (a) directly or indirectly, create incur, issue, assume, guaranty or otherwise become directly or indirectly liable with respect to any Indebtedness, or (b) issue any Capital Stock, except;
(i) the Securities;
(ii) Indebtedness of the Company and the Guar- antor under the Revolving Credit Agreement in an aggregate principal amount not in excess of (x) $100,000,000 at any time outstanding minus (y) the aggregate principal amount of Indebtedness under the Dynalectric Revolving Credit Agreement outstanding at such time, and Guaranties of such Indebtedness by any of the Subsidiaries of the Guarantor;
(iii) Indebtedness of the Company in respect of the Series A Notes and the Series B Notes;
(iv) Indebtedness of SellCo in respect of the SellCo Subordinated Notes;
(v) the Guaranties of (A) the Guarantor and SellCo in respect of their respective Guaranties of the Indebtedness of the Company under the Series A Notes, the Series A Indenture, the Series B Notes and the Series B Indenture, and (B) the Guarantor in respect of its Guaranty pursuant to Article 10 hereof;
(vi) so long as the Series A Notes are out- standing, Funded Indebtedness (as defined in the Series A Indenture) of the Company, to the extent permitted by the Series A Indenture;
(vii) Indebtedness of the Company or any of its Subsidiaries (other than the Water Companies) secured by Liens permitted by Section 4.08(i);
(viii) Indebtedness of the Company or any of its Subsidiaries (other than the Water Companies) under Capital Lease Obligations; provided, however, that the aggregate amount of Capital Lease Obligations incurred after the Issue Date in any fiscal year of the Company under this clause (viii) by (A) the Operating Companies shall not exceed an amount equal to 50% of the Capital Expenditures made by such Operating Companies during such fiscal year, and by (B) the SellCo Companies (other than the Water Companies) shall not exceed $3,000,000 at any time outstanding;
(ix) Indebtedness of Defender and the Company consisting of Insurance Related Letter of Credit Obliga- tions (and contingent reimbursement obligations of the Company and Defender in respect thereof) not in excess of $75,000,000 at any one time outstanding;
(x) Indebtedness (A) arising from loans or advances to any MES Company from any other MES Company made in the ordinary course of business and consistent with the Guarantor's cash management system; (B) arising from loans or advances to any Dynalectric Company from any other Dynalectric Company made in the ordinary course of business consistent with such Dynalectric Company's cash management system; (C) arising from loans or advances to any Sellco Company from any other Sellco Company made in the ordinary course of business consistent with SellCo's cash management system; and (D) arising from loans or advances to the Company from any MES Company made from and after the Issue Date in the ordinary course of business and consistent with the Company's past practices, in an aggregate amount at any time outstanding not in excess of $5,000,000;
(xi) Indebtedness incurred after the Issue Date arising from loans or advances by the Company or any MES Company to (i) the SellCo Companies in an aggregate principal amount at any time outstanding not in excess of $7,000,000 and (ii) the Dynalectric Companies in an aggregate amount at any time outstanding not in excess of $8,000,000;
(xii) Indebtedness of Comstock in an aggregate principal amount not in excess of $20,000,000 (Canadian) at any time outstanding (other than (A) Capital Lease Obligations, (B) Indebtedness owed to the Company or any Subsidiary of the Company, which Indebtedness is out- standing on the Issue Date, (C) Indebtedness owed to any Foreign MES Subsidiary, and (D) Indebtedness permitted under Section 4.09(xxiii)), and Guaranties by the Company, JWP International, Inc. or one or more Foreign MES Sub- sidiaries of such Indebtedness;
(xiii) Indebtedness of the U.K. Subsidiaries in an aggregate principal amount not in excess of Pound20,000,000 at any time outstanding (other than (A) Capital Lease Obli- gations, (B) Indebtedness owed to the Company which Indebtedness is outstanding on the Issue Date, (C) Indebtedness owed to any Foreign MES Subsidiary, and (D) Indebtedness permitted under Section 4.09(xxiii)) and Guaranties by JWP International, Inc. or one or more Foreign MES Subsidiaries of such Indebtedness;
(xiv) Indebtedness of the Middle East Subsidiaries
and the Malaysian Subsidiaries in an aggregate principal
amount not in excess of Pound7,000,000 at any time outstanding
(other than (A) Capital Lease Obligations, (B)
Indebtedness owed to the Company or any Subsidiary of the
Company, which Indebtedness is outstanding on the Issue
Date, (C) Indebtedness owed to any Foreign MES Subsidiary,
and (D) Indebtedness permitted under Section 4.09(xxiii))
and Guaranties by JWP International Inc. or one or more
Foreign MES Subsidiaries of such Indebtedness;
(xv) Indebtedness of U2 in an aggregate principal amount not in excess of $4,000,000 at any time outstanding (other than (A) Capital Lease Obligations, (B) Indebtedness owed to the Company which Indebtedness is outstanding on the Issue Date, (C) Indebtedness owed to any Foreign MES Subsidiary, and (D) Indebtedness permitted under Section 4.09(xxiii));
(xvi) Indebtedness of the Water Companies and preferred stock of the Water Companies, the aggregate principal amount outstanding and liquidation preference of which shall not exceed $130,000,000 at any time of determination;
(xvii) Capital Stock issued by the Company (other than Disqualified Stock);
(xviii) Indebtedness of the Company to Defender in an aggregate principal amount not in excess of $75,000,000 at any time outstanding, incurred in connection with Insurance Related Letters of Credit;
(xix) Indebtedness consisting of deferred payment obligations of the Company or any of its Subsidiaries for insurance premiums, or incurred by the Company or any of its Subsidiaries in respect of funds borrowed for the payment of such premiums, in either case in the ordinary course of business and consistent with past practices;
(xx) Indebtedness of any of the Operating Com- panies consisting of reimbursement obligations with respect to documentary letters of credit issued for its own account in the ordinary course of business;
(xxi) Indebtedness of any of the SellCo Companies consisting of reimbursement obligations with respect to documentary letters of credit issued for its own account in the ordinary course of business;
(xxii) Indebtedness outstanding on the Issue Date;
(xxiii) Indebtedness of Foreign MES Subsidiaries consisting of loans or advances made after the Issue Date by the Company or any Domestic MES Subsidiary in an aggregate principal amount not in excess of $5,000,000 at any time outstanding;
(xxiv) Indebtedness of one or more of the Company and the Dynalectric Companies pursuant to the Dynalectric Revolving Credit Agreement in an aggregate principal amount not in excess of $100,000,000 minus the principal amount, if any, outstanding under the Revolving Credit Agreement, at any time outstanding, and Guaranties of such Indebtedness by the other Dynalectric Companies, the Company, MES and the Domestic MES Subsidiaries;
(xxv) Indebtedness of the Company to SellCo in an aggregate principal amount not in excess of $5,500,000 at any time outstanding, evidenced by the SellCo Intercompany Note;
(xxvi) Indebtedness of any corporation at the time such corporation becomes a Subsidiary which Indebtedness was not created, assumed or guaranteed in contemplation thereof;
(xxvii) Indebtedness of (A) a Foreign MES Subsidiary to any other Foreign MES Subsidiary, (B) a Dynalectric Company to any other Dynalectric Company, (C) the Company or any MES Company to any other MES Company (other than a Foreign MES Subsidiary) and (D) any SellCo Company to any other SellCo Company;
(xxviii) additional Indebtedness of the Company and its Subsidiaries; provided, however, that after giving effect to the incurrence, issuance, assumption or guaranty of such Indebtedness, the Consolidated Fixed Charge Coverage Ratio for the Company's most recently ended fiscal quarter immediately preceding the date on which such additional Indebtedness is incurred, issued, assumed or guaranteed would have been at least 1.5 to 1.0, determined on a pro forma basis, as if such additional Indebtedness had been incurred, issued, assumed or guaranteed at the beginning of such fiscal quarter;
(xxix) Indebtedness at any time outstanding not in excess of $5,000,000 in the aggregate;
(xxx) Indebtedness of the Company in an aggregate amount at any time outstanding not in excess of $200,000 to the State of Connecticut or any agency or instrumentality thereof, incurred in connection with the relocation of the Company's executive offices to the State of Connecticut; and
(xxxi) any renewals, extensions or replacements of Indebtedness permitted under this Section 4.09 in an aggregate amount not in excess of the Indebtedness being renewed, extended or replaced.
Notwithstanding the above, at no time will the Company or any of its Subsidiaries be permitted to incur or assume Indebtedness if a Default or Event of Default would exist upon the incurrence or assumption of such Indebtedness or immediately thereafter.
Section 4.10. Limitation on Investments and Advances.
The Company shall not, and shall not permit any of its Subsidiaries to, make any Investments in or advances to any other Person except for:
(a) Permitted Investments;
(b) Investments in the Company, the Guarantor and any Domestic MES Subsidiary;
(c) extensions of trade credit and notes receivable, in either case made or obtained in the ordinary course of business consistent with past practice;
(d) existing Investments (but only to extent of the capital invested in such investments at the Issue Date unless otherwise provided in this Section 4.10);
(e) Investments consisting of loans or advances to the Company, the Guarantor, any Domestic MES Subsidiary or any Dynalectric Company made in the ordinary course of business and consistent with past practices in connection with the Company's, the Guarantor's or the Dynalectric Companies' cash management system;
(f) Investments made after the Issue Date consisting
of loans, advances or capital contributions (i) by the Company,
the Guarantor or any MES Subsidiary to any SellCo Company;
provided, however, that such Investments in the aggregate shall
not exceed at any time outstanding $7,000,000, (ii) by the
Company, the Guarantor or any MES Subsidiary to any Dynalectric
Company; provided, however, that such Investments in the
aggregate shall not exceed at any time outstanding $8,000,000,
(iii) by a Dynalectric Company to any other Dynalectric Company,
and (iv) by a SellCo Company to any other SellCo Company;
(g) loans or advances to employees of the Company, the Guarantor, any Domestic MES Company, any Dynalectric Company or any SellCo Company, which loans and advances in the aggregate shall not exceed $500,000 at any time outstanding;
(h) Investments made by any Foreign MES Subsidiary in any Foreign MES Subsidiary;
(i) Investments made by the Company or any MES Company after the Issue Date in (i) Comstock in an aggregate amount not in excess of $5,000,000 (Canadian) at any time outstanding, and (ii) Foreign MES Subsidiaries in an aggregate amount not in excess of $5,000,000 at any time outstanding;
(j) Investments of the Company or any of its Sub- sidiaries consisting of notes, bonds, debentures or other securities or instruments (other than general partnership and similar interests) acquired by the Company or such Subsidiary in connection with a sale, lease, conveyance or other disposition of assets (an "Asset Sale") by the Company or any such Subsidiary not otherwise prohibited hereunder;
(k) Investments of the Company or any of its Sub- sidiaries made in the ordinary course of business in connection with its capacity as a co-venturer in a joint venture, corpo- ration or other similar pooling of efforts in respect of a specific project or series of related specific projects for a limited or fixed duration to conduct a business of the type in which the Company or such Subsidiary is presently engaged consistent with past practices;
(l) Investments of SellCo evidenced by the SellCo Intercompany Note;
(m) Investments of Defender consisting of Indebt- edness incurred by the Company permitted in Section 4.09(xviii);
(n) Additional Investments made in the ordinary course of business consistent with past practice in an aggregate amount not in excess of $2,500,000 at any time outstanding;
(o) Additional Investments of the Company and its Subsidiaries, not to exceed, in the aggregate, 25% of Consol- idated Net Income for the period (taken as one accounting period) from the Issue Date to the end of the Company's most recently ended fiscal quarter; and
(p) following the payment in full of the Series A Notes, additional Investments of the Company or any MES Company in connection with its capacity as a co-venturer in a joint venture, corporation or other similar pooling of efforts (a "Strategic Joint Venture"), provided that (A) such Strategic Joint Venture is organized outside of, and does not conduct material operations in, the United States of America, (B) such Investment is approved by the Board of Directors of the Company in its reasonable judgment for the purpose of expanding the Company's mechanical and/or electrical business in or into a jurisdiction located outside of the United States of America pursuant to the Company's business plan, as the same may be modified by the Board of Directors of the Company in its reasonable judgment and (C) the aggregate of all such Investments made after the Issue Date and prior to June 30, 1996 does not exceed in any calender year (x) $10,000,000 over (y) the aggregate consideration, if any, paid by the Company in such calendar year pursuant to Section 5.01(j).
Section 4.11. Maintenance of Coverage Ratios.
(a) The Operating Companies shall maintain an Unrestricted Cash Coverage Ratio for each of the periods listed below of not less than the following ratio, calculated as of the last date of the periods indicated below:
Unrestricted
Cash
Coverage
Measurement Period Ratio
January 1, 1995 - June 30, 1995 1.00:1
January 1, 1995 - September 30, 1995 1.00:1
January 1, 1995 - December 31, 1995 1.00:1
Each Rolling Four Fiscal Quarter
Period ending thereafter 1.00:1
|
(b) The Operating Companies shall maintain a Con- solidated Fixed Charge Coverage Ratio for each of the periods listed below of not less than the following ratio, calculated as of the last date of the periods indicated below:
Consolidated
Fixed Charge
Coverage
Measurement Period Ratio
January 1, 1995 - June 30, 1995 1.00:1
January 1, 1995 - September 30, 1995 1.00:1
January 1, 1995 - December 31, 1995 1.00:1
Each Rolling Four Fiscal Quarter
Period ending thereafter 1.50:1
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Section 4.12. Corporate Existence.
Except as permitted under Article 5, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate, partnership or other existence of each Subsidiary of the Company in accordance with the respective organizational documents as they may be from time to time amended of the Company and each such Subsidiary and the rights (charter and statutory), governmental licenses and governmental franchises of the Company and its Subsidiaries; provided, however, that neither the Company nor any of its Subsidiaries shall be required to preserve any statutory right, governmental license or governmental franchise of any Subsidiary of the Company, unless the failure to do so would have a Material Adverse Effect; and provided further that nothing in this Section 4.12 shall prohibit the dissolution of any such Subsidiary of the Company (other than the Guarantor) if such dissolution would not have a Material Adverse Effect.
Section 4.13. Change of Control.
(a) If there shall at any time or times occur a Change of Control, then the Company shall notify the Holders in writing of such occurrence and shall make an offer to repurchase (the "Change of Control Offer"), not later than the 90th day after the earlier of (i) an Officer of the Company obtaining knowledge of such occurrence, and (ii) written notice to the Company by the Trustee or any Holder of any Security of such occurrence (the "Change of Control Payment Date"), all Securities then outstanding at a price equal to 100% of the outstanding principal amount thereof plus accrued and unpaid interest to the repurchase date (the "Offer Price").
(b) The Company shall comply with all applicable law (including, without limitation, Rule 14e-1 under the Exchange Act, if applicable) in the event that the Company shall be required to make an offer to repurchase pursuant to this Section 4.13.
(c) Subject to Section 4.13(b), the Company shall provide the Trustee with written notice of the Change of Control Offer at least 60 days before any such Change of Control Payment Date and at least 10 days before the notice of any Change of Control Offer is mailed to Holders. Notice of a Change of Control Offer shall be mailed by the Company not less than 45 days or more than 60 days before the Change of Control Payment Date to the Holders at their last registered addresses with a copy to the Trustee and the Paying Agent. The Change of Control Offer shall remain open from the time of mailing until one Business Day before the Change of Control Payment Date. The notice shall contain all instructions and materials necessary to enable such Holders to tender Securities pursuant to the Change of Control Offer. The notice, which shall govern the terms of the Change of Control Offer, shall state in addition to anything required to be stated therein under applicable law:
(i) that the Change of Control Offer is being made pursuant to this Section 4.13 and that all Securities validly tendered will be accepted for payment;
(ii) the Offer Price and the Change of Control Payment Date;
(iii) that any Security not tendered for payment will continue to accrue interest;
(iv) that, unless the Company defaults in making such repurchase payment, any Security accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest on and after the Change of Control Payment Date;
(v) that Holders electing to have a Security repurchased pursuant to a Change of Control Offer will be required to surrender the Security, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Security completed, to the Company at the address specified in the notice at least one Business Day before the Change of Control Payment Date;
(vi) that Holders will be entitled to withdraw their election if the Company receives, not later than one Business Day prior to the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Securities the Holder delivered for repurchase and a statement that such Holder is withdrawing his election to have such Security repurchased;
(vii) that Holders whose Securities are repur- chased only in part will be issued new Securities repre- senting the unrepurchased portion of the Securities sur- rendered;
(viii) the instructions that Holders must follow in order to tender their Securities; and
(ix) the circumstances and relevant facts regarding such Change of Control (including but not limited to information (to the extent reasonably available to the Company) with respect to pro forma historical and projected financial information after giving effect to such Change of Control, information regarding the Persons acquiring control, and such Person's business plans going forward).
(d) Subject to the provisions of Article 11, on the Change of Control Payment Date, the Company shall, to the extent lawful (i) accept for payment Securities or portions thereof tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent money sufficient to pay the Offer Price of all Securities or portions thereof so tendered and (iii) deliver to the Trustee Securities so accepted together with an Officer's Certificate stating the Securities or portions thereof tendered to the Company. The Paying Agent shall promptly mail or deliver to the Holders of Securities so accepted payment in an amount equal to the Offer Price, and the Trustee shall promptly authenticate and mail or deliver to Holders whose Securities are repurchased only in part a new Security equal in principal amount to the unrepurchased portion of the Security surrendered. For purposes of this Section 4.13, the Trustee shall act as Paying Agent.
Section 4.14. Maintenance of Properties.
The Company shall cause all material properties owned
by the Company or any of its Subsidiaries or used or useful in
the conduct of its business or the business of any of its
Subsidiaries to be maintained and kept in good condition, repair
and working order (ordinary wear and tear excepted) and supplied
with all necessary equipment and shall cause to be made all
necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the reasonable judgment of the
Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously con-
ducted at all times; provided, however, that nothing in this
Section shall prevent the Company or any of its Subsidiaries
from discontinuing the operation or maintenance of any of such
properties if such discontinuance is, in the reasonable judgment
of the Company, desirable in the conduct of its business or the
business of any of its Subsidiaries and not disadvantageous in
any material respect to the Holders.
Section 4.15. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all taxes, assessments and governmental charges levied or imposed upon the Company or any of its Subsidiaries or upon the income, profits or property of the Company or any Subsidiary, and (b) all lawful claims for labor, materials and supplies that, if unpaid, might by law become a Lien upon the property of the Company or any of its Subsidiaries; provided, however, that neither the Company nor any of its Subsidiaries shall be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim (i) whose amount, applicability or validity is being contested in good faith by appropriate proceedings, and with respect to which appropriate reserves have been established in accordance with Generally Accepted Accounting Principles or (ii) if the failure to so pay or discharge would not have a Material Adverse Effect.
Section 4.16. Maintenance of Insurance.
The Company shall, and shall cause its Subsidiaries to, keep at all times all of their properties that are of an insurable nature insured against loss or damage with insurers believed by the Company to be responsible to the extent that property of similar character is usually so insured by corpo- rations similarly situated and owning like properties in accordance with good business practice. The Company shall, and shall cause its Subsidiaries to, use the proceeds from any such insurance policy to repair, replace or otherwise restore the property to which such proceeds relate; provided that the Company or such Subsidiary may elect not to make such repair, replacement or restoration if the Company or such Subsidiary determines in good faith that such repair, replacement or restoration is not in the best interests of the Company or such Subsidiary.
Section 4.17. Compliance with Law.
The Company shall, and shall cause each of its Sub- sidiaries to, comply, in all material respects, with all applicable federal, state and local laws and regulations, including, without limitation, ERISA, those regarding the collection, payment and deposit of employees' income, unem- ployment and Social Security taxes and those relating to environmental matters, except where the failure to comply would not have a Material Adverse Effect.
Section 4.18. Books and Records.
The Company shall, and shall cause each of its Sub- sidiaries to, keep proper records and books of account with respect to its business activities, in which proper entries, reflecting all of their financial transactions, are made in accordance with Generally Accepted Accounting Principles.
Section 4.19. Employee Benefit Plans; ERISA.
The Company shall not, directly or indirectly, and shall not permit its Subsidiaries or any ERISA Affiliate to, directly or indirectly, by reason of an amendment or amendments (other than any amendment required by applicable law or by any federal or state agency or commission) to, or the adoption of, one or more Title IV Plans, permit the present value of all accrued benefit liabilities, under all Title IV Plans (using the actuarial assumptions utilized for purposes of funding such Title IV Plans) to increase by more than $2,000,000; provided, however, that this limitation shall not be applicable to the extent that the fair market value of assets allocable to such benefits, all determined as of the most recent valuation date for each such Title IV Plan, is in excess of the benefit lia- bilities, or to increase to the extent security must be provided to any Title IV Plan under Section 401(a)(29) of the Code. Neither the Company nor any of its Subsidiaries shall establish or become obligated to any new Plan which is a "welfare benefit plan," as defined in Section 3(1) of ERISA for the purpose of providing retiree medical and/or retiree life insurance benefits, or modify any existing welfare benefit plan for retirees, which would result in the present value of future liabilities under any such plans increasing by more than $1,000,000 (except as may be required by applicable laws or by any state or federal agency or commission). Except as here- inabove permitted with respect to any Title IV Plan, neither the Company nor any of its Subsidiaries shall establish or become obligated to any new Pension Plan, or modify any existing Pension Plan, which would result in the present value of future liabilities under any such plans increasing by more than $1,000,000.
Section 4.20. Maintenance of Consolidated Tangible Net Worth.
The Operating Companies shall at all times maintain a Consolidated Tangible Net Worth of not less than an amount equal to (a) from the Issue Date through December 31, 1994, $44,000,000, and (b) during each Quarter commencing on or after January 1, 1995, the sum of (i) $44,000,000 plus (ii) an amount equal to the sum of twenty five percent of the cumulative Consolidated Net Income of the Operating Companies (without subtracting any Consolidated Net Loss in any fiscal year) from January 1, 1995 through the date of determination.
Section 4.21. Performance Guaranties.
The Company shall not, and shall not permit any of its Subsidiaries to, enter into, assume, or otherwise become liable under, any Performance Guaranty except in the ordinary course of business consistent with sound commercial practices; provided, however, that the aggregate amount of Performance Guaranties in respect of the contracts of Unique Construction shall not exceed $8,000,000 at any time outstanding.
Section 4.22. No Material Changes in the Nature of Business.
The Company shall not, and shall not permit any of its Subsidiaries to, engage in any business not related to its businesses engaged in on the Issue Date.
ARTICLE 5
MERGERS AND ACQUISITIONS
Section 5.1. Mergers, Acquisitions, Etc.
The Company shall not and shall not permit any of its Subsidiaries to (i) merge with any Person, (ii) consolidate with any Person, (iii) acquire all or substantially all of the Capital Stock or stock equivalents of any Person, (iv) acquire, whether in one transaction or in a series of transactions, all or substantially all of the assets of any Person or assets constituting the business of a division, branch or other unit operation of any Person, or (v) sell, lease, transfer or otherwise dispose of, whether in one transaction or in a series of transactions, all or substantially all of its assets, except:
(a) the merger of a Domestic MES Subsidiary with and into, or sale or transfer of all or substantially all of the assets or Capital Stock of a Domestic MES Subsidiary to, the Guarantor or another Domestic MES Subsidiary;
(b) the merger of a Foreign MES Subsidiary with and into, or sale or transfer of all or substantially all of the assets or Capital Stock of a Foreign MES Subsidiary to, the Guarantor or another Foreign MES Subsidiary;
(c) the merger of a Dynalectric Company with and into, or sale or transfer of all or substantially all of the assets or Capital Stock of a Dynalectric Company to, another Dynalectric Company or an MES Subsidiary or, with respect to the sale or transfer of the Capital Stock of a Dynalectric Company, to the Guarantor;
(d) the merger of a Subsidiary of Sellco with and into, or sale or transfer of all or substantially all of the assets or Capital Stock of a Subsidiary of SellCo to, SellCo or another Subsidiary of SellCo;
(e) the merger of a Series B Subsidiary with and into, or sale or transfer of all or substantially all of the assets or Capital Stock of a Series B Subsidiary to, another Series B Subsidiary;
(f) one or more Asset Sales in respect of all or substantially all of the assets of (i) any Subsidiary of the Guarantor (other than a sale by such Subsidiary that would constitute a sale of all or substantially all of the assets of the Guarantor), (ii) any Dynalectric Company, (iii) any SellCo Company and (iv) any Series B Subsidiary;
(g) the acquisition for cash of all or substantially all of the assets of any corporation by any MES Company, provided that (i) such assets are purchased for no more than the fair market value thereof, and (ii) the aggregate fair market value of all such assets acquired during any calendar year shall not exceed $500,000; provided, however, that to the extent the actual acquisition of assets pursuant to this clause (g) in any calendar year shall be less than the maximum amount set forth in this clause (g) for such calendar year (without giving effect to the carry over permitted by this provision), the difference between such stated maximum amount and such actual acquisitions shall, in addition, be available for acquisitions in the next succeeding calendar year;
(h) the acquisition of all or substantially all of the assets of any domestic corporation by any Domestic MES Subsidiary, provided that (i) such assets are purchased for no more than the fair market value thereof, and (ii) the consid- eration for such assets consists solely of the common stock of such Domestic MES Subsidiary;
(i) following the later of the payment in full of the Series A Notes and June 30, 1996, the acquisition of all or substantially all of the Capital Stock or assets of any cor- poration by the Company or any MES Company, provided that, after giving effect to any such acquisition, no Default or Event of Default shall have occurred and be continuing; and
(j) if the Series A Notes are paid in full prior to
June 30, 1996, the acquisition of all or substantially all of
the Capital Stock or assets of any corporation (an "Acquired
Company") by the Company or any MES Company prior to June 30,
1996, provided that (A) such Acquired Company is organized
outside of, and does not conduct material operations in, the
United States of America, (B) such acquisition is approved in
the reasonable judgment of the Board of Directors of the Company
for the purpose of expanding the Company's mechanical and/or
electrical business in or into a jurisdiction located outside of
the United States of America pursuant to the Company's business
plan, as the same may be modified from time to time by the Board
of Directors of the Company in its reasonable judgment and (C)
after giving effect to such acquisition, (x) no Default or Event
of Default shall have occurred or be continuing and (y) the
aggregate consideration paid by the Company for all such
acquisitions after the Issue Date does not exceed in any
calendar year the excess of (aa) $10,000,000 over (bb) the
aggregate Investments made in such calendar year pursuant to
Section 4.10(p).
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.1. Events of Default.
(a) An "Event of Default" occurs if:
(i) any Obligor defaults in the payment of interest on any Security (including, without limitation, the issuance of Interest Deferral Securities) when the same becomes due and payable and the Default continues for a period of fifteen days; or
(ii) any Obligor defaults in the payment of the principal of any Security when the same becomes due and payable at maturity, upon redemption, repurchase or otherwise; or
(iii) any Obligor fails to observe or perform any covenant, condition or agreement on the part of the Company to be observed or performed pursuant to Section 4.11, 4.12, 4.13, 4.20 or 4.21 or pursuant to Article 5 hereof; or
(iv) any Obligor fails to comply with any of its other agreements or covenants in, or provisions of, the Securities, or this Indenture and the Default continues for the period and after the notice specified in Section 6.01(c); or
(v) (A) a default in the payment of principal,
premium or interest when due occurs (whether by scheduled
maturity, required prepayment, required repurchase or
redemption, acceleration, demand or otherwise) under any
agreement, Guaranty, note, mortgage, indenture or
instrument (other than the Securities) under which there
may be issued or by which there may be secured or evidenced
any Indebtedness of the Company or any of its Subsidiaries
(other than the (1) Rohr Indebtedness, (2) Indebtedness of
an Insignificant Subsidiary or (3) so long as such
Indebtedness is not guaranteed, directly or indirectly, by
the Company, any of the Domestic MES Subsidiaries, the
Guarantor or any SellCo Company, Indebtedness of any of the
U.K. Subsidiaries outstanding under a credit facility
existing on the Issue Date and any extensions, renewals or
replacements thereof) in an amount or amounts in excess of
(x) $7,500,000 individually or in the aggregate in respect
of Indebtedness of Comstock and (y) $5,000,000 individually
or $7,000,000 in the aggregate in respect of Indebtedness
of the Company or any of its subsidiaries other than
Comstock, (B) a default occurs under any such agreement,
note, mortgage, indenture or instrument, the effect of
which results in the acceleration of such Indebtedness
prior to its stated maturity, or (C) all or any portion of
such Indebtedness is required to be prepaid, redeemed,
purchased or defeased, or an offer to prepay, redeem,
purchase or defease such Indebtedness is required to be
made, in each case prior to the stated maturity thereof; or
(vi) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of its Subsidiaries (other than an Insignificant Subsidiary or in respect of the Rohr Indebtedness) and such judgment or judgments remain undischarged for a period (during which execution shall not be effectively stayed) of 60 days, provided that any such judgment or judgments exceeds $3,000,000 in any fiscal year; or
(vii) the Company or any of its Subsidiaries (other than an Insignificant Subsidiary) pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case, or
(B) consents to the entry of an order for relief against it in an involuntary case, or
(C) consents to the appointment of a Custodian of it or for all or substantially all of its property, or
(D) makes a general assignment for the benefit of its creditors, or
(E) is unable to pay its debts as the same become due; or
(viii) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:
(A) is for relief against the Company or any Subsidiary of the Company (other than an Insig- nificant Subsidiary) in an involuntary case, or
(B) appoints a Custodian of the Company or any Subsidiary of the Company (other than an Insig- nificant Subsidiary) or for all or substantially all of its property, or
(C) orders the liquidation of the Company or any Subsidiary of the Company (other than an Insignificant Subsidiary),
and the order or decree remains unstayed and in effect for 60 days; or
(ix) with respect to any Plan, (A) a prohibited transaction within the meaning of Section 4975 of the Code or Section 406 of ERISA occurs that in the reasonable determination of the Trustee could result in direct or indirect liability to the Company or any of its Subsid- iaries; (B) with respect to any Title IV Plan, the filing of a notice to voluntarily terminate any such plan in a distress termination; (C) with respect to any Multiemployer Plan, the Company, any of its Subsidiaries or any ERISA Affiliate shall incur any Withdrawal Liability; (D) with respect to any Qualified Plan, the Company, any of its Subsidiaries or any ERISA Affiliate shall incur an accumulated funding deficiency or request a funding waiver from the IRS, and (E) with respect to any Title IV Plan or Multiemployer Plan that has an ERISA Event not described in clause (B), (C) or (D) above that, in the reasonable determination of the Trustee, there is a reasonable likelihood for termination of any such plan by the PBGC and for resulting liability of the Company, any of its Subsidiaries or any ERISA Affiliate; provided, however, that the events listed in clauses (A) through (E) hereof shall constitute Events of Default only if the liability, deficiency or waiver request of the Company, any of its Subsidiaries or any ERISA Affiliate, whether or not assessed, exceeds, individually or in the aggregate, $3,000,000; or
(x) the Guaranty pursuant to Article 10 shall cease for any reason to be in full force and effect or the Guarantor, or any Person acting by or on behalf of the Guarantor, shall deny or disaffirm its obligations under such Guaranty.
(b) The term "Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.
(c) A Default under Section 6.01(a)(iv) is not an Event of Default until 30 days after the Trustee notifies the Obligors, or the Holders of at least 25% in aggregate principal amount of the then outstanding Securities notify the Obligors (and the Trustee, if such notice is given by the Holders), in writing of the Default. The notice must specify the Default, demand that it be remedied and state that the notice is a "Notice of Default."
Section 6.2. Acceleration.
If an Event of Default (other than an Event of Default
specified in clause (vii) or (viii) of Section 6.01(a)) occurs
and is continuing, the Trustee may, by written notice to the
Company, or the Holders of at least 25% in aggregate principal
amount of the then outstanding Securities may, by written notice
to the Obligors and the Trustee, and the Trustee shall, upon the
request of such Holders, declare the unpaid principal of, and
any accrued but unpaid interest on, all the Securities to be due
and payable. Upon such declaration, the unpaid principal of,
and accrued and unpaid interest shall be due and payable
immediately in cash; provided, however, that if any Senior
Indebtedness is outstanding, upon a declaration of acceleration
pursuant to this Section 6.02, such principal and interest shall
be payable upon the earlier of (x) the day which is five
Business Days after the provision to the Company, the Series A
Indenture Trustee and the Series B Indenture Trustee of such
written notice, and (y) one Business Day after the first date on
which the Indebtedness under each of the Series A Indenture and
the Series B Indenture shall have been accelerated. In the
event of a declaration of acceleration because an Event of
Default specified in Section 6.01(a)(v) has occurred and is
continuing, such declaration of acceleration shall be
automatically annulled if such default is cured or waived or the
holders of the Indebtedness which is the subject of such Event
of Default have rescinded their declaration of acceleration in
respect of such Indebtedness within 30 days thereof and the
Trustee has received written notice of such cure, waiver or
rescission and no other Event of Default under Section
6.01(a)(v) has occurred that has not been cured or waived within
30 days of the declaration of acceleration of such Indebtedness
in respect thereof. If an Event of Default specified in clause
(vii) or (viii) of Section 6.01(a) occurs, the unpaid principal
of, and any accrued but unpaid interest on, all the Securities
shall ipso facto become and be immediately due and payable in
cash without any declaration or other act on the part of the
Trustee or any Holder. The Holders of a majority in aggregate
principal amount of the then outstanding Securities by written
notice to the Trustee may rescind an acceleration and its
consequences if the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction and if
all existing Events of Default (except nonpayment of principal
or interest on the Securities that has become due solely because
of the acceleration) have been cured or waived. No such
rescission shall affect any subsequent Default or Event of
Default or impair any right consequent thereto.
Section 6.3. Other Remedies.
(a) Notwithstanding any other provision of this Indenture, if an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Inden- ture, including, without limitation, the Guaranty pursuant to Article 10; provided, however, that if any Senior Indebtedness is outstanding, the Trustee may only pursue any such available remedy upon or after the earlier of (x) the day which is five business days after the provision to the Company, the Series A Indenture Trustee and the Series B Indenture Trustee of written notice by the Trustee, at a time at which the Trustee is otherwise entitled to pursue such remedy, of its intention to do so, specifying such remedy, and (y) one business day after the first date on which the Indebtedness under each of the Series A Indenture and the Series B Indenture shall have been accelerated.
(b) The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. Except as set forth in Section 2.07, all remedies are cumulative to the extent permitted by law.
Section 6.4. Waiver of Past Defaults.
Subject to Section 9.02 hereof, the Holders of at least a majority in aggregate principal amount of the then outstanding Securities by notice to the Trustee may waive an existing Default or Event of Default and its consequences except a continuing Default or Event of Default in the payment of the principal of or interest on any Security. Upon any such waiver, such Default or Event of Default shall cease to exist and together with any Event of Default arising therefrom, shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon.
Section 6.5. Control by Majority.
(a) The Holders of at least a majority in principal amount of the then outstanding Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it. The Trustee may refuse, however, to follow any direction that conflicts with law or this Indenture, that may be unduly prejudicial to the rights of other Holders or that may subject the Trustee to personal liability. The Trustee shall be entitled to indemnification reasonably satisfactory to it against losses or expenses caused by the taking or not taking of such action.
(b) The Company may set a record date for purposes of determining the identity of Holders entitled to vote or consent to any action by vote or consent authorized or permitted under this Indenture, which record date shall be the later of 10 days prior to the first solicitation of such consent or the date of the most recent list of Holders furnished to the Trustee pursuant to Section 2.05 of this Indenture prior to such solicitation. If a record date is fixed, those persons who were Holders of Securities at such record date (or their duly designated proxies), and only those persons, shall be entitled to take such action by vote or consent or to revoke any vote or consent previously given, whether or not such persons continue to be Holders after such record date. No such vote or consent shall be valid or effective for more than 120 days after such record date.
Section 6.6. Limitation on Suits.
(a) A Holder may pursue a remedy with respect to this Indenture or the Securities only if:
(i) the Holder gives to the Trustee written notice of a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount of the then outstanding Securities make a written request to the Trustee to pursue the remedy;
(iii) such Holder or Holders offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense;
(iv) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and
(v) during such 60-day period the Holders of a majority in aggregate principal amount of the then out- standing Securities do not give the Trustee a direction inconsistent with the request.
(b) A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder.
Section 6.7. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of and interest on the Security, on or after the respective due dates expressed in the Security, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.
Section 6.8. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a)(i) or (ii) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against any or all of the Obligors or any other obligor on the Securities for the whole amount of principal and interest remaining unpaid on the Securities and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.
Section 6.9. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relative to any Obligor (or any other obligor upon the Securities), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 out of the estate in any such proceeding shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties which the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding except to vote for the election of a trustee in bankruptcy or similar Person.
Section 6.10. Priorities.
(a) If the Trustee collects any money pursuant to this Article, it shall, subject to the provisions of Article 11, pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under Section 7.07, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee, and the costs and expenses of collection;
Second: to the Holders for amounts due and unpaid on the Securities for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest, respectively; and
Third: to the Obligors.
(b) The Trustee may fix a record date and payment date for any payment to Holders and give whatever notice to the Holders the Trustee deems appropriate.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.06, or a suit by Holders of more than 10% in aggregate principal amount of the then outstanding Securities.
ARTICLE 7
TRUSTEE
Section 7.1. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default known to the Trustee:
(i) The duties of the Trustee shall be deter- mined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee.
(ii) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. The Trustee shall, however, examine the cer- tificates and opinions to determine whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:
(i) This clause (c) does not limit the effect of clause (a) or (b) of this Section.
(ii) The Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts.
(iii) The Trustee shall not be liable with respect
to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to
Section 6.05.
(d) Whether or not therein expressly so provided,
every provision of this Indenture that in any way relates to the
Trustee is subject to clause (a), (b), (c) and (e) of this
Section 7.01.
(e) Notwithstanding anything to the contrary out- standing, no provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability or expense that may be incurred thereby, including, but not limited to, liability relating to environmental laws, rules or regulations.
(f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.
Section 7.2. Rights of Trustee.
(a) The Trustee may conclusively rely and shall be protected from acting or refraining from acting based upon any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate (which shall conform to the provisions of Section 12.05) or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in the Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered the Trustee reasonable security and indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction.
Section 7.3. Individual Rights of Trustee.
The Trustee, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Company, the Guarantor or an Affiliate of the Obligors with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. The Trustee is subject, however, to Sections 7.10 and 7.11.
Section 7.4. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Securities; it shall not be accountable for the Company's use of any proceeds from the Securities or any money paid to the Company or upon the Company's direction under any provision hereof; it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee; and it shall not be responsible for any statement or recital herein or any statement in the Securities or any other document in connection with the sale of the Securities or pursuant to this Indenture other than its certificate of authentication.
Section 7.5. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to the Holders, as their names and addresses appear on the register of the Securities a notice of the Default or Event of Default within 90 days after the occurrence thereof. Except in the case of a Default or Event of Default in payment on any Security, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of the Holders.
Section 7.6. Reports by Trustee to Holders.
(a) Within 60 days after each May 15, beginning with the May 15 following the date of this Indenture, the Trustee shall mail to the Holders, in the manner and to the extent required by TIA Section 313(c), a brief report dated as of such reporting date that complies with TIA Section 313(a). The Trustee also shall comply with TIA Section 313(b). The Trustee shall also transmit by mail all reports as required by TIA Section 313(c).
(b) Commencing at the time this Indenture is qual- ified under the TIA, a copy of each report at the time of its mailing to Holders shall be filed with the SEC and each stock exchange on which the Securities are listed. The Company shall promptly notify the Trustee when the Securities are listed on any stock exchange.
Section 7.7. Compensation and Indemnity.
(a) The Obligors, jointly and severally, agree that they shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Obligors, jointly and severally, agree that they shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel.
(b) The Obligors, jointly and severally, shall
indemnify the Trustee for, and hold it harmless against, against
any and all loss, liability or expense incurred by it arising
out of or in connection with the acceptance or administration of
its duties under this Indenture, except as set forth in Section
7.07(c). The Trustee shall notify each Obligor promptly of any
claim for which it may seek indemnity. Failure by the Trustee
to so notify each Obligor shall not relieve any Obligor of its
obligations hereunder. The Obligors shall defend the claim and
the Trustee shall cooperate in the defense. The Trustee may
have separate counsel and the Obligors shall pay the reasonable
fees and expenses of such counsel. The Obligors need not pay
for any settlement made without its consent, which consent shall
not be unreasonably withheld. The obligation of the Obligors
under this Section 7.07 shall survive the satisfaction and
discharge of this Indenture.
(c) The Obligors need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through its own negligence or willful misconduct.
(d) To secure the Obligors' payment obligations in this Section, the Trustee shall have a Lien prior to the Securities on all money or property held or collected by the Trustee, except that held in trust to pay principal of and interest on particular Securities. Such Lien shall survive the satisfaction and discharge of the Indenture.
(e) When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(a)(vii) or (viii) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law.
Section 7.8. Replacement of Trustee.
(a) A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section.
(b) The Trustee may resign at any time and be dis- charged from the trust hereby created by so notifying the Company in writing. The Holders of a majority in aggregate principal amount of the then outstanding Securities may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if:
(i) the Trustee fails to comply with Section 7.10;
(ii) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law;
(iii) a Custodian or public officer takes charge of the Trustee or its property; or
(iv) the Trustee becomes incapable of acting.
(c) If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in aggregate principal amount of the then outstanding Securities may appoint a successor Trustee to replace the successor Trustee appointed by the Company.
(d) If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 10% in aggregate principal amount of the then outstanding Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee.
(e) If the Trustee after written request by any Holder who has been a Holder for at least six months fails to comply with Section 7.10, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.
(f) A successor Trustee shall deliver a written
acceptance of its appointment to the retiring Trustee and to the
Company. Thereupon the resignation or removal of the retiring
Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its
succession to the Holders. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor
Trustee, provided all sums owing to the Trustee hereunder have
been paid and subject to the Lien provided for in Section 7.07.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Obligors' obligations under Section 7.07 shall
continue for the benefit of the retiring Trustee.
Section 7.9. Successor Trustee by Merger, Etc.
If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee, provided such successor is eligible and qualified under Section 7.10.
Section 7.10. Eligibility; Disqualification.
(a) There shall at all times be one or more Trustee(s) hereunder at least one of whom shall be at all times either:
(i) a corporation organized and doing business under the laws of the United States of America or of any state or the District of Columbia, authorized under such laws to exercise corporate trust powers and subject to supervision or examination by federal or state authority and having a combined capital and surplus of at least $50,000,000; or
(ii) a corporation or other Person organized and doing business under the laws of a foreign government that is permitted to act as Trustee pursuant to a rule, regu- lation or order of the SEC, authorized under such laws to exercise corporate trust powers, and subject to supervision or examination by authority of such foreign government or a political subdivision thereof substantially equivalent to supervision or examination applicable to United States institutional trustees, and having a combined capital and surplus of at least $50,000,000.
(b) If such corporation publishes reports of con- dition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 7.10, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 7.10, it shall resign immediately in the manner and with the effect hereinafter specified in this Article 7. Neither the Company nor any person directly or indirectly controlling, controlled by, or under common control with the Company, shall serve as Trustee hereunder.
(c) The Trustee shall be subject to the provisions of
Section 310(b) of the TIA during the period of time provided for
therein. Nothing herein shall prevent the Trustee from filing
with the SEC the application referred to in the second to last
paragraph of Section 310(b) of the TIA.
(d) Notwithstanding the provisions of clause (a) of this Section 7.10, no obligor upon the Securities or any Affiliate of such obligor shall serve as Trustee hereunder.
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE 8
DISCHARGE OF INDENTURE
Section 8.1. Termination of Company's Obligations.
(a) This Indenture shall cease to be of further effect (except that the Obligor's obligations under Section 7.07 and the Obligors', Trustee's and Paying Agent's obligations under Section 8.03 hereof shall survive) when all outstanding Securities theretofore authenticated and issued have been delivered (other than destroyed, lost or stolen Securities that have been replaced or paid) to the Trustee for cancellation and the Company has paid all sums payable hereunder.
(b) In addition, if (x) Article 11 hereof does not prohibit such payment and, (y) in the event there is any Senior Indebtedness outstanding on the date such deposit is made, the Company has delivered to the Trustee a written consent of the Representatives of the holders of such Senior Indebtedness to such deposit and the satisfaction and discharge of this Indenture, then, the Obligors may terminate their obligations under the Securities and this Indenture if:
(i) the Company has irrevocably deposited in
trust for the benefit of the Holders with the Trustee or
(at the option of the Trustee) with a trustee reasonably
satisfactory to the Trustee and the Company, under the
terms of an irrevocable trust agreement in form and sub-
stance satisfactory to the Trustee at any time prior to the
stated maturity of the Securities or the date of redemption
of all of the Outstanding Securities, money or U.S.
Government Obligations maturing as to principal and
interest in such amounts and at such times as are suf-
ficient (in the reasonable opinion of a nationally rec-
ognized firm of independent accountants expressed in a
written certificate thereof delivered to the Trustee,
without consideration of the reinvestment of such interest)
to pay principal of and interest on the outstanding
Securities (other than Securities replaced pursuant to
Section 2.07) to maturity or redemption, as the case may
be, and to pay all other sums payable by it hereunder,
provided that (i) the trustee of the irrevocable trust
shall have been irrevocably instructed to pay such money or
the proceeds of such U.S. Government Obligations to the
Trustee and (ii) the Trustee shall have been irrevocably
instructed to apply such money or the proceeds of such U.S.
Government Obligations to the payment of said principal and
interest with respect to the Securities;
(ii) the Obligors deliver to the Trustee an Officers' Certificate stating that all conditions precedent provided for herein relating to the satisfaction and discharge of this Indenture have been complied with, and an Opinion of Counsel to the same effect;
(iii) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or as a result thereof;
(iv) the Obligors shall have delivered to the
Trustee (A) either (1) a ruling directed to the Trustee
received from the Internal Revenue Service to the effect
that the Holders of the Securities will not recognize
income, gain or loss for federal income tax purposes as a
result of the Obligors' exercise of its option under this
clause (b) and will be subject to federal income tax on
the same amount and in the same manner and at the same time
as would have been the case if such option had not been
exercised or (2) an Opinion of Counsel to the same effect
as the ruling described in clause (1), accompanied by a
ruling to that effect published by the Internal Revenue
Service, and (B) an Opinion of Counsel to the effect that
(1) after the passage of 90 days following the deposit, the
trust funds will not be subject to the preference
provisions of Section 547 of Title 11 of the United States
Code (except that no opinion need be given with respect to
the application of subsection (b)(4)(b) thereof), or (2)
(x) the Trustee will hold, for the benefit of the Holders
of Securities, a valid and perfected security interest in
such trust funds, and (y) the Holders of Securities will be
entitled to receive adequate protection of their interests
in such trust funds if such trust funds are used;
(v) each Obligor has paid or caused to be paid all sums then payable by such Obligor hereunder and under the Securities; and
(vi) the exercise by the Obligors of their option under this clause (b) shall not cause the Trustee to have a conflicting interest as defined in Section 7.10 or for purposes of the TIA with respect to any securities of the Company.
(c) Notwithstanding the foregoing paragraph (b), prior to the end of the 90-day period following the deposit referred to above, none of the Company's obligations, or to the extent applicable, any Guarantor's obligations, under this Indenture shall be discharged and, subsequent to the end of such 90-day period the Obligors' respective obligations under Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.10, 4.01, 4.02, 4.05, 4.13, 7.07, 7.08, 8.03 and 8.04 shall survive until the Securities are no longer outstanding. Thereafter, only the Obligors' and the Trustee's obligations in Sections 7.07, 8.03 and 8.04 shall survive.
(d) After such irrevocable deposit made pursuant to
Section 8.01(b) and satisfaction of the other conditions set
forth herein, the Trustee upon request shall acknowledge in
writing the discharge of the Obligors' obligations under this
Indenture except for those surviving obligations specified
above.
(e) In order to have money available on a payment date to pay principal of or interest on the Securities, the U.S. Government Obligations shall be payable as to principal or interest at least one Business Day before such payment date in such amounts as will provide the necessary money.
(f) "U.S. Government Obligations" means securities
that are (i) direct obligations of the United States of America
for the payment of which its full faith and credit is pledged or
(ii) obligations of a Person controlled or supervised by, and
acting as an agency or instrumentality of, the United States of
America, the timely payment of which is unconditionally
guarantied as a full faith and credit obligation by the United
States of America, that, in either case under clause (i) or
(ii), are not callable or redeemable at the option of the issuer
thereof.
Section 8.2. Application of Trust Money.
The Trustee or a trustee satisfactory to the Trustee and the Company shall hold in trust money or U.S. Government Obligations deposited with it pursuant to Section 8.01(b) hereof. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of and interest on the Securities.
Section 8.3. Repayment to the Company.
(a) The Trustee and the Paying Agent shall promptly pay to the Company upon written request any excess money or securities held by them at any time after the termination of the Company's obligations in accordance with Section 8.01.
(b) The Trustee and the Paying Agent shall pay to the Company, upon written request, any money held by them for the payment of principal or interest that remains unclaimed for two years and six months after the date upon which such payment shall have become due; provided, however, that the Company shall have caused notice of such payment to be mailed to each Holder entitled thereto not less than 30 days prior to such repayment. After payment to the Company, the Holders entitled to the money must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease.
Section 8.4. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 8.02 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Obligors' obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.01(b) until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with Section 8.02; provided, however, that if any Obligor has made any payment of interest on or principal of any Securities because of the reinstatement of its obligations, such Obligor shall be sub- rogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obli- gations held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENTS
Section 9.1. Without Consent of Holders.
(a) Subject to the provisions of Section 9.02(b), the Obligors and the Trustee may amend or supplement this Indenture or the Securities without the consent of any Holder:
(i) to cure any ambiguity, defect or incon- sistency;
(ii) to comply with any requirements of the SEC in connection with the qualification of this Indenture under the TIA as then in effect;
(iii) to provide for uncertificated Securities in addition to certificated Securities; or
(iv) to make any change that does not adversely affect the rights of any Holder hereunder or under any Security.
(b) Upon the written request of the Obligors, accompanied by a resolution of the Boards of Directors of the Obligors authorizing the execution of any such supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 9.06, the Trustee shall join with the Obligors in the execution of any supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee, may in its discretion, but shall not be obligated to, enter into such supplemental Indenture.
Section 9.2. With Consent of Holders.
(a) Subject to the provisions of Section 9.02(b), the Obligors and the Trustee may amend any of the provisions of this Indenture or the Securities or waive compliance in a particular instance by any Obligor of any provision of this Indenture or the Securities, with the written consent of the Holders of at least a majority in aggregate principal amount of the then outstanding Securities; provided that, without the consent of each Holder affected, an amendment or waiver under this Section may not:
(i) reduce the principal amount of Securities the Holders of which must consent to an amendment or waiver;
(ii) reduce the rate of or change the time for payment of interest, including defaulted interest, on any Security;
(iii) reduce the principal or premium (if any) of or change the fixed maturity of any Security or alter the redemption provisions with respect thereto;
(iv) make any Security payable in money other than that stated in the Security;
(v) make any change in Section 6.04 or 6.07 or in this clause (v) of this Section 9.02(a);
(vi) waive a Default in the payment of principal of or interest on, or redemption payment with respect to, any Security;
(vii) modify any of the provisions of this Indenture relating to subordination of the Securities or the Guaranty in a manner adverse to the Holders; or
(viii) release the Guarantor.
(b) No amendment or waiver under this Section 9.02 or under Section 9.01 shall make any change to Article 11 or that adversely affects the rights of any holder of Senior Indebtedness without the consent of such holder.
(c) Upon the written request of the obligors, accompanied by a resolution of the Boards of Directors of the obligors authorizing the execution of any such supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders as aforesaid, and upon receipt by the Trustee of the documents described in Section 9.06, the Trustee shall join with the obligors in the execution of such supplemental Indenture unless such supplemental Indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental Indenture.
(d) It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof.
(e) After an amendment or waiver under this Section becomes effective, the Company shall mail to the Holders of each Security affected thereby a notice briefly describing the amendment or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental Indenture or waiver.
(f) The Company shall give the Holders of the Securities notice of the effectiveness of any amendment under this Section 9.02.
Section 9.3. Compliance with Trust Indenture Act.
Every amendment to this Indenture or the Securities at a time when this Indenture shall be qualified under the TIA shall be set forth in a supplemental Indenture that complies with the TIA as then in effect.
Section 9.4. Revocation and Effect of Consents.
Until an amendment or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same Indebtedness as the consenting Holder's Security, even if notation of the consent is not made on any Security. Any such Holder or subsequent Holder may, however, revoke the consent as to his Security or portion of a Security if the Trustee receives written notice of revocation before the date the amendment or waiver becomes effective. An amendment or waiver becomes effective in accordance with its terms and thereafter binds every Holder. The Company may fix a record date for determining which Holders must consent to such amendment or waiver.
Section 9.5. Notation on or Exchange of Securities.
The Trustee may place an appropriate notation about an amendment or waiver on any Security thereafter authenticated. The Company, in exchange for all Securities, may issue and the Trustee shall authenticate new Securities that reflect the amendment or waiver. Failure to make the appropriate notation or issue a new Security shall not affect the validity and effect of such amendment or waiver.
Section 9.6. Trustee to Sign Amendments, Etc.
The Trustee shall sign any amendment or supplemental Indenture authorized pursuant to this Article 9 if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, but need not, sign it. In signing or refusing to sign such amendment or supplemental Indenture, the Trustee shall be entitled to receive, if requested, an indemnity reasonably satisfactory to it and to receive, and, subject to Section 7.01, shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel as conclusive evidence that such amendment or supplemental Indenture is authorized or permitted by this Indenture, that it is not inconsistent herewith, and that it will be valid and binding upon the Company in accordance with its terms. The Company may not sign an amendment or supplemental Indenture until the Board of Directors approves it.
ARTICLE 10
GUARANTY OF SECURITIES
Section 10.1. Guaranty.
(a) Subject to the provisions of this Article 10, the
Guarantor hereby unconditionally guaranties to each Holder and
to the Trustee, on behalf of the Holders, (i) the due and
punctual payment of the principal of and interest on each
Security, when and as the same shall become due and payable,
whether at maturity, upon redemption, by acceleration or
otherwise, the due and punctual payment of interest on the
overdue principal of and interest, if any, on the Securities, to
the extent lawful, and the due and punctual performance of all
other obligations of the Company to the Holders or the Trustee
all in accordance with the terms of such Security and this
Indenture, and (ii) in the case of any extension of time of
payment or renewal of any Securities or any of such other
obligations, that the same will be promptly paid in full when
due or performed in accordance with the terms of the extension
or renewal, at stated maturity, upon redemption, by acceleration
or otherwise. The Guarantor hereby agrees that its obligations
hereunder shall be absolute and unconditional, irrespective of,
and shall be unaffected by, any invalidity, irregularity or
unenforceability of any such Security or this Indenture, any
failure to enforce the provisions of any such Security or this
Indenture, any waiver, modification or indulgence granted to the
Company with respect thereto, by any Holder of such Security or
the Trustee, or any other circumstances that may otherwise
constitute a legal or equitable discharge of a surety or the
Guarantor. The Guarantor hereby waives diligence, presentment,
filing of claims with a court in the event of merger or
bankruptcy of the Company, any right to require a proceeding
first against the Company, the benefit of discussion, protest or
notice with respect to any such Security or the Indebtedness
evidenced thereby and all demands whatsoever (except as
specified below), and covenants that this Guaranty will not be
discharged as to any such Security except by payment in full of
the principal thereof and interest thereon and as provided in
Section 8.01. The Guarantor further agrees that, as between the
Guarantor, on the one hand, and the Holders and the Trustee, on
the other hand, (i) the maturity of the obligations guarantied
hereby may be accelerated as provided in Article 6 for the
purposes of this Guaranty, notwithstanding any stay, injunction
or other prohibition preventing such acceleration in respect of
the obligations guarantied hereby, and (ii) in the event of any
declaration of acceleration of such obligations as provided in
Article 6, such obligations (whether or not due and payable)
shall forthwith become due and payable by the Guarantor for the
purpose of this Guaranty. In addition, without limiting the
foregoing provisions, upon the effectiveness of an acceleration
under Article 6, the Trustee shall promptly make a demand for
payment on the Securities under the Guaranty provided for in
this Article 10 and not discharged.
(b) The Guarantor hereby waives any rights of sub- rogation or any similar rights against the Company in respect of any amounts paid to any Holder by the Guarantor pursuant to the provisions of this Guaranty.
(c) The Guaranty set forth in this Section 10.01 shall not be valid or become obligatory for any purpose with respect to a Security until the certificate of authentication on such Security shall have been signed by or on behalf of the Trustee.
Section 10.2. Obligations of the Guarantor Unconditional.
(a) Nothing contained in this Article 10 or elsewhere in this Indenture or in any Security is intended to or shall impair, as between the Guarantor and the Holders, the obligations of the Guarantor, which obligations are independent of the obligations of the Company under the Securities and the Indenture and are absolute and unconditional, to pay to the holders the principal of and interest on the Securities as and when the same shall become due and payable in accordance with the provisions of this Guaranty, or is intended to or shall affect the relative rights of the Holders and creditors of the Guarantor, nor shall anything herein or therein prevent the Trustee or any Holder from exercising all remedies otherwise permitted by applicable law upon the occurrence of an Event of Default.
(b) This Article 10 shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment of any of the Securities is rescinded or must otherwise be returned by the Holders or the Trustee upon the insolvency, bankruptcy or reorganization of any Obligor or otherwise, all as though such payment had not been made.
(c) The Guarantor hereby covenants and agrees that it shall comply with all its obligations, requirements and restrictions contained in Articles 4, 5 and 6 of this Indenture so as not to create a Default or Event of Default under this Indenture.
Section 10.3. Execution and Delivery of Guaranty.
(a) To evidence its Guaranty set forth in this Article 10, the Guarantor hereby agrees that a notation of such Guaranty shall be placed on each Security authenticated and delivered by the Trustee and that this Guaranty shall be exe- cuted on behalf of the Guarantor by the manual or facsimile signature of an Officer of the Guarantor.
(b) The Guarantor hereby agrees that its Guaranty set forth in this Article 10 shall remain in full force and effect notwithstanding any failure to endorse on each Security a notation of such Guaranty.
(c) If an Officer of the Guarantor whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security on which a Guaranty is endorsed, such Guaranty shall be valid nevertheless.
(d) The delivery of any Security by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guaranty set forth in this Indenture on behalf of the Guarantor.
Section 10.4. Limitations of Guaranties.
The Guarantor, and by its acceptance hereof each Holder, hereby confirms that it is the intention of all such parties that in no event shall the Guarantor's obligations under its Guaranty constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction. Therefore, in the event that the Guaranty would, but for this sentence, constitute or result in such a violation, then the liability of the Guarantor under such Guaranty shall be reduced to the extent necessary to eliminate such violation under the applicable fraudulent conveyance or similar law. Subject to the preceding limitation on liability, the Guaranty constitutes a guaranty of payment in full when due and not merely a guaranty of collectibility.
ARTICLE 11
SUBORDINATION
Section 11.1. Agreement to Subordinate.
(a) Each of the Company and the Guarantor agrees, and each Holder by accepting a Security consents and agrees, that the Indebtedness evidenced by the Securities and the Guaranty, all Obligations of the Company and the Guarantor under this Indenture and the payment of any Claims are subordinated in right of payment, to the extent and in the manner provided in this Article 11, to the prior payment in full of all Senior Indebtedness, and that the subordination is for the benefit of the holders of Senior Indebtedness and they and/or each of them may enforce such subordination.
(b) A distribution may consist of cash, securities or other property, by set-off or otherwise, and a payment or distribution on account of any Obligations with respect to the Securities or the Guaranty shall include any redemption, pur- chase or other acquisition of the Securities; provided, however, that a payment or distribution on Securities or the Guaranty shall not include the issuance of Interest Deferral Securities pursuant to the terms hereof and of the Securities.
(c) For the purposes of this Article 11, no Indebtedness now or hereafter existing under the Series A Notes, the Series A Indenture, the Series B Notes, the Series B Indenture or the Revolving Credit Agreement shall be deemed to have been paid in full unless the holders or owners thereof shall have received payment in full in cash.
Section 11.2. Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of the Company or the Guarantor in a total or partial liquidation or dissolution of the Company or the Guarantor or in a bankruptcy, reorgani- zation, insolvency, receivership or similar proceeding relating to the Company, the Guarantor or their respective property or in an assignment for the benefit of creditors, or an arrangement, adjustment, composition or relief of the Company, the Guarantor or their respective debts or any marshalling of the assets and liabilities of the Company or the Guarantor:
(a) holders of Senior Indebtedness shall be entitled to receive payment in full of all Obligations due or to become due with respect to the Senior Indebtedness (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Indebtedness) before Holders shall be entitled to receive any payment or distribution on account of any Obligations with respect to the Securities or the Guaranty or on account of any Claim; and
(b) until all Obligations with respect to Senior Indebtedness (as provided in subsection (a) above) are paid in full, any payment or distribution, including, without limita- tion, any payment or distribution which may be payable or deliverable by reason of the payment of any other indebtedness of the Company or the Guarantor being subordinated to the payment of the Securities or the Guaranty, to which Holders would be entitled but for this Article shall be made to holders of Senior Indebtedness, as their interest may appear, for application (in the case of cash) to, or as collateral (in the case of non-cash property or securities) for the payment or prepayment of, the Senior Indebtedness to the extent necessary to pay all such Senior Indebtedness in full after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, except that pursuant to a plan of reorganization under applicable Bankruptcy Law, Holders may receive securities and guaranties thereof that are subordinated to at least the same extent as the Securities and the Guaranty to (a) Senior Indebtedness and (b) any securities issued in exchange for Senior Indebtedness; provided, however, that if any Indebtedness is outstanding pursuant to the Series A Indenture, the Series B Indenture or the Revolving Credit Agreement, the terms (including, without limitation, terms in respect of maturities, covenants, defaults, acceleration and remedies) of any securities issued to Holders pursuant to this Section 11.02 must be no more restrictive as to the Company than those set forth herein and in the Revolving Credit Agreement or the indentures for Senior Indebtedness, as applicable, or in any securities issued in exchange therefor.
Section 11.3. Default on Senior Indebtedness.
(a) In the event that (i) any default in the payment
of any Obligation with respect to any Senior Indebtedness shall
have occurred and be continuing, whether at maturity, upon
redemption or otherwise (a "Payment Default"), unless and until
such Payment Default shall have been cured or waived in writing
by the holders of such Senior Indebtedness, or (ii) any judicial
proceedings (other than any such proceedings under any
Bankruptcy Law) shall be pending with respect to any default
under the Series A Indenture, the Series B Indenture or the
Revolving Credit Agreement, no direct or indirect payment or
distribution (including, without limitation, any payment or
distribution which may be payable or deliverable by reason of
the payment of any other Indebtedness of the Company or the
Guarantor being subordinated to payment of the Securities or the
Guaranty) shall be made by or on behalf of the Company or the
Guarantor or any other Person for or on account of any
Obligations with respect to the Securities or the Guaranty or on
account of any Claim, and neither the Trustee nor any Holder
shall receive from the Company or the Guarantor or any other
Person, directly or indirectly, any payment or distribution,
including, without limitation, from or by way of collateral, on
account of any Obligations with respect to the Securities or the
Guaranty or on account of any Claim, except that Holders may
receive other Indebtedness and guaranties thereof which is
subordinated to at least the same extent as the Securities and
the Guaranty to (i) Senior Indebtedness or (ii) any securities
issued in exchange for Senior Indebtedness; provided, however,
that if any Indebtedness is outstanding pursuant to the Series
A Indenture, the Series B Indenture or the Revolving Credit
Agreement, the terms (including, without limitation, terms in
respect of maturities, covenants, defaults, acceleration and
remedies) of any Indebtedness issued to Holders pursuant to this
Section 11.03(a) must be no more restrictive as to the Company
than those set forth herein and in such Indentures or Revolving
Credit Agreement.
Upon the maturity of all or any part of any Senior Indebtedness by lapse of time, redemption, acceleration (unless waived in writing) or otherwise, all amounts due to become due in respect of all Senior Indebtedness shall first be paid in full before any direct or indirect payment or distri- bution (including, without limitation, any payment or distri- bution which may be payable or deliverable by reason of the payment of any other Indebtedness of the Company or the Guar- antor being subordinated to the payment of the Securities or the Guaranty) to which Holders would be entitled but for this Article, may be made by or on behalf of the Company or the Guarantor or any other Person on account of any obligations with respect to the Securities or the Guaranty or on account of any Claim, except that Holders may receive other Indebtedness and guaranties thereof which is subordinated to at least the same extent as the Securities to (i) Senior Indebtedness or (ii) any securities issued in exchange for Senior Indebtedness; provided, however, that if any Indebtedness is outstanding pursuant to the Series A Indenture, the Series B Indenture or the Revolving Credit Agreement, the terms (including, without limitation, terms in respect of maturities, covenants, defaults, acceleration and remedies) of any Indebtedness issued to Securityholders pursuant to this Section 11.03(b) must be no more restrictive as to the Company than those set forth herein and in such Indentures or Revolving Credit Agreement.
(c) Upon receipt by the Company and the Trustee of written notice from the Series A Indenture Trustee, the Series B Indenture Trustee or the Revolving Credit Agent of any default (including an unmatured event of default) under the Series A Indenture, the Series B Indenture or the Revolving Credit Agreement, as the case may be, other than a Payment Default, or that a payment or distribution by the Company or the Guarantor with respect to any Security or the Guaranty would, immediately after giving effect thereto, result in such a default, and unless such default shall have been cured or waived in writing in accordance with the terms of the Series A Indenture, the Series B Indenture or the Revolving Credit Agreement, as the case may be, no direct or indirect payment or distribution (including, without limitation, any payment or distribution which may be payable or deliverable by reason of the payment of any other Indebtedness of the Company or the Guarantor being subordinated to payment of the Securities or the Guaranty) may be made by or on behalf of the Company or the Guarantor or any other Person for or on account of the Obligations with respect to the Securities or the Guaranty or on account of any Claim and neither the Trustee nor any Holder shall receive from the Company or the Guarantor or any other Person, directly or indirectly, any payment or distribution, including, without limitation, from or by way of collateral, in respect of the Obligations with respect to the Securities or the Guaranty or on account of any Claim during a period (the "Payment Blockage Period") commencing on the receipt of such notice and ending 179 days thereafter. Any number of such notices of default may be given; provided, however, that during any 360-day period the aggregate number of days during which a Payment Blockage Period shall be in effect shall not exceed 179 days and there shall be a period of at least 181 consecutive days in each 360-day period when no Payment Blockage Period exists. For all purposes of this Section 11.03(c), no default which, to the knowledge of the Series A Indenture Trustee, the Series B Indenture Trustee or Revolving Credit Agent, existed or was continuing on the date of the commencement of any Payment Blockage Period shall be, or be made, the basis for the commencement of a second Payment Blockage Period by it, whether or not within a period of 360 consecutive days, unless such default shall have been cured or waived for a period of not less than 90 consecutive days.
Section 11.4. Acceleration of Securities.
If payment of the Securities is accelerated because of an Event of Default, the Company shall promptly notify the Series A Indenture Trustee, the Series B Indenture Trustee and the Revolving Credit Agent of the acceleration.
Section 11.5. When Distribution Must be Paid Over.
(a) If a distribution is made to the Trustee, any Paying Agent or any Holder that because of this Article 11 should not have been made to it, the Trustee, such Paying Agent or such Holder who receives the distribution shall segregate such distribution from its other funds and property and hold it in trust for the benefit of, and pay it over (in the same form as received, with any necessary endorsement) to, the holders of Senior Indebtedness as their interests may appear, or their agent or representative or the trustee under the indenture or other agreement (if any) pursuant to which Senior Indebtedness remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness.
(b) With respect to the holders of Senior Indebt- edness, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 11, and no implied covenants or obligations with respect to the holders of Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness.
Section 11.6. Notice by Company or Guarantor.
The Company or the Guarantor shall promptly notify the Trustee and the Paying Agent of any facts known to it that would cause a payment of any obligations with resect to the Securities or the Guaranty or of any Claim to violate this Article, but failure to give such notice shall not affect the subordination of the Securities, the Guaranty and all Claims to the Senior Indebtedness provided in this Article.
Section 11.7. Subrogation.
After all Senior Indebtedness is paid in full and until the Securities are paid in full, Holders shall be sub- rogated (equally and ratably with all other Indebtedness pari passu with the Securities) to the rights of holders of Senior Indebtedness to receive distributions applicable to Senior Indebtedness to the extent that distributions otherwise payable to the Holders have been applied to the payment of Senior Indebtedness. A distribution made under this Article to holders of Senior Indebtedness which otherwise would have been made to Holders is not, as between Holders, the Company, the Guarantor and creditors of the Company or the Guarantor other than the holders of Senior Indebtedness, a payment by the Company or the Guarantor of Senior Indebtedness.
Section 11.8. Relative Rights.
(a) This Article 11 defines the relative rights of Holders and holders of Senior Indebtedness. Nothing in this Indenture shall:
(i) impair, as between the Company and the Guarantor, on the one hand, and Holders, on the other hand, the obligations of the Company and the Guarantor, which are absolute and unconditional, to pay principal of and interest on the Securities in accordance with their terms;
(ii) affect the relative rights of Holders and creditors of the Company and the Guarantor other than their rights in relation to holders of Senior Indebtedness; or
(iii) prevent the Trustee or any Holder from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Indebtedness to receive distribution and payments otherwise payable to Holders.
(b) If the Company fails because of this Article to pay principal of or interest on a Security on the due date, the failure is still a Default or Event of Default.
Section 11.9. Subordination May Not be Impaired.
(a) No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act in good faith by any such holder, or by any noncompliance by the Company, the Guarantor, the Trustee or any Agent with the terms and provisions and covenants herein, regardless of any knowledge thereof any such holder may have or otherwise be charged with.
(b) Without in any way limiting the generality of the foregoing paragraph, the holders or owners of Senior Indebtedness may at any time and from time to time, without the consent of or notice to the Trustee or any Holder, without incurring responsibility to any Holder and without impairing or releasing the subordination provided in this Article 11 or the obligations hereunder of the Holders to the holders of Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, all or any of the Senior Indebtedness (including any change in the rate of interest thereon), or otherwise amend or supplement in any manner, or grant any waiver or release with respect to, Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (ii) sell, exchange, release, not perfect or otherwise deal with any property at any time pledged, assigned or mortgaged to secure or otherwise securing, Senior Indebtedness, or amend, or grant any waiver or release with respect to, or consent to any departure from any guaranty for all or any of the Senior Indebtedness; (iii) release any person liable in any manner under or in respect of Senior Indebtedness; (iv) exercise or refrain from exercising any rights against, and release from obligations of any type, the Company, the Guarantor and any other Person; and (v) apply any sums from time to time received to the Senior Indebtedness.
(c) All rights and interests under this Indenture of the Series A Indenture Trustee, the Series B Indenture Trustee and the other holders of Senior Indebtedness, and all agreements and obligations of the Trustee, the Holders, the Company and the Guarantor under Sections 6.02 and 6.03 and under this Article 11 shall remain in full force and effect irrespective of (i) any lack of validity or enforceability of the Series A Indenture, the Series A Notes, the Series B Indenture, the Series B Notes, or any other agreement or instrument relating thereto or to any other Senior Indebtedness, or (ii) any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Trustee, any Holder, the Company, or the Guarantor.
(d) The provisions set forth in Sections 6.02 and
6.03 and in this Article 11 constitute a continuing agreement
and shall (i) be and remain in full force and effect until
payment in full of all Indebtedness under the Series A Inden-
ture, the Series B Indenture and any other agreement or
instrument relating thereto or to any other Senior Indebtedness,
(ii) be binding upon the Trustee, the Holders, the Company, the
Guarantor and their respective successors transferees and
assigns, and (iii) inure to the benefit of, and be enforceable
directly by, each of the holders of Senior Indebtedness and
their respective successors, transferees and assigns.
(e) Each of the Series A Indenture Trustee, the Series B Indenture Trustee and the Revolving Credit Agent is hereby authorized to demand specific performance of the pro- visions of this Article 11, whether or not the Company or the Guarantor shall have complied with any of the provisions of Article 11 applicable to it, at any time when the Trustee or any Holder shall have failed to comply with any of these provisions. The Trustee and the Holders hereby irrevocably waive any defense based on the adequacy of a remedy at law that might be asserted as a bar to such remedy of specific performance.
Section 11.10. Distribution or Notice to Representative.
(a) Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness, the distribution may be made and the notice given to their Representative.
(b) Upon any payment or distribution of assets of the Company or the Guarantor referred to in this Article 11, the Trustee and the Holders shall be entitled to rely in good faith upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other person making any distribution to the Trustee or to the Holders for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other Indebtedness of the Company or the Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 11.
Section 11.11. Rights of Trustee and Paying Agent.
(a) Notwithstanding the provisions of this Article 11 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment or distribution by the Trustee, or the taking of any action by the Trustee, and the Trustee or Paying Agent may continue to make payments on the Securities unless it shall have received at its Corporate Trust Office at least two Business Days prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Securities to violate this Article. Only the Company, a Representative or a holder of an issue of Senior Indebtedness that has no Representative may give the notice. Nothing in this Article 11 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07.
(b) The Trustee in its individual or any other capacity may hold Senior Indebtedness with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights.
Section 11.12. Authorization to Effect Subordination.
Each Holder of a Security by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 11, and appoints the Trustee his attorney-in-fact for any and all such purposes.
Section 11.13. Miscellaneous.
(a) Each Holder, the Company and the Guarantor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Senior Indebtedness, and any requirement that the Series A Indenture Trustee, the Series B Indenture Trustee or any other holder of Senior Indebtedness protect, secure, perfect or insure any security interest or Lien on any property subject thereto or exhaust any right or take any action against the Company, the Guarantor or any other Person or any collateral.
(b) The agreement contained in this Article 11 shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Senior Indebtedness is rescinded or must otherwise by returned by any holder of Senior Indebtedness upon the insolvency, bankruptcy or reorganization of the Company or the Guarantor or otherwise, all as though such payment had not been made.
(c) Unless and until written notice shall be given by the Company and the Series A Indenture Trustee, or by the Company and the Series B Indenture Trustee, or by the Company and the Revolving Credit Agent, to the Trustee at its Corporate Trust Office notifying the Trustee that Indebtedness is no longer outstanding under the Series A Indenture, the Series B Indenture or the Revolving Credit Agreement, as the case may be, the Trustee shall assume that such Indebtedness is outstanding. The Company agrees to give, and to cause each of the Series A Indenture Trustee, the Series B Indenture Trustee and the Revolving Credit Agent to give, such notice to the Trustee promptly after the first date on which no Indebtedness shall be outstanding under the Series A Indenture, the Series B Indenture or the Revolving Credit Agreement, as the case may be. For the purposes of this Indenture, Indebtedness shall be outstanding under the Series A Indenture, the Series B Indenture or the Revolving Credit Agreement whenever such Indebtedness shall not have been paid in full.
ARTICLE 12
MISCELLANEOUS
Section 12.1. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by any of Sections 310 to 317, inclusive, of the TIA through operation of Section 318(c) thereof, such imposed duties shall control.
Section 12.2. Notices.
(a) Any notice or communication by any obligor or the Trustee to any other party hereto is duly given if in writing and delivered in person or mailed by first-class mail (registered or certified, return receipt requested), telex, telecopier or overnight air courier guarantying next day delivery, to such party's address:
If to the Company:
EMCOR Group, Inc.
101 Merritt Seven Corporate Park
Norwalk, Connecticut 06851-1060
Attention: President
Telecopier No.: (203) 849-7850
If to the Guarantor:
MES Holdings Corporation
c/o EMCOR Group, Inc.
101 Merritt Seven Corporate Park
Norwalk, Connecticut 06851-1060
Attention: President
Telecopier No.: (203) 849-7850
If to the Trustee:
Shawmut Bank Connecticut, National Association
777 Main Street - MSN23
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
Telecopier No.: (203) 986-7920
(b) The obligors or the Trustee by notice to the other parties hereto may designate additional or different addresses for subsequent notices or communications.
(c) If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time.
Section 12.3. Communication by Holders with Other Holders.
Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). Any notice or communication given to a Holder shall be mailed to the Holder at the Holder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not received by the addressee.
Section 12.4. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance satisfactory to the Trustee (which shall include the statements set forth in Section 12.05) stating that, in the opinion of the signers, all conditions precedent and covenants (including any covenants compliance with which constitutes a condition pre- cedent), if any, provided for in this Indenture relating to the proposed action have been complied with; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05) stating that, in the opinion of such counsel, all such conditions precedent and covenants (including any covenants compliance with which con- stitutes a condition precedent) have been complied with.
Section 12.5. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than certificates pursuant to Section 4.04(a)) shall include:
(a) a statement that the person making such cer- tificate or opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(d) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with.
Section 12.6. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions.
Section 12.7. Legal Holidays.
A "Legal Holiday" is a Saturday, Sunday or day on which banking institutions or trust companies in the City of New York or at a place of payment are authorized or obligated by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period.
Section 12.8. Duplicate Originals.
The parties may sign any number of copies of this Indenture. One signed copy is enough to prove this Indenture.
Section 12.9. Governing Law.
The internal laws of the State of New York shall govern and be used to construe this Indenture and the Securi- ties, without regard to the conflicts of law rules thereof.
Section 12.10. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or any of its Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.
Section 12.11. Successors.
All agreements of the Company and the Guarantor in this Indenture and the Securities shall bind their respective successors. All agreements of the Trustee in this Indenture shall bind its successor.
Section 12.12. Severability.
In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provi- sions shall not in any way be affected or impaired thereby.
Section 12.13. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.
Section 12.14. Table of Contents, Headings, Etc.
The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms or provisions hereof.
SIGNATURES
EMCOR GROUP, INC.
By:
Title:
MES HOLDINGS CORPORATION
By:
Title:
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
as Trustee
By:
Title:
EXHIBIT A
(Face of Securities)
No.
EMCOR GROUP, INC.
11% Series C Notes, Due 2001
EMCOR Group, Inc. (formerly known as JWP INC.), a corporation organized and existing under the laws of the State of Delaware, promises to pay to or registered assigns the principal sum of Dollars on December 15, 2001 as set forth herein.
Interest Payment Dates: June 15, 1995, December 15, 1995, June 15, 1996 and each September 15, December 15, March 15 and June 15 thereafter.
Record Dates: June 1, 1995, December 1, 1995, June 1, 1996 and each September 1, December 1, March 1 and June 1 thereafter.
Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further pro- visions shall for all purposes have the same effect as if set forth at this place.
EMCOR GROUP, INC.
By:
Title:
Attest:
[SEAL]
By:
Title: Secretary
Dated:
Certificate of Authentication:
This is one of the Securities
referred to in the within-mentioned Indenture.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
as Trustee
By:
Authorized Officer
(Back of Securities)
EMCOR GROUP, INC.
11% Series C Notes, Due 2001
1. Interest. EMCOR Group, Inc., a Delaware corpo- ration (the "Company"), promises to pay interest on the prin- cipal amount of this Security from the date of issuance (the "Issue Date") until maturity at the interest rate of 11.0% per annum, payable as set forth in paragraph 2.
The Company shall pay interest (including post- petition interest in any proceeding under any Bankruptcy Law, as defined in the Indenture) on overdue principal at the rate equal to 2% per annum in excess of the then applicable interest rate on the Securities to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace period) at the same rate to the extent lawful. Interest shall be computed on the basis of a 360-day year of twelve 30-day months.
2. Method of Payment. The Company shall pay interest
(i) semi-annually in arrears on each of June 15, 1995, December
15, 1995 and June 15, 1996 to the holders of record of this
Security ("Holders") at the close of business on the June 1 and
December 1 next preceding the interest payment date, and (ii)
quarterly in arrears on each September 15, December 15, March 15
and June 15, to the Holders at the close of business on the
September 1, December 1, March 1 and June 1, next preceding the
interest payment date, commencing September 15, 1996. Interest
shall initially accrue from the date of issuance of this
Security, and the first interest payment date will be June 15,
1995. The Company shall pay interest on the Securities (except
defaulted interest) to the persons who are registered Holders of
Securities at the close of business on the record date for the
next interest payment date even though Securities are canceled
after the record date and on or before the interest payment
date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company shall pay principal
and, except as set forth below, interest in money of the United
States of America that at the time of payment is legal tender
for payment of public and private debts. The Company may,
however, pay principal and, except as set forth below, interest
by check payable in such money.
During the 18-month period commencing on the Issue Date (the "Interest Deferral Period"), the Company shall, in lieu of the payment of interest in cash on this Security (other than on the final maturity date of this Security), pay interest on this Security on each interest payment date by the issuance of additional Securities (the "Interest Deferral Securities") in an aggregate principal amount up to the amount of interest that would be payable with respect to this Security if such interest was paid in cash. For purposes of determining the principal amount of Interest Deferral Securities to be received as interest pursuant to this paragraph, each Interest Deferral Security will have a value equal to its face value. On each such interest payment date, the Trustee or authenticating agent shall authenticate Interest Deferral Securities for original issuance to each Holder of Securities on the preceding record date, as shown by the records of the Registrar, dated the date of such interest payment date, in the principal amount calcu- lated in the previous sentence. Each issuance of Interest Deferral Securities shall be made pro rata with respect to the outstanding Securities, except that the Company may, at its option, pay cash to any Holder to the extent necessary to avoid issuing Interest Deferral Securities in denominations which are not integral multiples of $100. Each Interest Deferral Security shall be governed by the Indenture and shall be subject to the same terms as this Security (except, as the case may be, with respect to the title, issuance date and aggregate principal amount). The term "Securities" shall include the Interest Deferral Securities that are issued under the Indenture. After the expiration of the Interest Deferral Period, interest on the Securities will be paid on each interest payment date in cash.
3. Paying Agent and Registrar. Shawmut Bank Con- necticut, National Association, as Trustee (the "Trustee"), shall act as Paying Agent and Registrar. The Company may change any Paying Agent, Co-Paying Agent, Registrar or Co-Registrar without prior notice. The Company or any of its subsidiaries may act in any such capacity.
4. Indenture. The Company issued the Securities under an Indenture dated as of December 15, 1994 (the "Inden- ture") among the Company, MES Holdings Corporation, as guar- antor, and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture. The Securities are subject to, and qualified by, all such terms, certain of which are summarized herein, and Holders are referred to the Indenture and such Act for a statement of such terms. The Securities are general obligations of the Company limited to $62,827,225 in original aggregate principal amount, plus the aggregate principal amount of Interest Deferral Securities issued pursuant to Paragraph 2 of the Securities.
5. Optional Redemption. Commencing on the Issue Date, the Company may redeem all or any portion of the Secu- rities, at the redemption prices set forth in the Indenture, together with accrued interest to the date of such redemption on the principal amount of Securities redeemed. Notwithstanding the foregoing, the Company may not redeem any Securities until all of the Company's Indebtedness under the Series A Notes and Series B Notes shall have been paid in full.
6. Repurchase Upon Change of Control. If at any time a Change of Control occurs, the Company shall be required to offer to repurchase all outstanding Securities at a price equal to 100% of the outstanding principal amount thereof plus accrued interest thereon to the date of repurchase of such Securities. Holders of Securities which are the subject of such an offer to repurchase shall receive an offer to repurchase from the Company prior to any related repurchase date, and may elect to have such Securities repurchased by completing the form entitled "Option of Holder to Elect Purchase" appearing on this Security and by complying with the other requirements requested by the Company in respect of such repurchase.
7. Notice of Redemption. Notice of redemption pursuant to paragraph 5 of this Security shall be mailed at least 30 days but no more than 60 days before the redemption date to each Holder to be redeemed at his registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. In the event of a redemption of less than all of the Securities, the Securities shall be chosen for redemption by the Trustee, generally pro rata, by lot or other method authorized in the Indenture. On and after the redemption date interest ceases to accrue on Securities or portions of them called for redemption.
If this Security is redeemed subsequent to a record date with respect to any interest payment date specified above and on or prior to such interest payment date, then any accrued interest shall be paid to the person in whose name this Security is registered at the close of business on such record date.
8. Denominations, Transfer, Exchange. Subject to certain exceptions set forth in the Indenture, the Securities are in registered form without coupons in denominations of $100 and integral multiples thereof. The transfer of Securities may be registered and Securities may be exchanged as provided in the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer doc- uments and to pay any taxes and fees required by law or per- mitted by the Indenture. The Registrar need not exchange or register the transfer of any Security or portion of a Security selected for redemption. Also, it need not exchange or register the transfer of any Securities for a period of 15 days before a selection of Securities to be redeemed.
9. Persons Deemed Owners. The registered Holder of a Security shall be treated as its owner for all purposes.
10. Amendments and Waivers. Subject to certain exceptions, the Indenture or the Securities may be amended with the consent of the Holders of at least a majority in principal amount of the then outstanding Securities, and any existing Default may be waived with the consent of the Holders of at least a majority in principal amount of the then outstanding Securities. Without the consent of any Holder, the Indenture or the Securities may be amended to cure any ambiguity, defect or inconsistency or to make any change that does not adversely affect the rights of any Holder.
11. Defaults and Remedies. An Event of Default is:
default for fifteen days in payment of interest on the Secu-
rities; default in payment of principal on the Securities;
failure by any Obligor to comply with certain of its agreements
in the Indenture or the Securities; failure by any Obligor for
30 days after notice to it to comply with any of its other
agreements in the Indenture or the Securities; certain defaults
under, and the acceleration prior to the maturity of, other
indebtedness of the Company and certain of its Subsidiaries;
certain final judgments which remain undischarged; certain
events of bankruptcy or insolvency; certain events relating to
Plans (as defined in the Indenture) and the ineffectiveness of
the Guaranty or the denial or disaffirmation of its obligations
thereunder by the Guarantor. If an Event of Default occurs and
is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Securities may declare
the principal amount of the Securities to be due and payable
immediately. In the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding
Securities become due and payable immediately without further
action or notice. Holders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may
require indemnity satisfactory to it before it enforces the
Indenture or Securities. Subject to certain limitations,
Holders of a majority in principal amount of the then out-
standing Securities may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders
notice of any continuing default (except a default in payment of
principal or interest) if it determines that withholding notice
is in their interests. The Company must furnish an annual
compliance certificate to the Trustee.
12. Subordination. The Securities and the Guaranty set forth in Article 10 of the Indenture are subordinated to Senior Indebtedness (as defined in the Indenture), which includes (a) the Indebtedness of the Company arising under the Series A Notes and the Series A Indenture and all Obligations with respect thereto, (b) the Indebtedness of the Company arising under the Series B Notes and the Series B Indenture and all Obligations with respect thereto, (c) the Indebtedness of the Guarantor arising under its guaranty of the Indebtedness of the Company under the Series A Notes and the Series A Indenture and all Obligations with respect thereto, (d) the Indebtedness of the Guarantor arising under its guaranty of the Indebtedness of the Company under the Series B Notes and the Series B Indenture and all Obligations with respect thereto, and (e) Indebtedness of the Company under the Revolving Credit Agreement in an amount not in excess of (x) $100,000,000 minus (y) the outstanding amount of Indebtedness of the Company under the Dynalectric Revolving Credit Agreement. To the extent provided in the Indenture, Senior Indebtedness must be paid in full before any payment of interest or principal on the Securities or the Guaranty set forth in Article 10 of the Indenture may be made. The Company agrees, and each Holder by accepting a Security agrees, to the subordination provided in the Indenture and authorizes the Trustee to give it effect.
13. Unclaimed Money. If money for the payment of principal or interest remains unclaimed for two years and six months, the Trustee and the Paying Agent will pay the money back to the Company at its request. After that, Security holders entitled to the money must look to the Company for payment unless an abandoned property law designates another person and all liability of the Trustee and such Paying Agent with respect to such money shall cease.
14. Discharge Prior to Redemption or Maturity. If the Company deposits with the Trustee money or U.S. Government Obligations sufficient to pay principal of, premium, if any, and accrued interest on the Notes to redemption or maturity, the Company will be discharged from the Indenture and the Securities, except for certain sections thereof.
15. Trustee Dealings with Obligors. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for any obligor on the Securities or its Affiliates, and may otherwise deal with each such obligor or its Affiliates, as if it were not Trustee.
No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations. Each Holder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities.
17. Authentication. This Security shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent.
18. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act.) Terms defined in the Indenture and not otherwise defined in this Security have the meanings set forth in the Indenture.
19. Indenture. Each Holder, by accepting a Security, agrees to be bound by all of the terms and provisions of the Indenture, as the same may be amended from time to time.
20. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed hereon.
The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Request may be made to: EMCOR Group, Inc., 101 Merritt Seven Corporate Park, Norwalk, Connecticut 06851, Attention: Secretary.
FORM OF NOTATION ON SECURITY
RELATING TO GUARANTY
MES Holdings Corporation (the "Guarantor," which term includes any successor Person under the Indenture) has uncon- ditionally guarantied, to the extent set forth in the Indenture and subject to the provisions in the Indenture, (a) the due and punctual payment of the principal of and interest on the Securities, whether at maturity, upon redemption, by acceler- ation or otherwise, the due and punctual payment of interest on overdue principal, and, to the extent permitted by law, in- terest, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee, all in accordance with the terms set forth in Article 10 of the Indenture and (b) in case of any extension of time of payment or renewal of any Securities or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, upon redemption, by acceleration or otherwise.
The obligations of the Guarantor to the Holders of Securities and to the Trustee pursuant to this Guaranty and the Indenture are expressly set forth in Article 10 of the Indenture and reference is hereby made to the Indenture for the precise terms of this Guaranty.
This Guaranty shall not be valid or obligatory for any purpose until the certificate of authentication on the Security upon which this Guaranty is noted shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers.
MES HOLDINGS CORPORATION
By:
Title:
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign and transfer this Security to
(insert assignee's social security or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint agent to
transfer this Security on the books of the Company. The agent
may substitute another to act for him.
Date: Your signature:
(Sign exactly as your name appears on the other side of this Security)
Signature Guaranty:
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company pursuant to Section 4.13 of the Indenture, check the box: / /
If you want to elect to have only a portion of this
Security purchased by the Company pursuant to the aforesaid
Section of the Indenture, state the amount to be purchased by
the Company: $
Date: Your Signature:
(Sign exactly as your name appears
on the other side of this Security)
Signature Guaranty:
EXHIBIT 4.17
SELLCO SUBORDINATED
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated December 15, 1994, made by SellCo Corporation, a Delaware corporation (the "Company"), to Shawmut Bank Connecticut, National Association, as trustee under the Indenture referred to below (in such capacity, the "Trustee" and, together with the Holders (as defined in the Indenture), the "Secured Parties").
W I T N E S S E T H:
WHEREAS, the Company has entered into an Indenture, dated
as
of December 15, 1994, with the Trustee in respect of the
Company's
12% Subordinated Contingent Payment Notes, Due 2004 (said
Indenture, as it may be amended, supplemented or otherwise
modified from time to time, being the "Indenture" and capitalized
terms not defined herein but defined therein or in the
Intercreditor Agreement referred to below being used herein as
therein defined); and
WHEREAS, the Trustee has entered into an Intercreditor Agreement, dated the date hereof and substantially in the form of Exhibit C to the Indenture (as the same may be amended, supplemented or otherwise modified from time to time, the "Intercreditor Agreement"), with the Company, EMCOR Group, Inc. (formerly known as JPW INC.), a Delaware corporation, and with each of IBJ Schroder Bank & Trust Company, as the trustee for the holders of the Series A Obligations referred to therein (the "Series A Indenture Trustee"), and United States Bank & Trust Company of New York, as the trustee for the holders of the Software House Obligations referred to therein (the "Software House Indenture Trustee"), pursuant to which, among other things, the Lien on the Pledged Collateral (as defined in Section 1(a) hereof) created hereby shall be subordinated to the Senior Liens (as defined in the Intercreditor Agreement) on the Pledged Collateral securing the Series A Obligations and the Software House Obligations; and
WHEREAS, the Pledged Collateral is Category One
Collateral
under the Intercreditor Agreement; and
WHEREAS, pursuant to the Intercreditor Agreement, the
Series
A Indenture Trustee and, after payment in full of the Series A
Obligations, the Software House Indenture Trustee, as the Senior
Lienors, have agreed to hold the Pledged Collateral as bailee for
the Trustee, as junior pledgee (the bailee of the Pledged
Collateral being hereinafter referred to as the "Senior
Pledgee");
and
WHEREAS, the Company is the legal and beneficial owner of
(a)
the shares of capital stock described in Schedule I hereto (the
"Pledged Shares") and issued by the issuers named therein (the
"Issuers"), and (b) the Indebtedness described in said Schedule
and issued by the obligors named therein (the "Pledged Debt");
and
WHEREAS, it is a requirement under the Indenture that the Company shall have made the pledge contemplated by this Agreement;
NOW, THEREFORE, in consideration of the premises, the
Company
hereby agrees with the Trustee on behalf and for the ratable
benefit of the Secured Parties as follows:
Section 1. Pledge.
(a) The Company hereby pledges and deposits with the Senior Pledgee, on the Trustee's behalf and for the ratable benefit of the Secured Parties, and grants to the Trustee on behalf and for the ratable benefit of the Secured Parties a security interest in, the following (the "Pledged Collateral"):
(i) all of the Pledged Shares;
(ii) all additional shares of stock or other securities of any Issuer from time to time acquired by the Company in any manner (any such shares being "Additional Shares");
(iii) the certificates representing the shares referred to in clauses (i) and (ii) above;
(iv) all of the Pledged Debt;
(v) all indebtedness for the deferred purchase price of property from time to time owed to (A) the Company by any Person in respect of the Sale by the Company of any of the Pledged Shares or Additional Shares, and (B) all indebtedness for the deferred purchase price of property from time to time owed to the Company or any of the Issuers by any other Person in respect of any Asset Sale (as defined in the Indenture) by such Issuer (any such indebtedness being "Additional Debt");
(vi) all notes or other instruments evidencing the indebtedness referred to in clauses (iv) and (v) above; and
(vii) all dividends, principal, interest, cash, instruments and other property or proceeds, from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the foregoing.
(b) The pledge made and the security interest granted pursuant to this Agreement, and all rights and remedies of the Trustee and the other Secured Parties hereunder and in and to the Pledged Collateral shall be subject in all respects to the terms and provisions of the Intercreditor Agreement. The Trustee, for itself and on behalf of each of the other Secured Parties, acknowledges and agrees that the Lien granted to the Secured Parties hereunder is junior and subordinate to the Senior Liens in the Pledged Collateral securing the Series A Obligations and the Software House Obligations.
(c) The Trustee, by execution of the Intercreditor Agreement, appoints each of the Senior Pledgees to hold the Pledged Collateral, in accordance with the terms of, and subject to the conditions of, the Intercreditor Agreement.
Section 2. Security for Obligations.
This Agreement secures and the Pledged
Collateral is security for the full and prompt
payment when due (whether at stated maturity, redemption,
repurchase, by acceleration or otherwise) of, and
the performance of, all of the Company's obligations under the
Securities, the Indenture, this Agreement, and
each other instrument, document and agreement executed by the
Company in connection with any of the
foregoing, whether now or hereafter existing and whether for
principal, premium, interest (including without
limitation, interest, whether or not allowed, after the filing of
a petition initiating any proceeding under any
Bankruptcy Law), penalties, commissions, charges, expenses, fees,
indemnifications, reimbursements, liabilities,
amounts payable, or otherwise (collectively, the "Obligations").
Section 3. Delivery of Pledged Collateral.
All certificates or instruments representing or evidencing the Pledged Collateral shall be delivered to the Senior Pledgee, so long as the Senior Liens have not been released, and thereafter, to the Trustee, and held by the Senior Pledgee, so long as the Senior Liens have not been released, and thereafter, by or on behalf of the Trustee, pursuant hereto and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Trustee. After the Senior Liens have been released, the Trustee shall have the right (a) at any time in its discretion and without notice to the Company, to transfer to or to register in its name or in the name of any of its nominees any or all of the Pledged Collateral, and (b) at any time to exchange certificates or instruments representing or evidencing any of the Pledged Collateral for certificates or instruments of smaller or larger denominations.
Section 4. Representations and Warranties.
The Company makes the following representations:
(a) The Pledged Shares (i) have been duly authorized and validly issued; (ii) are fully paid and non- assessable; and (iii) constitute 100% of the issued and outstanding shares of stock of the respective Issuers thereof owned by the Pledgor.
(b) The Company is the legal and beneficial owner of the
Pledged Collateral free and clear of any
Lien, except for (i) the Lien created by this Agreement, (ii) the
Senior Liens, and (iii) the Lien referred to in
Section 4.08(h) of the Indenture.
(c) The pledge of the Pledged Shares and the Pledged
Debt pursuant to this Agreement creates a
valid and perfected security interest in the Pledged Collateral
(other than the Pledged Shares referred to in
Section 4(d)), subject only to the Senior Liens and the Lien
referred to in Section 4.08(h) of the Indenture, in
favor of the Trustee on behalf and for the ratable benefit of the
Secured Parties securing the payment of all of
the Obligations.
(d) The Pledgor has informed the Trustee that the certificates representing the Pledged Shares issued by the Issuers listed on Exhibit A hereto are unavailable for delivery to the Trustee on the Issue Date. Each of the Issuers listed on Exhibit A hereto constitute Insignificant Subsidiaries. The Pledgor agrees to use commercially reasonable efforts to deliver such certificates to the Trustee hereunder within 90 days of the Issue Date. From and after the delivery of such certificates, the pledge of the Pledged Shares represented thereby pursuant to this Agreement will create a valid and perfected first priority security interest in such Pledged Shares, in favor of the Trustee on behalf and for the ratable benefit of the Secured Parties securing the payment of all of the Obligations.
(e) No consent, authorization, approval, or other action by, and no notice to or filing with, any governmental authority is required either (i) for the pledge by the Company of the Pledged Collateral pursuant to this Agreement or for the due execution, delivery or performance of this Agreement by the Company, or (ii) for the exercise by the Trustee of the voting or other rights provided for in this Agreement or of the remedies in respect of the Pledged Collateral pursuant to this Agreement, except as may be required in connection with the disposition of the Pledged Collateral by laws affecting the offering and sale of securities generally.
(e) The Pledged Debt constitutes all of the outstanding indebtedness for the deferred purchase price of property owed to the Company and each of the Issuers in respect of Asset Sales (as defined in the Indenture) by the Company and the Issuers.
Section 5. Further Assurances, Etc.
(a) The Company agrees that at any time and from time to time, at the cost and expense of the Company, the Company will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that the Trustee may request, in order to perfect and protect the Lien granted or purported to be granted hereby or, subject to the provisions of the Intercreditor Agreement, to enable the Trustee to exercise and enforce its rights and remedies hereunder with respect to any Pledged Collateral.
(b) The Company agrees to defend the title to the Pledged Collateral and the Lien thereon of the Trustee against the claim of any other Person and to maintain and preserve such Lien until indefeasible payment in full of all of the Obligations.
Section 6. Voting Rights; Dividends; Etc.
(a) Subject to the provisions of the Intercreditor Agreement, as long as no Default or Event of Default shall have occurred and be continuing:
(i) The Company shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement, the Indenture, the Securities or any other instrument or document relating thereto; provided, however, that the Company shall not exercise or shall refrain from exercising any such right if such action would (A) in the reasonable good faith judgment of the Company have a material adverse effect on the value of the Pledged Collateral or any part thereof, or (B) be inconsistent with or violate any provision of this Agreement, the Securities or the Indenture.
(ii) Subject to the provisions of the Intercreditor Agreement, the Company shall be entitled to receive and retain any and all dividends, principal, and interest paid in respect of the Pledged Collateral (subject to the Pledgor's application thereof in accordance with the Indenture), other than any and all
(A) dividends and interest paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Pledged Collateral,
(B) dividends and other distributions paid or payable in cash in respect of any Pledged Shares or Additional Pledged Shares in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise distributed in redemption of, or in exchange for, any Pledged Collateral,
all of which shall be forthwith delivered to the Trustee or to the Senior Pledgee on the Trustee's behalf to hold as Pledged Collateral and shall, if received by the Company, be received in trust for the benefit of the Secured Parties, be segregated from the other property or funds of the Company, and be forthwith delivered to the Trustee or to the Senior Pledgee on the Trustee's behalf as Pledged Col- lateral in the same form as so received (with any necessary indorsement).
(iii) Subject to the provisions of the Intercreditor Agreement, the Trustee shall execute and deliver (or cause to be executed and delivered) to the Company all such proxies and other instruments as the Company may reasonably request for the purpose of enabling the Company to exercise the voting and other rights which it is entitled to exercise pursuant to paragraph (i) above and to receive the dividends, principal, or interest payments which it is authorized to receive and retain pursuant to paragraph (ii) above.
(b) Subject to the provisions of the Intercreditor Agreement, upon the occurrence and during the continuance of a Default or an Event of Default:
(i) Upon notice by the Trustee to the Company, all rights of the Company to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 6(a)(i) above shall cease, and all such rights shall thereupon become vested in the Trustee who shall thereupon have the sole right to exercise such voting and other consensual rights.
(ii) All rights of the Company to receive the dividends, principal, interest payments and other distributions which it would otherwise be authorized to receive and retain pursuant to Section 6(a)(ii) above shall cease, and all such rights shall thereupon become vested in the Trustee who shall thereupon have the sole right to receive and hold as Pledged Collateral such dividends, principal, interest payments and other distributions.
(iii) All dividends, principal, interest payments and other distributions which are received by the Company contrary to the provisions of paragraph (ii) of this Section 6(b) shall be received in trust for the benefit of the Trustee, shall be segregated from other funds of the Company and shall be forthwith paid over to the Trustee as Pledged Collateral in the same form as so received (with any necessary indorsement).
(iv) The Company shall, if necessary to permit
the Trustee to exercise the voting and other
rights which it may be entitled to exercise pursuant to
Section 6(b)(i) above and to receive all
dividends, principal, interest payments and distributions
which it may be entitled to receive under
Section 6(b)(ii) above, execute and deliver to the
Trustee, from time to time and upon written notice
of the Trustee, appropriate proxies, dividend payment
orders and other instruments as the Trustee
may reasonably request. The foregoing shall not in any
way limit the Trustee's power and authority
granted pursuant to Section 8 hereof.
Section 7. Transfers and Other Liens; Additional Shares and Additional Debt.
(a) The Company agrees that it will not (i) sell or otherwise dispose of, or grant any option or warrant with respect to, any of the Pledged Collateral (except, in respect of the Pledged Shares, in accordance with the terms of the Indenture), or (ii) create or permit to exist any Lien upon or with respect to any of the Pledged Collateral except for (A) the Lien created pursuant to this Agreement, (B) the Senior Liens, and (C) the Lien referred to in Section 4.08(h) of the Indenture.
(b) The Company agrees that it will (i) cause each Issuer not to issue any shares of stock or other securities in addition to or in substitution for the Pledged Shares except to the Company, (ii) pledge here- under, immediately upon its acquisition (directly or indirectly) thereof, to the Trustee (or, until the Senior Liens have been released, to the Senior Pledgee) any and all Additional Shares and any and all Additional Debt, and (iii) promptly (and in any event within three Business Days) deliver to the Trustee a Pledge Amendment, duly executed by the Company, in substantially the form of Schedule II hereto (a "Pledge Amendment"), in respect of the Additional Shares or Additional Debt, together with all certificates, notes or other instruments representing or evidencing the same. The Company hereby (i) authorizes the Trustee to attach each Pledge Amendment to this Pledge Agreement, (ii) agrees that all Additional Shares and all Additional Debt listed on any Pledge Amendment delivered to the Trustee shall for all purposes hereunder constitute Pledged Shares and Pledged Debt, respectively, subject to the rights of the holders of Senior Liens, and (iii) is deemed to have made, upon such delivery, the representations and warranties contained in Section 4 hereof with respect to such Pledged Collateral.
Section 8. Trustee Appointed Attorney-in-Fact and Proxy.
Subject to the provisions of the Intercreditor Agreement,
the Company hereby irrevocably constitutes
and appoints the Trustee and any officer or agent thereof, with
full power of substitution, as its true and lawful
attorney-in-fact and proxy with full irrevocable power and
authority in the place and stead of the Company and
in the name of the Company or in its own name, from time to time
in the Trustee's discretion, for the purpose
of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute and deliver
any and all documents and instruments which the Trustee may deem
necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation, to
receive, indorse and collect all instruments made
payable to the Company representing any dividend, interest
payment or other distribution or payment in
respect of the Pledged Collateral or any part thereof, to give
full discharge for the same, and to vote or grant
any consent in respect of the Pledged Shares authorized by
Section 6(b) hereof. The Company hereby ratifies,
to the extent permitted by law, all that any said attorney shall
lawfully do or cause to be done by virtue hereof.
This power, being coupled with an interest, is irrevocable until
the Obligations are paid in full.
Section 9. Trustee May Perform.
Subject to the provisions of the Intercreditor Agreement,
if the Company fails to perform any
agreement contained herein, the Trustee may itself perform, or
cause performance of, such agreement, and the
expenses of the Trustee incurred in connection therewith shall be
payable by the Company under Section 12
hereof and constitute Obligations secured hereby.
Section 10. Reasonable Care.
The Trustee shall be deemed to have exercised reasonable
care in the custody and preservation of the
Pledged Collateral in its possession if the Pledged Collateral is
accorded treatment substantially equal to that
which the Trustee accords its own property, it being understood
that neither the Trustee nor any other
Secured Party shall have responsibility for (i) ascertaining or
taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any
Pledged Collateral, whether or not the Trustee
or any other Secured Party has or is deemed to have knowledge of
any such matter, or (ii) taking any
necessary steps to preserve rights against any Person with
respect to any Pledged Collateral.
Section 11. Remedies upon Default.
Subject to the provisions of the Intercreditor Agreement, if any Event of Default shall have occurred and be continuing:
(a) The Trustee may exercise in respect of the Pledged Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party after default under the Uniform Commercial Code in effect in the State of New York at that time (the "UCC"), and the Trustee may also, without notice except as specified below, sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker's board or at any office of the Trustee or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Trustee may deem commercially reasonable. The Company agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to the Company of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Trustee shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. The Trustee may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. The Company hereby waives any claims against the Trustee arising by reason of the fact that the price at which any Pledged Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if the Trustee accepts the first offer received and does not offer such Pledged Collateral to more than one offeree.
(b) If the Trustee shall determine to exercise its right to sell all or any of the Pledged Collateral pursuant to this Section 11, the Company agrees that, upon request of the Trustee, the Company will, at its own cost and expense:
(i) execute and deliver, and use its best efforts to cause each issuer of the Pledged Collateral and its directors and officers to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts and things, as may be necessary or, in the reasonable opinion of the Trustee, advisable to register such Pledged Collateral under the provisions of the Securities Act of 1933, as from time to time amended (the "Securities Act"), and to cause the registration statement relating thereto to become effective and to remain effective for such period as prospectuses are required by law to be furnished, and to make all amendments and supplements thereto and to the related prospectus which, in the opinion of the Trustee, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission ("SEC") applicable thereto;
(ii) use its best efforts to qualify the Pledged Collateral under the state securities or "Blue Sky" laws and to obtain all necessary governmental approvals for the sale of the Pledged Collateral, as requested by the Trustee;
(iii) make available to its security holders, as soon as practicable, an earning statement which will satisfy the provisions of section 11(a) of the Securities Act; and
(iv) do or cause to be done all such other acts and things as may be necessary to make such sale of the Pledged Collateral or any part thereof valid and binding and in compliance with applicable law.
The Company further acknowledges the impossibility of
ascertaining the amount of damages which would be
suffered by the Secured Parties by reason of the failure by the
Company to perform any of the covenants
contained in this Section 11 and, consequently, agrees that, if
the Company shall fail to perform any of such
covenants, it shall pay, as liquidated damages and not as a
penalty, an amount equal to the value of the
Pledged Collateral on the date the Trustee shall demand
compliance with this Section.
(c) The Company recognizes that, by reason of the aforementioned requirements and certain prohibitions contained in the Securities Act and applicable state securities laws, the Trustee may, at its option, elect not to require the Company to register all or any part of the Pledged Collateral and may therefore be compelled, with respect to any sale of all or any part of the Pledged Collateral, to limit purchasers to those who will agree, among other things, to acquire such securities for their own account, for investment, and not with a view to the distribution or resale thereof. The Company acknowledges and agrees that any such sale may result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions and, notwithstanding such circumstances, agrees that any such sale shall be deemed to have been made in a commercially reasonable manner. The Trustee shall be under no obligation to delay the sale of any of the Pledged Collateral for the period of time necessary to permit the Company to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if the Company would agree to do so.
(d) If the Trustee determines to exercise its right to sell any or all of the Pledged Collateral, upon written request, the Company shall, from time to time, furnish to the Trustee all such information as the Trustee may request in order to determine the number of shares and other instruments included in the Pledged Collateral which may be sold by the Trustee as exempt transactions under the Act and rules of the SEC thereunder, as the same are from time to time in effect.
(e) Any cash held by the Trustee as Pledged Collateral and all cash proceeds received by the Trustee in respect of any sale of, collection from, or other realization upon all or any part of the Pledged Collateral shall be applied by the Trustee as provided in Section 6.10 of the Indenture.
Section 12. Expenses.
The Company will upon demand pay to the Trustee the amount of any and all reasonable expenses, including, without limitation, the reasonable fees and expenses of the Trustee's counsel and of any experts and agents, which the Trustee may incur in connection with (a) the administration of this Agreement, (b) the custody or preservation of, sale of, collection from, or other realization upon, any of the Pledged Collateral, (c) the exercise or enforcement of any of the rights and remedies hereunder of the Trustee and the other Secured Parties, or (d) the failure by the Company to perform or observe any of the provisions hereof.
Section 13. Security Interest Absolute.
All rights of the Trustee and security interests hereunder, and all obligations of the Company hereunder, shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of any provision of the Indenture, the Securities, the Intercreditor Agreement, or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any other term of, or any increase in the amount of, all or any of the Obligations, or any other amendment or waiver of any term of, or any consent to any departure from any requirement of, the Indenture, the Securities, the Intercreditor Agreement, or any other instrument or document relating thereto;
(c) any exchange, release or non-perfection of any Lien on any other collateral, or any release or amendment or waiver of any term of any guaranty of, or consent to departure from any requirement of any guaranty of, all or any of the Obligations; or
(d) any other circumstance which might otherwise constitute a defense available to, or a discharge of, a borrower or a pledgor.
Section 14. Amendments, Etc.
No amendment or waiver of any provision of this Agreement
nor consent to any departure by the
Company herefrom shall in any event be effective unless the same
shall be in writing and signed by the
Trustee, and then such waiver or consent shall be effective only
in the specific instance and for the specific
purpose for which given.
Section 15. Addresses for Notices.
All notices and other communications provided for
hereunder shall be in writing (including
telegraphic, telex, telecopy or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or
delivered by hand, if to the Company or the Trustee, addressed to
the Company or the Trustee, as the case
may be, at its address specified in the Indenture, or, as to
either party, at such other address as shall be
designated by such party in a written notice to each other party
complying as to delivery with the terms of this
Section. All such notices and other communications shall, when
mailed, telegraphed, telexed, telecopied,
cabled or delivered, be effective four (4) Business Days after
deposit in the mails, delivered to the telegraph
company, confirmed by telex answerback, telecopied with
confirmation of receipt, delivered to the cable
company or delivered by hand to the addressee or its agent,
respectively.
Section 16. Continuing Security Interest; Transfer of Securities or Obligations.
This Pledge Agreement shall create a continuing security
interest in the Pledged Collateral and shall
(a) remain in full force and effect until indefeasible payment in
full of the Obligations, (b) be binding upon the
Company, its successors and assigns, and (c) inure, together with
the rights and remedies of the Trustee
hereunder, to the benefit of and be enforceable by the Secured
Parties and their respective successors,
transferees and assigns. Without limiting the generality of the
foregoing clause (c), any Holder may assign or
otherwise transfer any Security held by it or Obligation owing to
it to any other Person, and such other Person
shall thereupon become vested with all the rights in respect
thereof granted to such Holder herein or
otherwise with respect to such of the Securities or Obligations
so transferred or assigned. Subject to the
provisions of the Intercreditor Agreement, upon the payment in
full of the Obligations, the Company shall be
entitled to the return, upon its request and at its expense, of
such of the Pledged Collateral as shall not have
been sold or otherwise applied pursuant to the terms hereof.
Section 17. Governing Law; Severability; Terms.
This Agreement shall be governed by, and be construed and
interpreted in accordance with, the law
of the State of New York. Wherever possible, each provision of
this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if
any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such
prohibition or invalidity and without invalidating the remaining
provisions of this Agreement. Unless otherwise
defined herein or in the Indenture, terms defined in Article 9 of
the UCC are used herein as therein defined.
Section 18. Release of Liens.
Upon the Trustee's receipt of a written request by the
Company made contemporaneously with or at
any time after the receipt by the Trustee of all Net Cash
Proceeds and Additional Debt from the Company in
accordance with the terms of the Indenture in connection with the
sale by the Company of any of the Pledged
Shares or Additional Shares, the Trustee shall release its Lien
on such Pledged Shares and Additional Shares.
The Trustee shall, at the Company's expense, execute and deliver
such documents and instruments as the
Company may reasonably request to evidence such release.
Section 19. Waiver of Jury Trial.
The Company waives any right it may have to a trial by jury in respect of any litigation based on, or arising out of, under or in connection with, this Agreement or any course of conduct, course of dealing, verbal or written statement or other action of the Trustee or any other Secured Party.
Section 20. Conflicts.
In the event of any conflict between the terms of the Intercreditor Agreement and this Agreement, the terms of the Intercreditor Agreement shall govern.
Section 21. Section Titles.
The Section titles contained in this Agreement are and
shall be without substantive meaning or
content of any kind whatsoever and are not part of this
Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement
to be duly executed and
delivered by its duly authorized officer on the date first above
written.
SELLCO
CORPORATION
By:
Title:
Accepted and Acknowledged:
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
as Trustee
By:__________________________
Title:
SCHEDULE I TO PLEDGE AGREEMENT
Attached to and forming a part of that certain Pledge Agreement,
dated December 15, 1994, by SellCo
Corporation to Shawmut Bank Connecticut, National Association, as
Trustee.
Stock Issuer Class of Stock Stock Certificate No(s). Number of Shares
A to Z Equipment Corp. Common 6 100
Afgo Engineering Corporation Common 14 2
Afgo Engineering Corp. of
Washington Common 12 3
American Cable Products, Inc. Common 6 30
Antwerp Education Center
N.v.
AZCO Inc. Common 2A 1,000
Brandt Engineering Company
of Arkansas, Inc. Common 004 3,000
Brandt Service Company Common 003 1,000
Businessland Canada Ltd.
Businessland (Hong Kong)
Limited
Case/Acme Systems, Inc. Common 10 150
Computer Maintenance
Corporation Common 49 332,640
Drake & Scull France SARL
E.M.A. International Inc. Common 13 502
Fort Corp. Common 4 100
General Energy Development
Inc. Common 3 100
Gone Inc. Common 3 10,000
Guzovsky/JWP Electrical Inc. Common 2 100
Intec Business Phones Inc. Common 3 1,000
ISYS Security Systems, Inc. Common 3 100
Jamaica Water Securities Corp. Common 2 100
JWP Voc 1, Inc. Common 3 100
JWP Voc 2, Inc. Common 21 45
JWP Asset Management Inc. Common 2 100
JWP Brandt Engineering Co.,
Inc. Common 5 100
JWP Communications Inc. Common 3 100
JWP Controls Inc. Common 4 100
JWP Controls Holding, Inc. Common 3 100
JWP Credit Corp. Common 2 100
JWP E.C. Corp. Common 16 120
JWP Environmental
Composting Technologies, Inc. Common 2 1,000
JWP Equipment Services Inc. Common 3 100
JWP Espana SA
JWP France SARL
JWP Guzovsky Electrical Corp. Common 8 4,425
JWP/HCCII Corp. Common A-3 100
JWP of Hartford, Inc. Common 6 1,724
JWP Information Services, Inc. Common 1 100
JWP Information Services
SARL
JWP/IS Network Integration
Services Inc. Common 8 1,000
JWP Mechanical Services of
New York, Inc. Common 6 50
JWP Merger Sub Inc. Common 3 100
JWP New England Inc. Common 2 1,000
JWP/SHI Corp. Common 4 100
JWP Technical Services Corp. Common 3 1,000
Kerby Saunders, Inc. Common C5 300
Kerby Saunders, Inc. Preferred P9 360
Kerby Saunders-Warkol, Inc. Common 4 100
Marlon of Texas, Inc. Common 4 1,000
Metalair Industries, Inc. Common 7 2,000
Micro Avenue
MicroCom
North American Heating &
Air Conditioning Company Common 2 100
Photo-Scan Management
Systems, Inc. Common 2 431,107
Sivea Benelux
SLR Constructors Inc. Common 3 100
Superior Engineering
Corporation Class A
Voting
Common 11 33,803
Superior Engineering
Corporation Class B
Non-Voting
Common 60 168,978
Sutter Hill Industries, Inc. Common 11-C 110,000
Teletime Limited
University Cogeneration, Inc. Common 2 10,000
University Mechanical
Contractors, Inc. Common 22 1,500
University Nuclear Systems,
Inc. Common 4 1,000
Wachtel, Duklauer & Fein
Incorporated (New Jersey) Common 3 90
Wachtel, Duklauer & Fein
Incorporated (New York) Common 17 242.8
Walker Engineering, Inc. Common 7 950,000
Worldwide Communications,
Inc. Common 7 124.61538
JWP Unrestricted Sub 3 Inc. Common 2 1,000
JWP Unrestricted Sub 9 Inc. Common 3 100
JWP Unrestricted Sub 12 Inc. Common 3 1
|
Issuer Description of Debt Debt Certificate No(s). Final Maturity Automatic Mechanical Services, Inc. Promissory Note (7/30/93) N/A IGYS Systems, Inc. Secured Note (2/5/92) N/A KSW, Inc. Promissory Note (1/20/94) N/A |
SCHEDULE II TO PLEDGE AGREEMENT
PLEDGE AMENDMENT
This Pledge Amendment, dated , 19__, is
delivered pursuant to Section 7 of the Pledge
Agreement referred to below. The undersigned hereby agrees that
this Pledge Amendment may be attached
to the Pledge Agreement, dated December 15, 1994, between the
undersigned and Shawmut Bank Connecticut,
National Association, as Trustee on behalf of and for the ratable
benefit of the Secured Parties referred to
therein and that the [Additional Shares] [and] [Additional Debt]
listed on this Pledge Amendment shall be and
become part of the Pledged Collateral referred to in the Pledge
Agreement and shall secure all Obligations of
the undersigned. The terms defined in the Pledge Agreement or
Indenture are being used herein as therein
defined.
SELLCO CORPORATION
By:____________________________
Title:
Stock Certificate Number Stock Issuer Class of Stock No(s). Par Value of Shares
Original
Description Debt Certificate Final Principal
Issuer of Debt No(s). Maturity Amount
|
INTERCREDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT (this "Agreement") is
entered into as of this 15th day of
December, 1994 among (a) IBJ SCHRODER BANK & TRUST COMPANY, as
the Series A Indenture
Trustee under the Series A Indenture referred to below and for
the benefit of the holders of the Series A
Notes referred to below, (b) UNITED STATES TRUST COMPANY OF NEW
YORK, as the Software
House Indenture Trustee under the Software House Indenture
referred to below and for the benefit of the
holders of the Software House Notes referred to below, (c)
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, as the SellCo Indenture Trustee under the
SellCo Indenture referred to below
and for the benefit of the holders of the SellCo Notes referred
to below, (d) EMCOR GROUP, INC.
(formerly known as JWP INC.), a Delaware corporation (the
"Company"), (e) SELLCO CORPORATION, a
Delaware corporation, all of the capital stock of which is owned
by the Company ("Sellco"), and (f) MES
HOLDINGS CORPORATION, a Delaware corporation, all of the capital
stock of which is owned by the
Company ("MES"). Capitalized terms used in this Agreement shall
have the meanings set forth in Section 1
below. All other terms contained in this Agreement shall, unless
the context indicates otherwise, have the
meanings provided therefor by the Uniform Commercial Code to the
extent the same are defined therein.
RECITALS
A. (1) The Company, the Guarantors and the Series A Indenture Trustee have entered into the Series A Indenture, (2) the Company and the Series A Indenture Trustee have entered into the Series A Senior Pledge Agreement and the Series A Subordinated Pledge Agreement, (3) SellCo and the Series A Indenture Trustee have entered into the Series A SellCo Pledge Agreement and (4) the Company and Guarantors will incur Series A Obligations under the Series A Indenture and the Series A Notes, the Company will incur Series A Obligations under the Series A Senior Pledge Agreement and the Series A Subordinated Pledge Agreement and SellCo will incur Series A Obligations under the Series A SellCo Pledge Agreement.
B. (1) The Company, the Guarantors and the Software
House Indenture Trustee have entered
into the Software House Indenture, (2) the Company and the
Software House Indenture Trustee have entered
into the Software House Senior Pledge Agreement and the Software
House Subordinated Pledge Agreement,
(3) SellCo and the Software House Indenture Trustee have entered
into the Software House SellCo Pledge
Agreement, and (4) the Company and the Guarantors will incur
Software House Obligations under the
Software House Indenture and the Software House Notes, the
Company will incur Software House Obligations
under the Software House Senior Pledge Agreement and the Software
House Subordinated Pledge Agreement,
and SellCo will incur Software House Obligations under the
Software House SellCo Pledge Agreement.
C. (1) SellCo and the SellCo Indenture Trustee have entered into the SellCo Indenture and the SellCo Subordinated Pledge Agreement, and (2) SellCo will incur SellCo Obligations thereunder and under the SellCo Notes.
D. This Agreement sets forth the agreement of the parties as to the relative priority of their respective Liens on the Category One Collateral and the Category Two Collateral and certain other rights, priorities and interests among themselves with respect thereto.
NOW THEREFORE, in consideration of the foregoing and the
mutual covenants herein contained
the parties agree as follows:
1. Definitions. As used herein the following terms shall have the meanings indicated.
"Agreement" means this Agreement as modified or amended from time to time in accordance with the terms hereof.
"Avoided Transfer" has the meaning set forth in Section 6.2(a) hereof.
"Bankruptcy Code" means Title 11 of the United States Code (11 U.S.C. 101 et seq.), as amended from time to time and any successor statute.
"Business Day" means any day other than Saturday, Sunday
and a day that is a legal holiday under the
laws of the State of New York or on which banking institutions in
the State of New York are required or
authorized by law or other governmental action to close.
"Category One Collateral" means the "Pledged Collateral"
as defined in the Series A Senior Pledge
Agreement, the Software House Subordinated Pledge Agreement, the
Series A SellCo Pledge Agreement, the
Software House SellCo Pledge Agreement and the SellCo
Subordinated Pledge Agreement.
"Category Two Collateral" means the "Pledged Collateral"
as defined in the Software House Senior
Pledge Agreement and the Series A Subordinated Pledge Agreement.
"Collateral" means the Category One Collateral and the Category Two Collateral.
"Effective Date" has the meaning set forth in the Plan of Reorganization.
"Guarantor" means SellCo and MES as guarantors pursuant
to the Series A Indenture and the
Software House Indenture.
"Indenture Documents" means the Series A Documents, the
Software House Documents and the
SellCo Documents.
"Insolvency or Liquidation Proceeding" means (a) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding relative to the Company, SellCo or MES or to any of their respective assets, or (b) any liquidation, dissolution, reorganization or winding up of the Company, SellCo or MES whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or any other marshalling of assets and liabilities of the Company, SellCo or MES.
"Lien" means any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement,
security interest, encumbrance, lien, preference, priority or
other security agreement or other preferential
arrangement whatsoever, including, without limitation, any right
of setoff, any conditional sale or other title
retention agreement, the interest of a lessor under a lease, any
financing lease having substantially the same
economic effect as any of the foregoing and the filing of any
financing statement (other than a financing
statement filed by a "true" lessor pursuant to Section 9-408 of
the Uniform Commercial Code or other
comparable law of any jurisdiction) naming the owner of the asset
to which such Lien relates as debtor;
provided, none of the foregoing shall be a "Lien" for purposes of
this Agreement if it arises or results solely
from the exercise by a Secured Party or a Trustee of rights or
remedies as an unsecured creditor of the
Company, SellCo or MES and does not arise or result from a
consensual agreement or arrangement between
or among the Company, SellCo or MES, on the one hand, and any
such Secured Party or a Trustee, on the
other hand.
"Obligations" means with respect to any Indenture
Document, the full and prompt payment when due
(whether at stated maturity, redemption, repurchase, by
acceleration or otherwise) of, and the performance of,
all of the obligations under such Indenture Document of each
Obligor party to such Indenture Document,
whether now or hereafter existing and whether for principal,
premium, interest, fees, expenses or otherwise,
and shall include, without limitation, in the case of all Senior
Obligations, all interest accrued or accruing (or
which would, absent the commencement of an Insolvency or
Liquidation Proceeding, accrue) after the
commencement of an Insolvency or Liquidation Proceeding in
accordance with and at the rate specified in the
Indenture Documents governing said Obligations whether or not the
claim for such interest is allowed as a
claim in such Insolvency or Liquidation Proceeding; and to the
extent any payment with respect to any of the
Senior Obligations (whether by or on behalf of the Company,
SellCo or MES, as proceeds of security,
enforcement or any right of setoff or otherwise) is declared to
be fraudulent or preferential, set aside or
required to be paid to a trustee, receiver or similar Person,
then such payment or part thereof originally
intended to be satisfied shall be deemed to be reinstated and
outstanding as if such payment had not occurred.
"Obligor" means:
(a) with respect to the Series A Indenture, the Series A Notes, the Software House Indenture and the Software House Notes, the Company and the Guarantors;
(b) with respect to the SellCo Indenture and the SellCo Notes, SellCo;
(c) with respect to the Series A Senior Pledge Agreement, the Series A Subordinated Pledge Agreement, the Software House Senior Pledge Agreement and the Software House Subordinated Pledge Agreement, the Company; and
(d) with respect to the Series A SellCo Pledge Agreement, the Software House SellCo Pledge Agreement and the SellCo Subordinated Pledge Agreement, SellCo.
"paid in full" and "payment in full" means with respect
to any Senior Obligations, payment in full
thereof in cash (or otherwise to the written satisfaction of the
holders thereof) and termination of the
Indenture Documents with respect to thereto.
"Person" means any person, individual, sole proprietorship, partnership, joint venture, corporation, unincorporated organization, association, institution, entity, party, including any government and any political subdivision, agency or instrumentality thereof.
"Plan of Reorganization" means the Third Amended Joint
Plan of Reorganization of the Company and
SellCo under Chapter 11 of the Bankruptcy Code (Chapter 11 Case
No. 94 B 46404 (JHG)), as amended, the
terms of which have been confirmed pursuant to Section 1129 of
the Bankruptcy Code.
"Pledge Agreement" means any of the Series A Senior
Pledge Agreement, the Series A Subordinated
Pledge Agreement, the Series A SellCo Pledge Agreement, the
Software House Senior Pledge Agreement, the
Software House Subordinated Pledge Agreement, the Software House
SellCo Pledge Agreement or the SellCo
Subordinated Pledge Agreement.
"Recovery" has the meaning set forth in Section 6.2(a) hereof.
"Relevant Secured Parties" means (a) with respect to the
Series A Indenture Trustee, the Series A
Secured Parties, (b) with respect to the Software House Indenture
Trustee, the Software House Secured
Parties, and (c) with respect to the SellCo Indenture Trustee,
the SellCo Secured Parties.
"Secured Party" means a Series A Secured Party, a Software House Secured Party, or a SellCo Secured Party.
"SellCo Documents" means the SellCo Indenture, the SellCo
Notes and the SellCo Subordinated
Pledge Agreement.
"SellCo Indenture" means that certain Indenture, dated as
of the Effective Date, among SellCo and the
SellCo Indenture Trustee, in respect of the SellCo Notes, as the
same may from time to time be amended,
renewed, supplemented or otherwise modified.
"SellCo Indenture Trustee" means the then acting Trustee
under the SellCo Indenture and any
successor thereto exercising substantially the same rights and
powers, or if there is no acting Trustee under the
SellCo Indenture, holders of SellCo Notes holding a majority in
principal amount of outstanding SellCo
Obligations.
"SellCo Notes" means the 12% Subordinated Contingent Payment Notes, due 2004, issued by SellCo under the SellCo Indenture.
"SellCo Obligations" means the Obligations of SellCo with respect to the SellCo Documents.
"SellCo Secured Parties" means at any time the SellCo Trustee and the holders of SellCo Notes at such time.
"SellCo Subordinated Pledge Agreement" means the Pledge
Agreement dated the Effective Date
between SellCo and the SellCo Indenture Trustee for the benefit
of the SellCo Secured Parties, and any
document or instrument under which any Lien is granted by SellCo
in any Category One Collateral to secure
the SellCo Obligations or under which rights or remedies with
respect to any such Lien are governed, as the
same may from time to time be amended, renewed, extended,
supplemented or modified.
"Senior Lien" means: (a) In the case of the Category One
Collateral: (i) as between (A) the Series A
Secured Parties on the one hand and (B) the Software House
Secured Parties on the other hand, the Lien of
the Series A Indenture Trustee in the Category One Collateral,
and (ii) as between (A) the Series A Secured
Parties and the Software House Secured Parties on the one hand
and (B) any SellCo Secured Party on the
other hand, the Lien of the Series A Indenture Trustee and of the
Software House Indenture Trustee in the
Category One Collateral; and (b) in the case of the Category Two
Collateral, the Lien therein of the Software
House Indenture Trustee.
"Senior Lienor" means at any time as to any Collateral, each Trustee having a Senior Lien at such time in such Collateral.
"Senior Obligation Holder" means any holder of all or a portion of the Senior Obligations.
"Senior Obligations" means at any time as to any Collateral, the Obligations secured at such time by a Senior Lien in such Collateral pursuant to Section 2.
"Series A Documents" means the Series A Indenture, the Series A Notes, the Series A Senior Pledge Agreement, the Series A Subordinated Pledge Agreement and the Series A SellCo Pledge Agreement.
"Series A Indenture" means that certain Indenture, dated
as of the Effective Date, among the
Company, the Guarantors and the Series A Indenture Trustee, in
respect of the Series A Notes, as the same
may from time to time be amended, renewed, supplemented or
otherwise modified.
"Series A Indenture Trustee" means the then acting Trustee under the Series A Indenture and any successor thereto exercising substantially the same rights and powers, or if there is no acting Trustee under the Series A Indenture, holders of Series A Notes holding a majority in principal amount of outstanding Series A Obligations.
"Series A Notes" means the 7% Senior Secured Notes, Series A, due 1997, issued by the Company under the Series A Indenture.
"Series A Obligations" means the Obligations of the Obligors with respect to the Series A Documents.
"Series A Secured Parties" means at any time the Series
A Indenture Trustee and the holders of
Series A Notes at such time.
"Series A SellCo Pledge Agreement" means the Pledge
Agreement dated the Effective Date between
SellCo and the Series A Indenture Trustee for the benefit of the
Series A Secured Parties, and any document
or instrument under which any Lien on Category One Collateral is
granted by SellCo to secure the Series A
Obligations or under which rights or remedies with respect to any
such Lien are governed, as the same may
from time to time be amended, renewed, extended, supplemented or
modified.
"Series A Senior Pledge Agreement" means the Pledge
Agreement dated the Effective Date between
the Company and the Series A Note Trustee for the benefit of the
Series A Secured Parties, and any
document or instrument under which any Lien on the Category One
Collateral is granted by the Company to
secure the Series A Obligations or under which rights or remedies
with respect to any such Lien are governed,
as the same may from time to time be amended, renewed, extended,
supplemented or modified.
"Series A Subordinated Pledge Agreement" means the Pledge
Agreement dated the Effective Date
between the Company and the Series A Indenture Trustee for the
benefit of the Series A Secured Parties, and
any document or instrument under which any Lien is granted by the
Company in any Category Two Collateral
to secure the Series A Obligations or under which rights or
remedies with respect to any such Lien are
governed, as the same may from time to time be amended, renewed,
extended, supplemented or modified.
"Software House Documents" means the Software House
Indenture, the Software House Notes, the
Software House Senior Pledge Agreement, the Software House
Subordinated Pledge Agreement and the
Software House SellCo Pledge Agreement.
"Software House Indenture" means that certain Indenture,
dated as of the Effective Date, among the
Company, the Guarantors and the Software House Indenture Trustee,
in respect of the Software House Notes,
as the same may from time to time be amended, renewed,
supplemented or otherwise modified.
"Software House Indenture Trustee" means the then acting
Trustee under the Software House
Indenture and any successor thereto exercising substantially the
same rights and powers, or if there is no acting
Trustee under the Software House Indenture, holders of Software
House Notes holding a majority in principal
amount of outstanding Software House Obligations.
"Software House Notes" means the 7% Senior Secured Notes,
Series B, due 1997, issued by the
Company under the Software House Indenture.
"Software House Obligations" means the Obligations of the
Obligors with respect to the Software
House Documents.
"Software House Secured Parties" means at any time the Software House Indenture Trustee and the holders of the Software House Notes at such time.
"Software House SellCo Pledge Agreement" means the Pledge
Agreement dated the Effective Date
between SellCo and the Software House Indenture Trustee for the
benefit of the Software House Secured
Parties, and any document or instrument under which any Lien is
granted by SellCo in any Category One
Collateral to secure the Software House Obligations or under
which rights or remedies with respect to any
such Lien are governed, as the same may be from time to time
amended, renewed, extended, supplemented or
modified.
"Software House Senior Pledge Agreement" means the Pledge
Agreement dated the Effective Date
between the Company and the Software House Indenture Trustee for
the benefit of the Software House
Secured Parties, and any document or instrument under which any
Lien is granted by the Company in any
Category Two Collateral to secure the Software House Obligations
or under which rights or remedies with
respect to any such Lien are governed, as the same may from time
to time be amended, renewed, extended,
supplemented or modified.
"Software House Subordinated Pledge Agreement" means the
Pledge Agreement dated the Effective
Date between the Company and the Software House Indenture Trustee
for the benefit of the Software House
Secured Parties, and any document or instrument under which any
Lien is granted by the Company in any
Category One Collateral to secure the Software House Obligations
or under which rights or remedies with
respect to any such Lien are governed, as the same may from time
to time be amended, renewed, extended,
supplemented or modified.
"Trustee" means the Series A Indenture Trustee, the Software House Indenture Trustee, and the SellCo Indenture Trustee.
"Uniform Commercial Code" means the Uniform Commercial
Code of the State of New York, as
amended.
2. Lien Priorities
2.1 Subordination of Liens. Notwithstanding the date, manner or order of grant, attachment or perfection of any Liens granted to any Secured Party in the Collateral, and notwithstanding any provision of the Uniform Commercial Code, or any applicable law or decision, or any provision of any of the Indenture Documents or any other circumstance whatsoever, each Trustee, for itself and on behalf of each Relevant Secured Party, hereby agrees:
(a) Category One Collateral. With respect to the Category One Collateral:
(i) The Lien of the Series A Indenture Trustee and Series A Secured Parties in the Category One Collateral, now or hereafter held, shall be a senior and prior Lien therein to secure the Series A Obligations.
(ii) Any Lien of the Software House Indenture Trustee and Software House Secured Parties in the Category One Collateral, now or hereafter held by the Software House Secured Parties, regardless of how acquired, whether by grant, statute, operation of law, subrogation or otherwise, shall be junior and subordinate to all Liens in the Category One Collateral securing the Series A Obligations, and all Liens in the Category One Collateral securing the Series A Obligations shall be and remain senior to all Liens in the Category One Collateral securing the Software House Obligations for all purposes of this Agreement, whether or not subordinated to any Lien securing any other indebtedness of any Obligor in any Insolvency or Liquidation Proceeding.
(iii) Any Lien of the Sellco Indenture Trustee or of any SellCo Secured Parties in the Category One Collateral, now or hereafter held by either such Trustee or any such SellCo Secured Party, regardless of how acquired, whether by grant, statute, operation of law, subrogation or otherwise, shall be junior and subordinate to all Liens in the Category One Collateral securing the Series A Obligations and all Liens in the Collateral One Collateral securing the Software House Obligations; and all Liens in the Category One Collateral securing the Series A Obligations or the Software House Obligations shall be and remain senior to all Liens in the Category One Collateral securing any SellCo Obligations for all purposes of this Agreement, whether or not subordinated to any Liens securing any other indebtedness of any Obligor in any Insolvency or Liquidation Proceeding.
(b) Category Two Collateral. With respect to the Category Two Collateral:
(i) The Lien of the Software House Indenture Trustee and Software House Secured Parties in the Category Two Collateral, now or hereafter held, shall be a senior and prior Lien therein to secure the Software House Obligations.
(ii) Any Lien of the Series A Indenture Trustee and Series A Secured Parties in the Category Two Collateral now or hereafter held by the Series A Secured Parties regardless of how acquired, whether by grant, statute, operation of law, subrogation or otherwise, shall be junior and subordinate to all Liens in the Category Two Collateral securing the Software House Obligations; and all Liens in the Category Two Collateral securing the Software House Obligations shall be and remain senior to all Liens in the Category Two Collateral securing the Series A Obligations for all purposes of this Agreement, whether or not subordinated to any Lien securing any other indebtedness of any Obligor in any Insolvency or Liquidation Proceeding.
2.2 Prohibition on Contesting Liens; No New Liens. Each Trustee, for itself and on behalf of each Relevant Secured Party, agrees that it shall not (and hereby waives any right to) contest or support any other Person in contesting, in any proceeding (including, without limitation, any Insolvency or Liquidation Proceeding), the priority or the validity or enforceability of a Senior Lien held by any other Secured Party in any Collateral.
3. Enforcement.
3.1 No Exercise of Remedies. The provisions of this
Section 3.1 are subject to the provisions of
Section 5.3 below.
(a) Category One Collateral. With respect to the Category One Collateral:
(i) Unless and until the Series A Obligations have been paid in full, neither the Software House Indenture Trustee nor the Software House Secured Parties shall assert any right or remedy in respect of the Category One Collateral or any Lien therein held by the Series A Indenture Trustee or the Series A Secured Parties or any of them (including, without limitation, under or in respect of the Software House Subordinated Pledge Agreement or the Software House SellCo Pledge Agreement) except as expressly permitted by this Agreement. The Software House Indenture Trustee, for itself and on behalf of each Software House Secured Party, agrees not to take or receive from or on behalf of any Obligor, directly or indirectly, in cash or other property or by setoff or in any other manner (whether pursuant to any enforcement, collection, execution, levy or foreclosure proceeding or otherwise) any Category One Collateral or any proceeds thereof, unless and until all Series A Obligations shall have been paid in full. Without limiting the generality of the foregoing, unless and until the Series A Obligations have been paid in full, the sole right of the Software House Indenture Trustee and the Software House Secured Parties with respect to the Category One Collateral is to hold a Lien therein pursuant to the Software House Subordinated Pledge Agreement and the Software House SellCo Pledge Agreement for the period and to the extent granted therein and to receive a share of the proceeds thereof, if any, after payment in full of the Series A Obligations. Notwithstanding anything to the contrary in this Agreement (including Section 5.3), none of the Software House Indenture Trustee or Software House Secured Parties shall assert or exercise any right or remedy (A) unless it would be entitled to assert or exercise such right or remedy if it held no Lien, or (B) if any right of or benefit to the Series A Secured Parties is restricted or impaired to a greater extent than if the Software House Indenture Trustee or Software House Secured Parties held no Lien.
(ii) Unless and until all Series A Obligations and all Software House Obligations have been paid in full, neither the SellCo Indenture Trustee nor any SellCo Secured Party shall assert any right or remedy in respect of the Category One Collateral or any Lien therein held by the Series A Indenture Trustee or the Series A Secured Parties or the Software House Indenture Trustee or the Software House Secured Parties or any of them (including without limitation under or in respect of the SellCo Subordinated Pledge Agreement) except as expressly permitted by this Agreement. The SellCo Indenture Trustee, on behalf of itself and the SellCo Secured Parties, agrees not to take or receive from or on behalf of any Obligor, directly or indirectly, in cash or other property or by setoff or in any other manner (whether pursuant to any enforcement, collection, execution, levy or foreclosure proceeding or otherwise) any Category One Collateral or any proceeds thereof, unless and until all Series A Obligations and Software House Obligations shall have been paid in full. Without limiting the generality of the foregoing, unless and until the Series A Obligations and the Software House Obligations have been paid in full, the sole right of the SellCo Indenture Trustee and any SellCo Secured Party with respect to any Category One Collateral is to hold a Lien therein pursuant to the SellCo Subordinated Pledge Agreement for the period and to the extent granted therein and to receive a share in the proceeds thereof, if any, after payment in full of the Series A Obligations and the Software House Obligations. Notwithstanding anything to the contrary contained in this Agreement (including Section 5.3), neither the SellCo Indenture Trustee nor any SellCo Secured Party shall assert or exercise any right or remedy (A) unless it would be entitled to assert or exercise such right or remedy if it held no Lien, or (B) if any right of or benefit to the Series A Secured Parties or Software House Secured Parties is restricted or impaired to a greater extent than if such Trustee or SellCo Secured Parties held no Lien.
(b) Category Two Collateral. With respect to the Category Two Collateral, unless and until all Software House Obligations have been paid in full, neither the Series A Indenture Trustee nor any Series A Secured Parties shall assert any right or remedy in respect of the Category Two Collateral or any Lien therein held by the Software House Indenture Trustee or the Software House Secured Parties or any of them (including without limitation under or in respect of the Series A Subordinated Pledge Agreement) except as expressly permitted by this Agreement. The Series A Indenture Trustee, on behalf of itself and the Series A Secured Parties, agrees not to take or receive from or on behalf of the Company, directly or indirectly, in cash or other property or by setoff or in any other manner (whether pursuant to any enforcement, collection, execution, levy or foreclosure proceeding or otherwise) any Category Two Collateral or any proceeds thereof, unless and until all Software House Obligations shall have been paid in full. Without limiting the generality of the foregoing, unless and until the Software House Obligations have been paid in full, the sole right of the Series A Indenture Trustee and the Series A Secured Parties with respect to any Category Two Collateral is to hold a Lien therein pursuant to the Series A Subordinated Pledge Agreement for the period and to the extent granted therein and to receive a share in the proceeds thereof, if any, after payment in full of the Software House Obligations. Notwithstanding anything to the contrary contained in this Agreement (including Section 5.3), neither the Series A Indenture Trustee nor any Series A Secured Party shall assert or exercise any rights or remedy (i) unless it would be entitled to assert or exercise such right or remedy if it held no Lien, or (ii) if any right or benefit to the Software House Secured Parties is restricted or impaired to a greater extent than if the Series A Trustee or Series A Secured Parties held no Lien.
3.2 Cooperation. With respect to any Collateral, each Trustee, for itself and on behalf of each Relevant Secured Party, agrees that, unless and until all Senior Obligations secured by such Collateral have been paid in full, it will not commence, or join with any creditor other than the Trustee or Senior Obligation Holders in commencing any enforcement, collection, execution, levy or foreclosure proceeding with respect to any Lien held by it in such Collateral or proceeds thereof.
4. Proceeds; No Setoff; Payments Over. Subject to the provisions of Section 5.3, with respect to any Collateral in which any Trustee or Secured Party has a Senior Lien, until payment in full of all Senior Obligations secured thereby, no Trustee or Secured Party other than the Senior Lienor with respect to such Collateral shall exercise any right of setoff or counterclaim with respect to any such Collateral or with respect to any proceeds thereof, and all proceeds of such Collateral shall be paid to such Senior Lienor for application to such Senior Obligations. Subject to the provisions of Section 5.3, any proceeds of Collateral received by any Trustee or any Secured Party and any other cash or other property received by any Trustee or any Secured Party in contravention of this Agreement shall be segregated and held in trust and paid over to the Senior Lienor with respect to such Collateral for the benefit of the Senior Obligation Holders secured thereby in the same form as received, with any necessary endorsements or as a court of competent jurisdiction may otherwise direct. With respect to any Collateral, the Senior Lienor with respect thereto is hereby authorized to make any such endorsements as the agent for each other Trustee and each Secured Party. This authorization is coupled with an interest and is irrevocable.
5. Other Agreements.
5.1 Releases. With respect to any Collateral, if the Senior Lienor releases with respect thereto any of its Liens in any part of such Collateral in connection with the sale, lease, exchange, transfer or other disposition thereof in accordance with the terms of the Indenture Documents governing such Liens or for application of proceeds to the Senior Obligations secured thereby, the Liens, if any, of each other Trustee and/or the Secured Parties shall be automatically and unconditionally and simultaneously released and such Trustees and Secured Parties shall execute and deliver to the applicable Obligor such termination statements, releases and other documents as the Senior Lienor or such Obligor may request to effectively confirm such release. Notwithstanding the foregoing, if not applied to the Senior Obligations, the Trustees' and Secured Parties' Lien granted pursuant to the Pledge Agreements shall, subject to all of the provisions of this Agreement, continue in the proceeds of any sale, lease, exchange or other disposition of Collateral.
5.2 Amendments to Pledge Agreements. Without the prior written consent of each Senior Lienor, no Pledge Agreement shall be amended, modified or supplemented.
5.3 Rights as Unsecured Creditors. Notwithstanding anything to the contrary in this Agreement (but subject to the last sentence of each of Sections 3.1(a)(i), 3.1(a)(ii) and 3.1(b)), each Trustee and the Secured Parties may exercise rights and remedies as an unsecured creditor against any Obligor in accordance with the terms of the Indenture Documents. Nothing in this Agreement shall prohibit the receipt by any Trustee or any Secured Party of scheduled payments of interest and principal due under any Indenture so long as such receipt is not the direct or indirect result of the exercise by such Trustee or any Secured Party of rights or remedies as a secured creditor or enforcement of any Lien held by any of them.
5.4 Bailee for Perfection. (a) The Series A Indenture Trustee agrees to hold the certificates, notes and other instruments representing or evidencing (i) the Pledged Collateral (as defined in the Series A Senior Pledge Agreement and the Software House Subordinated Pledge Agreement) and (ii) the Pledged Collateral (as defined in the Series A SellCo Pledge Agreement, the Software House SellCo Pledge Agreement and the SellCo Subordinated Pledge Agreement) included in the Category One Collateral (such Pledged Collateral referred to in clauses (i) and (ii) above being collectively the "Category One Instruments") in its possession as bailee for the Software House Indenture Trustee and, to the extent the same constitute Collateral under the SellCo Subordinated Pledge Agreement, for the SellCo Indenture Trustee, respectively, and any assignee, solely for the purpose of perfecting the security interest granted in such Category One Instruments pursuant to the Software House Subordinated Pledge Agreement, the Software House SellCo Pledge Agreement and the SellCo Subordinated Pledge Agreement, subject to the terms and conditions of this Section 5.4; and the Software House Indenture Trustee agrees to hold the certificates, notes and other instruments representing or evidencing the Pledged Collateral (as defined in the Software House Senior Pledge Agreement and the Series A Subordinated Pledge Agreement) included in the Category Two Collateral (the "Category Two Instruments") in its possession as bailee for the Series A Indenture Trustee and any assignee solely for the purpose of perfecting the security interest granted in the Category Two Instruments pursuant to the Series A Subordinated Pledge Agreement, subject to this Section 5.4 (each of the Series A Indenture Trustee and the Software House Indenture Trustee, in its capacity as a bailee pursuant to this subsection (a) or pursuant to subsection (f) below, being herein referred to as a "Bailee").
(b) Until the Series A Obligations are paid in full, the Series A Indenture Trustee shall be entitled to deal with the Category One Instruments in accordance with the terms of the Series A Indenture, the Series A Senior Pledge Agreement and the Series A SellCo Pledge Agreement as if the Lien of the other Trustees under the other Pledge Agreements did not exist, and the rights of such other Trustees shall at all times be subject to the terms of this Agreement and to the Series A Indenture Trustee's rights under the Series A Indenture, the Series A Senior Pledge Agreement and the Series A SellCo Pledge Agreement; and until the Software House Obligations are paid in full, the Software House Indenture Trustee shall be entitled to deal with the Category Two Instruments in accordance with the terms of the Software House Indenture and the Software House Senior Pledge Agreement as if the Lien of the Series A Indenture Trustee under the Series A Subordinated Pledge Agreement did not exist, and the rights of the Series A Indenture Trustee shall at all times be subject to the terms of this Agreement and to the Software House Indenture Trustee's rights under the Software House Indenture and the Software House Senior Pledge Agreement.
(c) No Bailee pursuant to this Section 5.4 shall
have any obligation whatsoever to any Trustee or
any Secured Party to assure that any Collateral is genuine or
owned by any Obligor or to preserve right or
benefits of any Person except as expressly set forth in this
Section 5.4. The duties or responsibilities of a
Bailee hereunder shall be limited to solely holding Pledged
Shares as provided herein as Bailee for purposes
of perfecting a Lien. A Bailee (i) shall not be obligated to
recognize and shall not have any liability or
responsibility arising under any other instrument to which it is
not a party; (ii) may rely upon any instrument
believed by it to be genuine and sufficient and properly
presented and shall not be liable or responsible for any
action taken or omitted in accordance with the provisions
thereof; (iii) shall not be liable or responsible for
any act it may do or omit to do except in the case of willful
misconduct or gross negligence; (iv) in case any
Pledged Shares shall be attached, garnished or levied upon any
order of court, or the delivery thereof shall be
stayed or enjoined by any order of court, or any other order,
judgment or decree shall be made or entered by
any court affecting such property, or any part thereof, or any of
its acts, is expressly authorized in its sole
discretion to obey and comply with all writs, orders, judgments
or decrees so entered or issued, whether with
or without jurisdiction, and in case it obeys and complies with
any such writ, order, judgment or decree it shall
not be liable to any Trustee or to any other Person by reason of
such compliance notwithstanding such writ,
order, judgment or decree being subsequently reversed, modified,
annulled, set aside or vacated; (v) shall in no
event be liable for its failure to ascertain the terms and
conditions of or to comply with any agreement or other
document in connection with the transactions contemplated by the
Indenture Documents; (vi) shall not be
responsible or liable for any forgery or fraudulent
impersonations of any Person; and (vii) shall not be required
to make any determination with respect to a controversy which may
arise between a Trustee or any Person
with respect to the transactions contemplated by the Indenture
Documents and may await the settlement and
such controversy by legal proceedings or otherwise, as it may
require and in such event, it shall not be liable
for interest or damage.
(d) A Bailee shall not be under any obligation to institute or defend any action, suit or other proceeding or take any other action against any Person in connection with any Collateral or Indenture Document. A Bailee shall be entitled to rely upon any writing or other document, telecopy or telegram believed by it to be genuine and correct and to have been signed, sent or made by the proper Person. A Bailee may consult counsel with respect to any question arising hereunder or in connection herewith and such Bailee shall not be liable for any action taken or omitted to be taken in good faith upon advice of such counsel.
(e) A Bailee shall not have, by reason of any Pledge Agreement or this Agreement or any other document, a fiduciary relationship in respect of any Trustee or Secured Party.
(f) A Bailee may deem and treat the Trustee under an Indenture as the pledgee under a Pledge Agreement and the holder of any Lien in the Category One Instruments and Category Two Instruments for all purposes and may require reasonable evidence of authority by any Person purporting to act on behalf of such Trustee. Upon payment in full of the Series A Obligations, the Series A Indenture Trustee shall deliver possession of the Category One Instruments then in its possession to the Software House Indenture Trustee or as otherwise ordered by a court, and the Software House Indenture Trustee agrees, from and after its receipt of such Category One Instruments, and to the extent the same constitute Collateral securing the SellCo Obligations, to hold the same in its possession, as Bailee for the SellCo Indenture Trustee, as the case may be, for the purpose set forth in subsection (a) above, and each such Trustee agrees that the provisions set forth in this Section 5.4 with respect to the Series A Indenture Trustee, as Bailee with respect to the Category One Instruments, shall be applicable to the Software House Indenture Trustee, as Bailee with respect to the Category One Instruments. Upon payment in full of the Series B Obligations, the Series B Indenture Trustee shall deliver possession of the Category Two Instruments then in its possession to the Series A Indenture Trustee or as otherwise ordered by a court.
6. Insolvency or Liquidation Proceedings.
6.1 Filing of Claims. The Trustees and the Secured
Parties may file proofs of claim and other
pleadings and motions with respect to the Collateral in which
they hold a Lien in an Insolvency or Liquidation
Proceeding, subject to the limitations contained in this
Agreement and only if consistent with the terms hereof
and the limitations on the Trustees and the Secured Parties
imposed hereby. If a proper claim or proof of
debt has not been filed in the form required in such proceeding
at least 30 days prior to the expiration of the
time for filing such claims, the Senior Lienor with respect to
such Collateral shall have the right (but not the
duty) to file an appropriate claim for and on behalf of the other
Trustees and Secured Parties and any of
them. Each Senior Lienor is hereby granted an irrevocable power
of attorney, coupled with an interest, to file
such claims in the name of the other Trustees and Secured Parties
or its own name, as provided in this
Section 6.1.
6.2 Preference Issues. (a) If, as a result of (i) the existence of the Senior Lien of a Senior Lienor or Senior Obligation Holders on any Collateral and (ii) the application of Section 550 of the Bankruptcy Code, such Senior Lienor or Senior Obligation Holder would, but for the provisions of this Section 6.2, be required in any Insolvency or Liquidation Proceeding to turn over or otherwise pay to the estate of an Obligor any amount ("Recovery") representing or constituting a transfer avoidable as to any other Trustee or any other holder of any Obligation (the "Avoided Transfer") which Avoided Transfer, but for the application of section 550 of the Bankruptcy Code, would not have been recoverable from such Senior Lienor or Senior Obligation Holder, then the Lien of such other Trustee and other holder of any Obligation in such Collateral shall be automatically and without the necessity of any act, be assigned to, and be junior and subordinate to the rights of, the estate in any such Insolvency or Liquidation Proceeding to the extent of such Recovery, and such other Trustee and other holder of any Obligation disclaim the benefit of any Lien which, but for the provisions of this Section 6.2, would result in any such Avoided Transfer.
(b) If and to the extent the foregoing provisions of
Section 6.2(a) are not effective, for any reason
whatsoever, to prevent payment of the Recovery, or any part
thereof, by the Senior Lienor or Senior
Obligation Holder, the provisions of this Section 6.2(b) shall
apply. The amount of the Senior Obligations will
increase by the amount of the Recovery (or part thereof) paid by
the Senior Lienor or Senior Obligation
Holder, and the Senior Lienor and such Senior Obligation Holder
shall be entitled to be paid in full such
amount from the proceeds of the Collateral in which they have a
Senior Lien before any other Trustee or
Secured Party is entitled to any proceeds thereof.
(c) If and to the extent the foregoing provisions of
Section 6.2(a) and (b) are not effective, for
any reason whatsoever, to prevent payment of the Recovery, or any
part thereof, by the Senior Lienor or
Senior Obligation Holder, the provisions of this Section 6.2(c)
shall apply. The Senior Lienor and such Senior
Obligation Holder shall be entitled to receive payment in full of
all amounts which, but for the Avoided
Transfer, they would have received (including, without
limitation, interest at the contract rate provided in their
Indenture Documents) before any of the other Secured Parties or
Trustees shall be entitled to receive any
direct or indirect payment or distribution with respect to their
Obligations or any claim which is the equivalent
of or a substitute therefor. Any payment or distribution to
which any such Trustee or Secured Party would,
but for the provisions of this Section 6.2(c), be entitled to
receive, shall be paid directly to the Senior Lienor
for the benefit of the Senior Obligation Holders, and, if any
such Trustee or Secured Party shall receive any
such payment or distribution, it shall hold the same in trust for
the benefit of the Senior Obligation Holders
and pay the same over (without regard to counterclaim or setoff)
to the Senior Lienor for the benefit of the
Senior Obligation Holders in the same form as received (with any
necessary endorsements). Subject to the
provisions of Section 8.5 hereof, the Secured Parties shall be
entitled to rights of subrogation with respect to
amounts paid to Senior Obligation Holders under this Section
6.2(c).
6.3 Relief from the Stay and Adequate Protection. With respect to each item of Collateral, each Trustee holding a lien junior to a Senior Lien on such item hereby appoints the Senior Lienor holding the most senior Lien on such item as its attorney in fact (which appointment is coupled with an interest) to seek relief from or termination of any stay or injunction in any Insolvency or Liquidation Proceeding or to seek "adequate protection," as such term is used under the Bankruptcy Code, or any other relief in such Insolvency or Liquidation Proceeding in the name of the Trustee holding such junior Lien. No holder of such junior Lien shall seek such relief with respect to such item of Collateral without the consent of the Senior Lienor holding the most senior Lien on such item of Collateral. In the event that the debtor in an Insolvency or Liquidation proceeding makes any payment or transfers any property of any nature for the purpose of satisfying its obligation to provide "adequate protection" to any holder of such junior Lien, the Senior Lienor holding the most senior Lien in such item of Collateral shall be entitled to receive such property on account of the Senior Obligations secured by such Senior Lien.
7. Reliance; Waivers; etc.
7.1 Reliance. The consent by the Trustees and Secured Parties to the execution and delivery of each Pledge Agreement and the grant to the Trustees of a Lien in the applicable Collateral and all loans and other extensions of credit made as of and after the date hereof by the Secured Parties to an Obligor shall be deemed to have been given and made in reliance upon this Agreement. Each Trustee, for itself and on behalf of the Relevant Secured Parties, expressly waives all notice of the acceptance of and reliance on this Agreement by any other Trustee or Secured Party.
7.2 No Warranties or Liability. Each Trustee, for itself and on behalf of the Relevant Secured Parties, acknowledges and agrees that they have not made any representation or warranty with respect to the execution, validity, legality, completeness, collectability or enforceability of any of the Indenture Documents. The Secured Parties will be entitled to manage and supervise their respective loans and extensions of credit to an Obligor in accordance with law and their usual practices, modified from time to time as they deem appropriate and the Senior Obligation Holders may manage their loans and extensions of credit without regard to any rights or interest that the holders of other Obligations may have in the Collateral, in which the Senior Obligation Holders have a Senior Lien. No Senior Lienor or Senior Obligation Holder, on the one hand, and each other Trustee and the other Secured Parties, on the other hand, shall have any duty to the other to act or refrain from acting in a manner which allows, or results in, the occurrence or continuance of an event of default or default under any of their respective agreements with any Obligor (including the relevant Indenture Documents), regardless of any knowledge thereof which they may have or be charged with.
7.3 No Waiver of Subordination Provisions. (a) No right of a Senior Lienor or Senior Obligation Holder, or any of them to enforce subordination as provided in this Agreement shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of any Obligor or by any act or failure to act by any Senior Lienor or Senior Obligation Holder, or by any noncompliance by any Person with the terms, provisions and covenants of this Agreement or of any of the Indenture Documents, regardless of any knowledge thereof which the Senior Lienor or and Senior Obligation Holder, or any of them, may have or be otherwise charged with.
(b) Without in any way limiting the generality of the foregoing paragraph, so long as any Trustee is a Senior Lienor with respect to any Collateral, such Trustee and the Senior Obligations Holders holding Senior Obligations secured by such Collateral, or any of them, may, at any time, and from time to time, without the consent of, or notice to, any other Trustee or Secured Party, without incurring any liabilities to such Trustees or Secured Parties, and without impairing or releasing the subordination and other benefits provided in this Agreement (even if any right of subrogation or other right or remedy of any Secured Parties or Trustees is affected, impaired or extinguished thereby) do any one or more of the following:
(i) change the manner, place or terms of payment or change or extend the time of payment of, or renew, exchange, amend, increase or alter, the terms of any of such Senior Obligations or any Lien in any Collateral or guaranty thereof or any liability of the Company or any guarantor, or any liability incurred directly or indirectly in respect thereof (including, without limitation, any increase in or extension of the Senior Obligations, without any restriction as to the amount, tenor or terms of any such increase or extension), or otherwise amend, renew, exchange, extend, modify, supplement in any manner any Senior Liens held by the Senior Lienor, the Senior Obligations or any of the Indenture Documents relating thereto;
(ii) sell, exchange, release, surrender, realize upon, enforce or otherwise deal with in any manner and in any order any part of such Collateral or any liability of any Obligor or any guarantor to such Senior Lienor or holder of such Senior Obligation, or any liability incurred directly or indirectly in respect thereof;
(iii) settle or compromise any Senior Obligation or any other liability of any Obligor or any guarantor or any security therefor or any liability incurred directly or indirectly in respect thereof and apply any sums by whomsoever paid and however realized to any liability (including, without limitation, the Senior Obligations) in any manner or order; and
(iv) exercise or delay in or refrain from exercising any right or remedy against any Obligor or any Collateral or any guarantor or any other Person, elect any remedy, and otherwise deal freely with each Obligor and such Collateral and any guarantor or any holder of any liability of any Obligor or any guarantor to such holder or any liability incurred directly or indirectly in respect thereof.
(c) So long as any Trustee is a Senior Lienor with a Senior Lien in any Collateral, each other Trustee agrees for itself and on behalf of each Relevant Secured Party, that the Senior Lienor and the Senior Obligation Holders with respect to such Collateral shall have no liability to and any other Trustee or Secured Party, and each such other Trustee hereby waives, for itself and on behalf of each Relevant Secured Party, any claim against any such Senior Lienor or Senior Obligation Holder arising out of any and all actions which such Senior Lienor or Senior Obligation Holders may take or permit or omit to take with respect to (i) their Indenture Documents, (ii) collection of the Senior Obligations, or (iii) such Collateral. Each such Trustee agrees, for itself and on behalf of each Relevant Secured Party, that such Senior Lienor and Senior Obligation Holders have no duty to them in respect of the maintenance or preservation of such Collateral or any rights of any Person therein.
(d) So long as any Trustee is a Senior Lienor with a Senior Lien in any Collateral, each other Trustee, for itself and on behalf of each Relevant Secured Party, agrees not to assert and hereby waives, to the fullest extent permitted by law, any right to demand, request, plead or otherwise assert or otherwise claim the benefit of, any marshalling, appraisement, valuation or other similar right that may otherwise be available under applicable law or any other similar rights a junior secured creditor may have under applicable law.
8. Miscellaneous.
8.1 Conflicts. In the event of any conflict between the provisions of this Agreement and the provisions of the Indenture Documents, the provisions of this Agreement shall govern.
8.2 Continuing Nature of Subordination. This Agreement shall continue effective until all Senior Obligations shall have been paid in full in cash. Each Trustee, on behalf of itself and each Relevant Secured Party, hereby waives any right it may have under applicable law to revoke this Agreement or any of the provisions of this Agreement.
8.3 Amendments; Waivers. No amendment, modification or waiver of any of the provisions of this Agreement by any Trustee or Secured Party shall be deemed to be made unless the same shall be in writing signed on behalf of the party making the same or its authorized agent and each waiver, if any, shall be a waiver only with respect to the specific instance involved and shall in no way impair the rights of the parties making such waiver or the obligations of the other parties to such party in any other respect or at any other time.
8.4 Information Concerning Financial Condition of the Company. No Trustee or Secured Party shall have any duty to advise any other Trustee or Secured Party of information known to it or them regarding (a) the financial condition of the Obligors and all endorsers and/or guarantors of the Obligations or (b) any other circumstances bearing upon the risk of nonpayment of the Obligations. In the event any Trustee or Secured Party, in its or their sole discretion, undertakes at any time or from time to time to provide any such information to any other Trustee or any Secured Party, it or they shall be under no obligation (i) to provide any such information on any subsequent occasion, (ii) to undertake any investigation not a part of its regular business routine, or (iii) to disclose any information which, pursuant to accepted or reasonable commercial finance practices, such party wishes to maintain confidential.
8.5 Subrogation. No payment or distribution to any Senior Lienor or Senior Obligation Holder shall entitle any other Trustee or holder of any other Obligation to exercise any right of subrogation until all Senior Obligations have been paid in full.
8.6 Application of Payments. All payments received by a Senior Lienor or Senior Obligation Holder may be applied, reversed, and reapplied, in whole or in part, to such part of the Senior Obligations as such Senior Lienor or Senior Obligation Holders in their sole discretion, deem appropriate. Each Trustee, for itself and on behalf of the Relevant Secured Parties, assents to any extension or postponement of the time of payment of the Senior Obligations or any part thereof and to any other indulgence with respect thereto, to any substitution, exchange or release of any security which may at any time secure any part of the Senior Obligations and to the addition or release of any other Person primarily or secondarily liable therefor.
8.7 Consent to Jurisdiction; Waivers. THE PARTIES HERETO CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN NEW YORK, NEW YORK, WAIVE PERSONAL SERVICE OF ANY AND ALL PROCESS, AND CONSENT THAT ALL SUCH SERVICE MAY BE MADE BY REGISTERED MAIL DIRECTED TO SUCH PARTY AS PROVIDED IN SECTION 8.8 BELOW FOR SUCH PARTY. SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED THREE (3) DAYS AFTER THE SAME SHALL BE POSTED AS AFORESAID. THE PARTIES HERETO WAIVE TRIAL BY JURY, ANY OBJECTION TO ANY ACTION INSTITUTED HEREUNDER BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO THE VENUE OF ANY ACTION INSTITUTED HEREUNDER.
8.8 Notices. All notices to the Series A Secured Parties, the Software House Secured Parties or the SellCo Secured Parties permitted or required under this Agreement may be sent to the Series A Indenture Trustee, the Software House Indenture Trustee and the SellCo Indenture Trustee, respectively. Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and may be personally served, telecopied, telexed or sent by courier service or United States mail and shall be deemed to have been given when delivered in person or by courier service, upon receipt of a telecopy or telex or four (4) Business Days after deposit in the United States mail (registered or certified, with postage prepaid and properly addressed). For the purposes hereof, the addresses of the parties hereto (until notice of a change thereof is delivered as provided in this Section 8.8) shall be as set forth below each party's name on Schedule 1 hereto, or, as to each party, at such other address as may be designated by such party in a written notice to all of the other parties.
8.9 Further Assurances. The Trustees and the Secured Parties shall take such further action and shall execute and deliver to the Senior Lienors such additional documents and instruments (in recordable form, if requested) as the Senior Lienors may reasonably request to effectuate the terms of and the subordination contemplated by this Agreement.
8.10 Governing Law. This Agreement has been delivered and accepted at and shall be deemed to have been made at New York, New York and shall be interpreted, and the rights and liabilities of the parties bound hereby determined, in accordance with the internal laws and decisions (as opposed to the conflict of laws provisions) of the State of New York.
8.11 Binding on Parties, Successors and Assigns. Any and all agreements, waivers, representations and obligations of the Trustees made or incurred under this Agreement shall bind each of the Relevant Secured Parties and by their acceptance of the benefits of their Pledge Agreement and the Plan of Reorganization each Secured Party agrees to be bound hereby. This Agreement shall be binding upon and inure to the benefit of the Trustees and the Secured Parties and their respective successors and assigns.
8.12 Specific Performance. Each Senior Lienor may demand specific performance of this Agreement. Each of the Trustees, for itself and on behalf of the Relevant Secured Parties, hereby irrevocably waives any defense based on the adequacy of a remedy at law and any other defense which might be asserted to bar the remedy of specific performance in any action which may be brought by a Senior Lienor.
8.13 Section Titles; Time Periods. The section titles contained in this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of this Agreement. In the computation of time periods, unless otherwise specified, the word "from" means "from and including" and the each of the phrases "to" and "until" means "to and including".
8.14 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be an original and all of which shall together constitute one and the same document.
8.15 Authorization. By his signature, each Person executing this Agreement on behalf of a party hereto represents and warrants to the other parties hereto that he is duly authorized to do so.
8.16 No Third Party Beneficiaries. This Agreement and the rights and benefits hereof shall inure to benefit of the Senior Lienors and the Senior Obligation Holders and their successors and assigns and no other Person, including without limitation, the Company as debtor in possession and any trustee for the estate created by the commencement of an Insolvency or Liquidation Proceeding, shall have or be entitled to assert rights or benefits hereunder.
8.17 Effectiveness. This Agreement shall become effective as of the Effective Date and when executed and delivered by the parties hereto. This Agreement shall be effective both before and after the commencement of any Insolvency or Liquidation Proceeding. All references to the Company shall include the Company as debtor in possession and any receiver or Trustee for the Company in any Insolvency or Liquidation Proceeding.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first
written above.
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By:
Title:
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By:
Title:
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, as Trustee
By:
Title:
Each of the undersigned, EMCOR GROUP, INC., SELLCO
CORPORATION and MES
HOLDINGS CORPORATION, hereby (a) acknowledges receipt of a copy
of the foregoing Intercreditor
Agreement this 15th day of December, 1994 and agrees to take no
action and to refrain from taking any action
which is inconsistent with the terms thereof, (b) irrevocably
authorizes and directs the Senior Lienors to
deliver all certificates, notes and other instruments
representing or evidencing Category One Instruments or
Category Two Instruments in their possession to the applicable
Trustee pursuant to Section 5 above upon
payment in full of the Senior Obligations secured by the Senior
Lien of such Senior Lienor and termination of
the relevant Indenture Documents, and (c) agrees that such
Intercreditor Agreement shall be binding on it and
on all successors and assigns of the undersigned.
EMCOR GROUP, INC.
By:
Title:
SELLCO CORPORATION
By:
Title:
MES HOLDINGS CORPORATION
By:
Title:
Schedule 1
Addresses
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: Corporate Trust and Agency Administration
Telecopier No.: (212) 858-2952
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Department B
Telecopier No.: (212) 852-1626
Shawmut Bank Connecticut, National Association
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
Telecopier No.: (203) 986-7920
EXHIBIT 10(u)
1994 MANAGEMENT STOCK OPTION PLAN
OF
EMCOR GROUP, INC.
1. Purpose. The purpose of this Stock Option Plan is to advance the interests of the Corporation by encouraging and enabling the acquisition of a larger personal proprietary interest in the Corporation by officers, management and key employees of the Corporation and its Subsidiaries upon whose judgment and keen interest the Corporation is largely dependent for the successful conduct of its operations and by providing such officers, management and key employees with incentives to put forth maximum efforts for the success of the Corporation's business. It is anticipated that the acquisition of such proprietary interest in the Corporation and such incentives will stimulate the efforts of such officers, management and key employees on behalf of the Corporation and its Subsidiaries and strengthen their desire to remain with the Corporation and its Subsidiaries. It is also expected that such incentives and the opportunity to acquire such a proprietary interest will enable the Corporation and its Subsidiaries to attract desirable personnel.
2. Definitions. When used in this Plan, unless the context otherwise requires:
(a) "Board of Directors" shall mean the Board of Directors of the Corporation, as constituted at any time.
(b) "Chairman of the Board" shall mean the person who at the time shall be Chairman of the Board of Directors.
(c) "Committee" shall mean the Committee hereinafter described in Section 3.
(d) "Corporation" shall mean EMCOR Group, Inc., a Delaware corporation.
(e) "Eligible Persons" shall mean those persons described in Section 4 who are potential recipients of Options.
(f) "Fair Market Value" on a specified date shall mean the closing price at which a Share is traded on the stock exchange, if any, on which Shares are primarily traded or, if the Shares are not then traded on a stock exchange, the closing price of a Share as reported on the NASDAQ National Market System or, if the Shares are not then traded on the NASDAQ National Market System, the average of the closing bid and asked prices at which a Share is traded on the over-the-counter market, but if no Shares were traded on such date, then on the last previous date on which a Share was so traded, or, if none of the above are applicable, the value of a Share as established by the Committee for such date using any reasonable method of valuation.
(g) "Options" shall mean the Stock Options granted pursuant to this Plan.
(h) "Plan" shall mean this 1994 Management Stock Option Plan of EMCOR Group, Inc., as adopted by the Board of Directors on December 12, 1994, as such Plan from time to time may be amended.
(i) "President" shall mean the person who at the time shall be the President of the Corporation.
(j) "Share" shall mean a share of common stock of the Corporation.
(k) "Subsidiary" shall mean any corporation 50% or more of whose stock having general voting power is owned by the Corporation, or by another Subsidiary as herein defined, of the Corporation.
3. Committee. The Plan shall be administered by the Compensation Committee of the Board of Directors, which shall consist of two or more directors of the Corporation, each of whom shall be a "disinterested person" within the meaning of Rule 16b-3(c)(2) under the Securities Exchange Act of 1934, as from time to time amended (the "Exchange Act") and an "outside director" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code") and the regulations promulgated thereunder.
4. Participants. The class of persons who are potential recipients of Options granted under this Plan consist of key employees of the Corporation or a Subsidiary, as determined by the Committee. The parties to whom Options are granted under this Plan, and the number of Shares subject to each such Option, shall be determined by the Committee in its sole discretion, subject, however, to the terms and conditions of this Plan. Persons to whom Options may be granted include key employees who are also directors of the Corporation or a Subsidiary.
5. Shares. Subject to the provisions of Section 14 hereof, the Committee may grant Options with respect to an aggregate of up to 1,000,000 Shares, all of which shares may be either Shares held in treasury or authorized but unissued Shares. The maximum number of Shares which may be the subject of Options granted to any individual in any calendar year shall not exceed 500,000 Shares. If the Shares that would be issued or transferred pursuant to any Option are not issued or transferred and cease to be issuable or transferable for any reason, the number of Shares subject to such Option will no longer be charged against the limitation provided for herein and may again be made subject to Options; provided, that the counting of Shares subject to Options granted under the Plan against the number of Shares available for further Options shall in all cases conform to the requirements of Rule 16b-3 under the Exchange Act; and provided, further, that with respect to any Option granted to any Eligible Person who is a "covered employee" as defined in Section 162(m) of the Internal Revenue Code and the regulations promulgated thereunder that is canceled, the number of Shares subject to such Option shall continue to count against the maximum number of Shares which may be the subject of Options granted to such Eligible Person.
6. Grant of Options. Within one year after the
Effective Date, as defined in the Corporation's plan of
reorganization pursuant to Chapter 11 of the Bankruptcy Code
(such date being hereinafter referred to as the "Effective Date"
and such plan being hereinafter referred to as the "Plan of
Reorganization"), but in no event prior to the expiration of
three months plus 20 days after the Effective Date, the
Committee shall grant to Eligible Persons Options for the
purchase of up to 500,000 Shares. All other Options shall be
granted from time to time as determined by the Committee. The
number of any Options to be granted to any Eligible Person shall
be determined by the Committee in its sole discretion. At the
time an Option is granted, the Committee may, in its sole
discretion, designate whether such Option (a) is to be
considered as an incentive stock option within the meaning of
Section 422 of the Internal Revenue Code, or (b) is not to be
treated as an incentive stock option for purposes of this Plan
and the Internal Revenue Code.
Notwithstanding any other provision of this Plan to the contrary, to the extent that the aggregate Fair Market Value (determined as of the date an Option is granted) of the Shares with respect to which Options which are designated as (or deemed to be) incentive stock options granted to an employee (and any incentive stock options granted to such employee under any other incentive stock option plan maintained by the Corporation or any Subsidiary that meets the requirements of Section 422 of the Internal Revenue Code) first become exercisable in any calendar year exceeds $100,000, such Options shall be treated as Options which are not incentive stock options. Options with respect to which no designation is made by the Committee shall be deemed to be incentive stock options to the extent that the $100,000 limitation described in the preceding sentence is met. This paragraph shall be applied by taking options into account in the order in which they are granted.
Nothing herein contained shall be construed to prohibit the issuance of Options at different times to the same person.
The form of an Option shall be determined from time to time by the Committee. A certificate of Option signed by the Chairman of the Board or the President or a Vice President of the Corporation, attested by the Treasurer or an Assistant Treasurer, or Secretary or an Assistant Secretary of the Corporation and bearing the seal of the Corporation affixed thereto, shall be issued to each person to whom an Option is granted. The certificate of Option for an Option shall be legended to indicate whether or not the Option is an incentive stock option.
7. Purchase Price. The purchase price per Share of the Shares to be purchased pursuant to the exercise of the initial grants of Options for the purchase of up to 500,000 Shares shall be equal to the average market price of a Share over the 20-day trading period immediately preceding the date on which such Options are granted; provided, however, that in the event that the average market price of a Share during such period cannot be determined, the purchase price hereunder shall be determined by an investment advisor selected by the Committee. Notwith- standing the foregoing, the purchase price per Share for the Shares to be purchased pursuant to the exercise of an incentive stock option shall not in any event be less than 100% of the Fair Market Value of a Share on the date of grant of the Option.
The purchase price per Share for the Shares to be purchased pursuant to the exercise of all other Options shall be at least 100% of the Fair Market Value of a Share on the date such Option is granted.
8. Duration of Options. The duration of any Option granted under this Plan shall be for a period of ten years from the date upon which the Option is granted.
9. Ten Percent Stockholders. Notwithstanding any other provision of this Plan to the contrary, no Option which is intended to qualify as an incentive stock option may be granted under this Plan to any employee who, at the time the Option is granted, owns shares possessing more than 10 percent of the total combined voting power or value of all classes of stock of the Corporation, unless the exercise price under such Option is at least 110% of the Fair Market Value of a Share on the date such Option is granted and the duration of such Option is no more than five years.
10. Exercise of Options. Except as otherwise provided herein, Options after the grant thereof, shall be exercisable by the holder at such rate and times as may be fixed by the Committee, provided, however, that no Options may be exercised in part or in full prior to the approval of the Plan by a majority vote of the stockholders of the Corporation as provided in Section 19. No Options may be exercised until the first anniversary of the date upon which the Options were granted; one-third of the Shares subject to Options may be purchased on or after the first anniversary of the date of grant; and an additional one-third of the Shares subject to Options may be purchased on or after each of the second and third anniversaries, respectively, of the date of grant.
Notwithstanding the foregoing, all or any part of any remaining unexercised Options granted to any person may, after approval of the Plan by the stockholders of the Corporation as provided in Section 19, be exercised in the following circumstances (but in no event during the six-month period commencing on the later of the date granted or the date of shareholder approval of the Plan): (a) subject to the provisions of Section 13 hereof, immediately upon (but prior to the expiration of the term of the Option) the holder's retirement from the Corporation and all Subsidiaries on or after his 65th birthday, (b) subject to the provisions of Section 13 hereof, upon the disability (to the extent and in a manner as shall be determined by the Committee in its sole discretion) or death of the holder, or (c) upon the occurrence of such special circumstance or event as in the opinion of the Committee merits special consideration; provided, however, that the estate of the deceased holder of an Option may exercise it prior to the expiration of the six-month period described above.
An Option shall be exercised by the delivery of a written notice duly signed by the holder thereof to such effect ("Exercise Notice"), together with the Option certificate and the full purchase price of the Shares purchased pursuant to the exercise of the Option, to the Chairman of the Board or an officer of the Corporation appointed by the Chairman of the Board for the purpose of receiving the same. Payment of the full purchase price shall be made as follows: in cash or by check payable to the order of the Corporation; by delivery to the Corporation of Shares which shall be valued at their Fair Market Value on the date of exercise of the Option (provided, that a holder may not use any Shares acquired pursuant to this Plan or any other plan maintained by the Company or a Subsidiary unless the holder has beneficially owned such Shares for at least six months); by providing with the Exercise Notice an order to a designated broker to sell part or all of the Shares and to deliver sufficient proceeds to the Corporation, in cash or by check payable to the order of the Corporation, to pay the full purchase price of the Shares and all applicable withholding taxes; or by such other methods as the Committee may permit from time to time.
Within a reasonable time after the exercise of an Option, the Corporation shall cause to be delivered to the person entitled thereto, a certificate for the Shares purchased pursuant to the exercise of the Option. If the Option shall have been exercised with respect to less than all of the Shares subject to the Option, the Corporation shall also cause to be delivered to the person entitled thereto a new Option certificate in replacement of the certificate surrendered at the time of the exercise of the Option, indicating the number of Shares with respect to which the Option remains available for exercise, or the original Option certificate shall be endorsed to give effect to the partial exercise thereof.
Notwithstanding any other provision of the Plan or of any Option, no Option granted pursuant to the Plan may be exercised at any time when the Option or the granting or exercise thereof violates any law or governmental order or regulation.
11. Consideration for Options. The Corporation shall obtain such consideration for the grant of an Option as the Committee in its discretion may determine.
12. Non-transferability of Options. Options and all other rights thereunder shall be non-transferable or non-assignable by the holder thereof except to the extent that the estate of a deceased holder of an Option may be permitted to exercise them. Options may be exercised or surrendered during the holder's lifetime only by the holder thereof.
13. Termination of Employment. All or any part of any
Option, to the extent unexercised, shall terminate immediately,
upon the cessation or termination for any reason of the holder's
employment by the Corporation or any Subsidiary, except that the
holder shall have until the end of the three-month period
following the cessation of his employment with the Corporation
or its Subsidiaries, and no longer, to exercise any unexercised
Option that he could have exercised on the day on which such
employment terminated; provided, that such exercise must be
accomplished prior to the expiration of the term of such Option.
Notwithstanding the foregoing, if the cessation of employment is
due to retirement on or after attaining the age of sixty-five
(65) years, or to disability (to an extent and in a manner as
shall be determined in each case by the Committee in its sole
discretion) or to death, the holder or the representative of the
estate of a deceased holder shall have the privilege of
exercising the Options which are unexercised at the time of such
retirement, or of such disability or death; provided, however,
that such exercise must be accomplished prior to the expiration
of the term of such Option and (a) within three months of the
holder's retirement or disability, or (b) within six months of
the holder's death, as the case may be.
14. Adjustment Provision. If prior to the complete exercise of any Option there shall be declared and paid a stock dividend upon the Shares or if the Shares shall be split up, converted, exchanged, reclassified, or in any way substituted for, then the Option, to the extent that it has not been exercised, shall entitle the holder thereof upon the future exercise of the Option to such number and kind of securities or cash or other property subject to the terms of the Option to which he would have been entitled had he actually owned the Shares subject to the unexercised portion of the Option at the time of the occurrence of such stock dividend, split-up, conversion, exchange, reclassification or substitution, and the aggregate purchase price upon the future exercise of the Option shall be the same as if the originally optioned Shares were being purchased thereunder.
Any fractional shares or securities issuable upon the exercise of the Option as a result of such adjustment shall be payable in cash based upon the Fair Market Value of such shares or securities at the time of such exercise. If any such event should occur, the number of Shares with respect to which Options remain to be issued, or with respect to which Options may be reissued, shall be adjusted in a similar manner.
Notwithstanding the foregoing, upon the dissolution or
liquidation of the Corporation, or the occurrence of a merger or
consolidation in which the Corporation is not the surviving
corporation, or in which the Corporation becomes a subsidiary of
another corporation or in which the voting securities of the
Corporation outstanding immediately prior thereto do not
continue to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity)
more than 50% of the combined voting securities of the Corpora-
tion or such surviving entity immediately after such merger or
consolidation, or upon the sale of all or substantially all of
the assets of the Corporation, this Plan and the Options granted
hereunder shall terminate unless provision is made by the Cor-
poration in connection with such transaction for the assumption
of Options theretofore granted, or the substitution for such
Options of new options of the successor corporation or a parent
or subsidiary thereof, with appropriate adjustments as to the
number and kinds of shares and the per share exercise prices.
In the event the Options terminate as aforesaid in connection
with such a dissolution, liquidation, merger, consolidation or
sale, the holder of any such Option shall be entitled to receive
from the Corporation cash in an amount equal to the excess of
(i) the Fair Market Value (determined on the basis of the amount
received by shareholders in connection with such transaction) of
the Shares subject to the portion of the Option not theretofore
exercised (whether or not the Option is then exercisable
pursuant to its terms or otherwise), over (ii) the aggregate
purchase price which would be payable for such Shares upon the
exercise of the Option. In the event of any other change in the
corporate structure or outstanding Shares, the Committee may
make such equitable adjustments to the number of Shares and the
class of shares available hereunder or to any outstanding Option
as it shall deem appropriate to prevent dilution or enlargement
of rights.
15. Issuance of Shares and Compliance with Securities Act. The Corporation may postpone the issuance and delivery of Shares pursuant to the grant or exercise of any Option until (a) the admission of such Shares to listing on any stock exchange on which Shares of the Corporation of the same class are then listed, and (b) the completion of such registration or other qualification of such Shares under any State or Federal law, rule or regulation as the Corporation shall determine to be necessary or advisable. Any holder of an Option shall make such representations and furnish such information as may, in the opinion of counsel for the Corporation, be appropriate to permit the Corporation, in the light of the then existence or non- existence with respect to such Shares of an effective Registration Statement under the Securities Act of 1933, as from time to time amended (the "Securities Act"), to issue the Shares in compliance with the provisions of the Securities Act or any comparable act. The Corporation shall have the right, in its sole discretion, to legend any Shares which may be issued pursuant to the grant or exercise of any Option, or may issue stop transfer orders in respect thereof.
16. Income Tax Withholding. If the Corporation or a Subsidiary shall be required to withhold any amounts by reason of any Federal, State or local tax rules or regulations in respect of the issuance of Shares pursuant to the exercise of any Option, the Corporation or the Subsidiary shall be entitled to deduct and withhold such amounts from any cash payments to be made to the holder of such Option. In any event, the holder shall make available to the Corporation or Subsidiary, promptly when requested by the Corporation or such Subsidiary, sufficient funds to meet the requirements of such withholding; and the Corporation or Subsidiary shall be entitled to take and authorize such steps as it may deem advisable in order to have such funds made available to the Corporation or Subsidiary out of any funds or property due or to become due to the holder of such Option.
17. Administration and Amendment of the Plan. Except as hereinafter provided, the Board of Directors or the Committee may at any time withdraw or from time to time amend the Plan as it relates to, and the terms and conditions of, any Option not theretofore granted, and the Board of Directors or the Committee, with the consent of the affected holder of an Option, may at any time withdraw or from time to time amend the Plan as it relates to, and the terms and conditions of, any outstanding Option. Notwithstanding the foregoing, any amendment by the Board of Directors or the Committee which would increase the number of Shares issuable under the Plan or to any individual employee or change the class of Eligible Persons shall be subject to the approval of the stockholders of the Corporation within one year of such amendment.
Determinations of the Committee as to any question which may arise with respect to the interpretation of the provisions of the Plan and Options shall be final. The Committee may authorize and establish such rules, regulations and revisions thereof not inconsistent with the provisions of the Plan, as it may deem advisable to make the Plan and Options effective or provide for their administration, and may take such other action with regard to the Plan and Options as it shall deem desirable to effectuate their purpose.
The Plan is intended to comply with Rule l6b-3 under the Exchange Act. Any provision inconsistent with such Rule shall be inoperative and shall not affect the validity of the Plan.
18. No Right of Employment. Nothing contained herein or in an Option shall be construed to confer on any employee any right to be continued in the employ of the Corporation or any Subsidiary or derogate from any right of the Corporation and any Subsidiary to retire, request the resignation of or discharge such employee (without or with pay), at any time, with or without cause.
19. Effective Date of the Plan. This Plan is conditioned upon its approval by the stockholders of the Corporation on or before December 11, 1995 by the vote of the holders of a majority of the stock of the Corporation voting at such meeting in person or by proxy; except that this Plan is adopted and approved by the Board of Directors effective December 12, 1994 to permit the grant of Options prior to the approval of the Plan by the stockholders of the Corporation as aforesaid. In the event that this Plan is not approved by the stockholders of the Corporation as aforesaid, this Plan and any Options granted hereunder shall be void and of no force or effect.
20. Final Issuance Date. No Option shall be granted under the Plan after December 11, 2004.
EXHIBIT 10(v)
RELIANCE INSURANCE COMPANIES
UNDERWRITING AND CONTINUING
INDEMNITY AGREEMENT
THIS AGREEMENT, made and entered into this 22nd day of November, 1994, is among JWP INC., as debtor and as debtor-in- possession, a Delaware corporation, DYN Specialty Contracting, Inc., a Virginia corporation, B&B Contracting & Supply Company, a Texas corporation, Dynalectric Company, a Florida corporation, Dynalectric Company of Nevada, a Nevada corporation, Contra Costa Electric, Inc., a California corporation, JWP Systems/Kirkwood Electric Co., Inc., a California corporation, and Reliance Surety Company, a Delaware corporation, Reliance Insurance Company, a Pennsylvania corporation, United Pacific Insurance Company, a Pennsylvania corporation, Reliance National Indemnity Company, a Wisconsin corporation and Reliance Insurance Company of Illinois, an Illinois corporation.
R E C I T A L S
WHEREAS, JWP is the subject of a chapter 11 proceeding now pending in the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"), Case No. 93-B- 46404 (JHG) (the "Reorganization"), and has or shall obtain bankruptcy court authority to enter into this Agreement and the other UNDERWRITING DOCUMENTS to which it is a party; and
WHEREAS, each PRINCIPAL is engaged in the business, among other things, of an electrical contractor for commercial and industrial construction in the United States, and any PRINCIPAL, individually, jointly with others or on behalf of any of its subsidiaries, affiliates, or divisions or their subsidiaries, affiliates or divisions now in existence or hereafter formed or acquired, or on behalf of third-party individuals, partnerships, or corporations, may desire or be required from time to time in connection with this business to deliver certain BOND(s) to OBLIGEES; and
WHEREAS, upon the express condition that this Agreement and the other UNDERWRITING DOCUMENTS be executed, RELIANCE has executed or procured or will execute or procure the execution of such BOND(s), and RELIANCE may continue previously executed BOND(s) and may forbear cancellation of such BOND(s); and
WHEREAS, each of the INDEMNITORS recognizes that BONDS are a necessary and desirable adjunct to the business done and to be done by the PRINCIPALS and desires to accommodate the financial, security, indemnity, exoneration and other requirements of RELIANCE as an inducement to RELIANCE to become surety upon obligations of the PRINCIPALS and has therefore agreed to be bound by this Agreement and the other UNDERWRITING DOCUMENTS to which it is a party and has agreed to exercise its best efforts to permit and require the PRINCIPALS to honor and perform all of the terms of this Agreement; and
WHEREAS, RELIANCE has agreed to act as surety or procure surety BONDS for the PRINCIPALS, subject to the understanding of the parties that RELIANCE is under no obligation to act as surety for every bond of the PRINCIPALS, that RELIANCE shall have the right to refuse to execute BONDS upon CONTRACTS which in its sole judgment present risks not contemplated by this Agreement and that the PRINCIPALS are under no obligation to obtain BONDS from RELIANCE.
NOW, THEREFORE, in consideration of the mutual agreements set forth herein, the execution or procurement of any BOND(s) by RELIANCE or the forbearance or cancellation of any existing BOND(s) by RELIANCE and as an inducement to such execution, procurement or forbearance, we, the undersigned PRINCIPALS and INDEMNITORS, agree and bind ourselves, our successors and assigns, jointly and severally, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINED TERMS. For the purposes of this Agreement, the following terms shall have the meanings listed below:
AFFILIATE means, with respect to any PERSON, any other PERSON or group acting in concert with such PERSON that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under the common control with such PERSON. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control with"), as used with respect to any PERSON or group of PERSONS, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of management and policies of such PERSON, whether through the ownership of voting securities or by contract or otherwise.
BANKRUPTCY CODE means Title 11 of the United States Code (11 U.S.C. Section 101 et seq.) as amended from time to time, and any successor statute.
BANKRUPTCY COURT - see Recitals.
BELMONT means Belmont Capital Partners II, L.P.
BELMONT FACILITY means the credit facility evidenced by that certain Credit Agreement dated February 14, 1994 among JWP, certain of the other INDEMNITORS and BELMONT.
BOND(s) means any surety agreements, undertakings, or instruments of guarantee signed by RELIANCE on behalf of any PRINCIPAL, whether executed before or after the execution of this Agreement.
CONTRACT(s) means any contract for which any BOND(s) is issued on behalf of any PRINCIPAL.
DEBT means, as of any applicable date of determination and as to any PERSON, all items of indebtedness, obligation or liability of such PERSON whether matured or unmatured, liquidated or unliquidated, direct or indirect, absolute or contingent, joint or several, that should be classified on such Person's balance sheet as a liability in accordance with GAAP.
EFFECTIVE DATE shall mean the effective date of the plan or reorganization of JWP resulting from the REORGANIZATION.
ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations and published interpretations thereof.
EVENT OF DEFAULT means any one or more of the following:
(a) INDEMNITORS, or any of them, within ten (10) days after
receipt of written notice by RELIANCE to INDEMNITORS
have failed or refused to perform any material
obligation under this Agreement or any other
UNDERWRITING DOCUMENT, as determined by RELIANCE;
or
(b) Any representation or warranty made or deemed made by
any INDEMNITOR in this Agreement or any other
UNDERWRITING DOCUMENT, or which is contained in any
certificate, document, opinion or financial or other
statement furnished under or in connection with any
UNDERWRITING DOCUMENT, shall prove to have been
incorrect in any material respect on or as of the date
made or deemed made;
or
(c) an OBLIGEE has declared any PRINCIPAL to be in default
under the respective CONTRACT(s) between such PRINCIPAL
and such OBLIGEE, Reliance has, upon investigation,
reasonably determined that PRINCIPAL is in default
under such CONTRACT(s) and has notified such PRINCIPAL
in writing of such determination (such a determination
by RELIANCE shall not be binding upon such PRINCIPAL in
any dispute such PRINCIPAL may have with such OBLIGEE
or a claimant under the related BOND(s) and such
PRINCIPAL has failed to cure such default within that
period of time provided to cure said default within
such CONTRACT(s); except as provided above, it shall be
no defense to the enforcement of this Agreement by
RELIANCE, and co-sureties, if any, that PRINCIPAL
asserts that it is not in default under the
CONTRACT(s));
or
(d) RELIANCE has received notice or knowledge of facts
giving rise to a reasonable belief that it has incurred
or may incur a LOSS and a PRINCIPAL has failed to cure
such LOSS or to take reasonable steps to avoid the
incurrence by RELIANCE of such LOSS within ten (10)
days after receipt of written notice sent by RELIANCE
to such PRINCIPAL;
or
(e) Any PRINCIPAL within ten (10) days after receipt of
notice sent by RELIANCE to such PRINCIPAL has failed,
refused or delayed to pay or is unable to pay any
claims, bills or other indebtedness incurred in, or in
connection with, the performance of the CONTRACT(s)
which claims, bills or other indebtedness RELIANCE,
upon investigation, shall have reasonably determined to
be valid;
or
(f) Except for JWP's obligations, agreements and
instruments entered into by it prior to the
REORGANIZATION which have been impaired pursuant to the
REORGANIZATION and which do not remain in effect after
the EFFECTIVE DATE, any INDEMNITOR shall hereafter (a)
fail to pay any indebtedness for borrowed money of such
INDEMNITOR in an aggregate principal amount in excess
of $500,000, or any interest or premium thereon, when
due (whether by scheduled maturity, required
prepayment, acceleration, demand, or otherwise), or (b)
fail to perform or observe any term, covenant, or
condition on its part to be performed or observed under
any agreement or instrument relating to any such
indebtedness, when required to be performed or
observed, if the effect of such failure to perform or
observe is to accelerate, or to permit the
acceleration, after the giving of notice, of the
maturity of such indebtedness, whether or not such
failure to perform or observe shall be waived by the
holder of such indebtedness; or any such indebtedness
shall be declared hereafter to be due and payable, or
required to be prepaid (other than by a regularly
scheduled required prepayment), prior to the stated
maturity thereof;
or
(g) Prior to the EFFECTIVE DATE, (1) the REORGANIZATION
shall be dismissed or converted to a case under Chapter
7 of the BANKRUPTCY CODE or a Chapter 11 trustee shall
be appointed in the REORGANIZATION; (2) an application
shall be filed by JWP for the approval of, or there
shall arise, any other administrative expense claim
(other than those in favor of BELMONT, SEABOARD and
other surety bonding companies and the administrative
expense claims specifically provided in the INTERIM
ORDER AND THE FINAL ORDER) having any priority over, or
being pari passu with, the administrative expenses
priority of the INDEMNITOR'S obligations arising
hereunder or under any BONDS in the REORGANIZATION; (3)
an order of the BANKRUPTCY COURT shall be entered in
the REORGANIZATION appointing an examiner with enlarged
powers (powers beyond those set forth in Section
1106(a)(3) and (4) of the BANKRUPTCY CODE) under
Section 1106(b) of the BANKRUPTCY CODE; (4) an order of
the BANKRUPTCY COURT shall be entered amending,
supplementing, staying, vacating or otherwise modifying
the INTERIM ORDER (except for modifications acceptable
to RELIANCE in its sole discretion); or (5) the
EFFECTIVE DATE shall not have occurred on or before
February 1, 1995;
or
(h) After the EFFECTIVE DATE, any INDEMNITOR becomes unable
or generally fails to pay, or admits in writing its
inability to pay, debts as they become due; or any
INDEMNITOR applies for, consents to, or acquiesces in
the appointment of, a trustee, receiver or other
custodian for such INDEMNITOR or any property thereof,
or makes a general assignment for the benefit of
creditors; or, in the absence of such application,
consent or acquiescence, a trustee, receiver or other
custodian is appointed for any INDEMNITOR or for a
substantial part of the property of any thereof and is
not discharged within 30 days; or any bankruptcy,
reorganization, debt arrangement, or other case or
proceeding under any bankruptcy or insolvency law, or
any dissolution or liquidation proceeding, is commenced
in respect of any INDEMNITOR and if such case or
proceeding is not commenced by such INDEMNITOR, it is
consented to or acquiesced in by such INDEMNITOR or
remains for 30 days undismissed; or any INDEMNITOR
takes any corporate action to authorize, or in
furtherance of, any of the foregoing;
or
(i) Either (a) the FINAL ORDER shall not be entered by the
BANKRUPTCY COURT within twenty (20) days of the entry
of the INTERIM ORDER or (b) following entry of the
FINAL ORDER, the FINAL ORDER shall be reversed on
appeal;
or
(j) One or more final judgments or decrees shall be entered
against any INDEMNITOR involving, in the aggregate, a
liability (not covered by collectible insurance) of
$500,000 or more and all such judgments or decrees
shall not have been vacated, satisfied, discharged or
stayed or bonded pending appeal within thirty (30)
consecutive days from the entry thereof.
FINAL ORDER means an order of the BANKRUPTCY COURT satisfying each of the requirements set forth in Section 4.1(i).
FINANCIAL STATEMENTS means all those balance sheets, income statements and other financial data (whether of any PRINCIPAL, any INDEMNITOR, or otherwise) which have been furnished to RELIANCE for the purpose of or in connection with this Agreement and the transactions contemplated hereby.
GAAP is defined as generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board.
INDEMNITOR means any of the PRINCIPALS or JWP; and INDEMNITORS means collectively all of the PRINCIPALS and JWP.
INTERIM ORDER - see Section 4.1(i).
JWP means JWP INC., as debtor and as debtor-in-possession, a Delaware corporation.
LEASE DEBT means, as of the applicable date of determination and as to any PERSON, an amount equal to the net present value (as determined by such PRINCIPAL'S independent certified public accountants utilizing an assumed interest rate of eleven percent (11%) per annum) of all lease, rent and other payments or indebtedness of any character whatsoever required to be paid under all leases or other contracts or arrangements with a term of more than one (1) year, whether or not in writing, relating to the use of personal property in respect of which such PRINCIPAL is a lessee, sublessee, user or obligor and which should not be capitalized in accordance with GAAP.
LIEN means any mortgage, deed of trust, pledge, security interest, hypothecation, assignment, deposit arrangement to assure payment of Debt, encumbrance, lien (statutory or other), or preference, priority, or other security agreement, or preferential arrangement to assure payment of Debt, charge, or encumbrance of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction to evidence any of the foregoing).
LOSS means:
(a) All damages, costs, reasonable attorney fees and liabilities (including all expenses accrued in connection therewith) which RELIANCE may sustain or incur by reason of executing or procuring the execution of the BOND(s), or any other BOND(s) which may be already or hereafter executed on behalf of any PRINCIPAL, or any renewal or continuation thereof; or which may be sustained or incurred by reason of making any investigation on account thereof, prosecuting or defending any action in connection therewith, obtaining a release, recovering or attempting to recover any salvage in connection therewith or enforcing by litigation or otherwise any of the provisions of this Agreement, including, but not limited to:
(1) money judgments, amounts paid in settlement or compromise, the full amount of reasonable attorney and other professional fees incurred or paid by RELIANCE, court costs and fees, and interest at the maximum legal rate allowable on all sums due it from the date of RELIANCE's demand for said sums, whether or not interest has been awarded by a court, provided such LOSS is not due to the gross negligence or willful misconduct of RELIANCE; and
(2) any LOSS which RELIANCE may sustain or incur in connection with the CONTRACT(s) or BOND(s), whether that LOSS results from the activity of any PRINCIPAL individually or as part of a joint venture, partnership or other entity which has been or may be formed; and
(3) any LOSS which RELIANCE may sustain or incur as a result of any actions taken by RELIANCE upon information provided by any INDEMNITOR, provided such LOSS is not due to the gross negligence or willful misconduct of RELIANCE;
(b) All reasonable legal and consulting fees and related expenses incurred in connection with any application or submission by any PRINCIPAL for a proposal, bid or other BOND, whether or not RELIANCE decides to issue said BOND; and
(c) All premiums, fees, interest and other charges due RELIANCE in connection with this Agreement or the BOND(S).
MATERIAL ADVERSE CHANGE means with respect to any PERSON a material adverse change in the condition (financial or otherwise), business, operations or prospects of such PERSON and its subsidiaries, taken as a whole.
MORTGAGE means a Deed of Trust in substantially the form of Exhibit IV executed by a PRINCIPAL in favor of RELIANCE.
NET CURRENT ASSETS means, as of any applicable date of determination and as to all the PRINCIPALS collectively, the aggregate current portion of assets (excluding indebtedness, obligations and liabilities due from Affiliates) of all the PRINCIPALS less the aggregate current portion of DEBT (excluding SUBORDINATED DEBT) as determined in accordance with GAAP.
OBLIGEE means any named party or parties appearing on the BOND(s) in whose favor the BOND(s) are issued.
PERMITTED LIENS means:
(a) LIENS for taxes, assessments, or governmental charges of a PRINCIPAL that are either not yet past due or that are being contested in good faith by appropriate proceedings and for which adequate reserves have been established;
(b) mechanics', workmen's, materialmen's and repairmen's LIENS or other like LIENS arising by operation of law in the ordinary course of business and securing sums which are not past due, or that are being contested in good faith by appropriate proceedings and for which adequate reserves have been established;
(c) any LIEN on assets existing on the effective date of this Agreement and listed on Schedule A to this Agreement (provided that the property subject to that LIEN is limited to the property to which that LIEN is attached prior to the effective date of this Agreement) and the continuation of any such LIEN upon a refinancing, renewal or extension of the DEBT secured by such existing LIEN (provided that the principal amount of the debt as of the effective date of this Agreement is not increased);
(d) any LIEN on assets granted to secure the purchase price thereof;
(e) any LIEN on assets granted in connection with third party (including capitalized leases) leases or sales in the ordinary course of business;
(f) following the EFFECTIVE DATE any LIEN on assets granted in connection with the WORKING CAPITAL FACILITY provided that the lender thereunder shall have entered into an intercreditor agreement with RELIANCE in form and substance acceptable to RELIANCE in its sole discretion;
(g) any LIEN granted on its assets by any PRINCIPAL to RELIANCE to secure a LOSS;
(h) LIENS on PRINCIPALS' insurance policies in connection with the deferred payment or financing thereof in the ordinary course of business;
(i) LIENS consisting of cash collateral deposits made by PRINCIPALS in the ordinary course of business in connection with PRINCIPALS' insurance program consistent with past practice;
(j) pledges or deposits by PRINCIPALS under workmen's compensation laws, unemployment insurance laws, or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for borrowed money) or leases to which a PRINCIPAL is a party or deposits to secure public or statutory obligations of a PRINCIPAL or deposits of cash or United States Government bonds to secure surety or appeal bonds to which such PRINCIPAL is a party, or deposits as security for contested taxes or for the payment rent;
(k) survey exceptions, encumbrances, easements or reservations of, or rights of others for, rights-of- way, sewers, electric lines, telegraph or telephone lines and other similar purposes, or zoning or other restrictions as to the use of real property or liens incidental to the conduct of such PRINCIPAL or to the ownership of its properties;
(l) LIENS consisting of restrictions regarding the disbursement or withdrawal of funds deposited by a PRINCIPAL in its bank accounts in the ordinary course of business consistent with past practice which accounts are (A) maintained in connection with specific construction projects or contracts from which payment and disbursements with respect to such projects or contracts are to be made or (B) required by customers of such PRINCIPAL to be excluded from PRINCIPALS' cash management system;
(m) LIENS securing DEBT permitted by Section 6.16(l);
(n) prior to the EFFECTIVE DATE, LIENS in favor of BELMONT arising pursuant to the BELMONT FACILITY; provided that the DEBT secured by such LIENS shall in no event exceed the excess of (i) the aggregate amount of Intercompany Debt (as such term is defined in the Credit Agreement evidencing the BELMONT FACILITY, as in effect on the date hereof) from time to time owed by the PRINCIPALS to any AFFILIATES (other than the PRINCIPALS) over (ii) the aggregate amount of such Intercompany Debt as of February 14, 1994.
PERSON means any entity, whether an individual, trustee, corporation, partner, joint stock company, unincorporated organization, business association or firm, joint venture, a government or any agent or instrumentality or political subdivision thereof.
PLAN means any employee benefit plan established, maintained or to which contributions have been made by any PRINCIPAL.
PLEDGE AGREEMENT means the Pledge Agreement in substantially the form of Exhibit IA executed by JWP in favor of RELIANCE or the Pledge Agreement in substantially the form of Exhibit IB executed by DYN Specialty Contracting, Inc., and PLEDGE AGREEMENTS means both of the foregoing agreements.
PRINCIPAL means any of DYN Specialty Contracting, Inc., B&B Contracting & Supply Company, Dynalectric Company, Dynalectric Company of Nevada Inc., Contra Costa Electric, Inc., JWP Systems/ Kirkwood Electric Company, Inc.; and PRINCIPALS means collectively all of the foregoing corporations.
RELIANCE means: Reliance Surety Company, Reliance Insurance Company, United Pacific Insurance Company, Reliance National Indemnity Company and Reliance Insurance Company of Illinois; or their AFFILIATES, subsidiaries, or divisions or any co-sureties, reinsurers or other companies directly or indirectly writing bonds for which this Agreement is consideration.
REORGANIZATION - see Recitals.
SEABOARD means Seaboard Surety Company.
SECURITY AGREEMENT means a Security Agreement in substantially the form of Exhibit II executed by a PRINCIPAL in favor of RELIANCE.
SUBORDINATED DEBT means any DEBT of any PRINCIPAL which is
owed to an AFFILIATE of such PRINCIPAL and which is subordinated
to any LOSS pursuant to the terms of a subordination agreement,
in substantially the form of Exhibit V attached hereto, executed
by such PRINCIPAL and such AFFILIATE; provided that SUBORDINATED
DEBT shall not include DEBT (other than DEBT constituting
indebtedness for borrowed money) owed to an AFFILIATE incurred in
the ordinary course of business in compliance with the provisions
set forth in Section 6.21; provided further that SUBORDINATED
DEBT shall include any management fees permitted pursuant to
Section 6.22.
TANGIBLE NET WORTH means, as of any applicable date of
determination and as to all the PRINCIPALS collectively, the
excess of (i) the net book value of all assets (other than all
items of indebtedness, obligation or liability due from
AFFILIATES and intangible assets) of all the PRINCIPALS after all
appropriate deductions (including, without limitation, reserves
for doubtful receivables, obsolescence, depreciation,
amortization), all as determined in accordance with GAAP, over
(ii) consolidated DEBT (excluding any Subordinated Debt) of all
the PRINCIPALS.
UNDERWRITING DOCUMENT means this Agreement, each PLEDGE
AGREEMENT, each SECURITY AGREEMENT, each MORTGAGE, each BOND and
any other instrument, document or agreement delivered by any
INDEMNITOR in connection herewith.
WORKING CAPITAL FACILITY means a revolving credit facility in form acceptable to RELIANCE entered into between the PRINCIPALS and a lender(s) reasonably satisfactory to RELIANCE.
SECTION 1.2 USE OF DEFINED TERMS. Any collective defined term and any defined term used in the plural shall be taken to encompass all members of the relevant class. Any defined term used in the singular preceded by "any" shall be taken to indicate any number of the members of the relevant class. Any defined term used in the singular and preceded by the word "each" shall indicate all members of the relevant class, individually.
ARTICLE II
BOND FACILITY
SECTION 2.1 BONDS. Subject to the terms of this Agreement, RELIANCE agrees to provide or procure surety bonds for the PRINCIPALS. RELIANCE reserves the right to decline to execute any BOND(s) and if RELIANCE executes any proposal or bid bond and if any PRINCIPAL is awarded the CONTRACT(s), RELIANCE shall not be obligated to execute any BOND(s) required to perform the awarded contract. No claim shall be made, nor any cause of action asserted against RELIANCE as a consequence of its failure to execute any BOND(s).
SECTION 2.2 PREMIUM PAYMENT. Each PRINCIPAL agrees to pay all premiums on the BOND(s) issued for such PRINCIPAL, computed in accordance with the regular manual of rates in effect on the date such BOND(s) are executed. The failure of any PRINCIPAL to pay the bond premiums or the failure of RELIANCE to receive premiums shall not provide INDEMNITORS with any defense to an action under this Agreement. Each PRINCIPAL also agrees to pay all premiums due RELIANCE on any insurance policy(ies) issued at the request of a PRINCIPAL, an INDEMNITOR or any authorized agent thereof by RELIANCE for the benefit of such PRINCIPAL or INDEMNITORS.
ARTICLE III
INDEMNIFICATION
SECTION 3.1 INDEMNITY. INDEMNITORS agree to indemnify, and keep indemnified, and hold and save harmless RELIANCE against all LOSS. The duty of INDEMNITORS to indemnify RELIANCE is a continuing duty, separate from the duty to exonerate, and survives any payments made in exoneration of RELIANCE. Amounts due RELIANCE pursuant to this Section shall be payable upon demand.
SECTION 3.2 EXONERATION. INDEMNITORS recognize and acknowledge the common law right of RELIANCE to be exonerated by PRINCIPAL. In the event any PRINCIPAL fails or refuses to exonerate RELIANCE upon demand, all INDEMNITORS other than such PRINCIPAL agree, upon demand by RELIANCE, to exonerate RELIANCE from LOSS, by satisfying such PRINCIPAL's obligations under the CONTRACT(s) and obtaining either a withdrawal of all claims against RELIANCE under the BOND(s) or a general release.
SECTION 3.3 CASH COLLATERAL Upon refusal or failure of any PRINCIPAL to exonerate RELIANCE in accordance with the terms hereof, INDEMNITORS agree upon demand to deposit with RELIANCE an amount of money designated by RELIANCE, such funds to be held by RELIANCE as collateral, with the right to use such funds or any part thereof at any time in payment or compromise of any LOSS, and in which funds INDEMNITORS do hereby grant to RELIANCE a security interest to secure, any LOSS.
SECTION 3.4 WAIVER OF CLAIMS AND HOLD HARMLESS Each INDEMNITOR specifically agrees to protect, indemnify and hold harmless RELIANCE, each of its officers, directors, employees, agents and its attorneys-in-fact against any and all LOSS that may in any way arise in connection with this Agreement and the other UNDERWRITING DOCUMENTS and the powers herein granted, specifically waiving any claim which any INDEMNITOR has or might hereafter have against RELIANCE or its attorneys-in-fact on account of anything done in enforcing the terms of this Agreement, the BOND(s) or any other UNDERWRITING DOCUMENT except for any LOSS due to the gross negligence or willful misconduct of RELIANCE.
SECTION 3.5 RIGHT OF INDEMNITORS TO TERMINATE AGREEMENT. Each INDEMNITOR expressly recognizes and covenants this Agreement as its continuing obligation to protect RELIANCE from all LOSS. Any INDEMNITOR may notify RELIANCE at its Home Office, of such INDEMNITOR's withdrawal from this Agreement; and shall state when, not less than thirty (30) days after receipt of such notice by RELIANCE, such withdrawal shall be effective. Such INDEMNITOR will not be liable under this Agreement as to any BOND(s) executed by RELIANCE after the effective date of such notice; provided, that as to any and all such BOND(s) executed or authorized by RELIANCE prior to the effective date of such notice and as to any and all renewals, continuations, extensions, or substitutions (and, if a proposal or bid bond has been executed or authorized prior to such effective date, as to any contract bond executed pursuant thereto) regardless of when the same are executed, such INDEMNITOR shall be and remain fully liable hereunder, as if notice had not been served. Withdrawal by any INDEMNITOR shall in no way affect the obligation of any other INDEMNITOR who has given no notice of termination to RELIANCE.
SECTION 3.6 INDEMNITORS AGREE TO BECOME PARTY DEFENDANTS. In the event of legal proceedings against RELIANCE, RELIANCE may apply for a court order making any or all of the INDEMNITORS party defendants, and each INDEMNITOR consents to the granting of such application, including consent to the jurisdiction of the court in which the application is made, and agrees to become such a party defendant or third-party defendant and to allow judgment, in the event of judgment against RELIANCE, to be rendered also against each INDEMNITOR, jointly and severally, in like amount and in favor of RELIANCE unless such judgment is due to the gross negligence or willful misconduct of RELIANCE.
SECTION 3.7 INDEMNITORS' WAIVER OF NOTICE. INDEMNITORS waive notice of the execution, continuation, modification, renewal, enlargement or amendment of any BOND and of any fact, act or information concerning or affecting the rights or liabilities of RELIANCE or INDEMNITORS including, but not limited to, any acts giving rise to any LOSS under the BOND(s). INDEMNITORS further agree that any notification by RELIANCE to any one INDEMNITOR shall constitute notice to all INDEMNITORS.
SECTION 3.8 INDEMNITORS' KNOWING CONSENT TO AGREEMENT. Each INDEMNITOR warrants that it is specifically and beneficially interested in obtaining the BOND(s) or the forbearance of cancellation of any existing BOND(s). INDEMNITORS acknowledge that the execution of this Agreement and the undertaking of indemnity was not made in reliance upon any representation concerning the responsibility of any INDEMNITOR or concerning the competence of PRINCIPAL to perform. INDEMNITORS agree to make no claim against RELIANCE for any oral representations, promises or statements made to any of them by RELIANCE or any of its agents or brokers, or for the failure of RELIANCE to disclose facts or information to INDEMNITORS.
SECTION 3.9 INDEMNITORS' DUTY TO REMAIN INFORMED OF PRINCIPAL'S BUSINESS. INDEMNITORS possess the duty to remain informed of all aspects of each PRINCIPAL's business and the business activities and financial affairs of each PRINCIPAL. INDEMNITORS acknowledge that they are presently informed of the state of business activities and financial affairs of each PRINCIPAL and all INDEMNITORS. RELIANCE possesses no obligation to inform any INDEMNITOR of any aspect of any PRINCIPAL's business or the business activities and financial affairs of the INDEMNITORS or of the request for, or issuance of, any BOND(s).
SECTION 3.10 ENFORCEABILITY OF RIGHTS DIRECTLY AGAINST INDEMNITORS. RELIANCE shall be entitled to enforce the obligations of this AGREEMENT directly against any INDEMNITOR without the necessity of first proceeding against the PRINCIPAL. The failure of any INDEMNITOR to perform any of the terms of this Agreement or the release of any INDEMNITOR by RELIANCE shall not excuse or release the remaining INDEMNITORS from their obligations under this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1 CONDITION PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT. The effectiveness of this Agreement is subject to the condition precedent that RELIANCE shall have received each of the following, in form and substance satisfactory to RELIANCE and its counsel:
(a) A SECURITY AGREEMENT duly executed by each PRINCIPAL, together with acknowledgment copies of the Financing Statements (UCC-1) duly filed under the Uniform Commercial Code of all jurisdictions in the opinion of RELIANCE desirable to perfect the security interest created by each SECURITY AGREEMENT;
(b) PLEDGE AGREEMENTS duly executed by JWP and by DYN Specialty Contracting, Inc. pursuant to which all the capital stock of each of the PRINCIPALS is pledged to RELIANCE, together with evidence of prior delivery to BELMONT of (i) the stock certificates evidencing all shares pledged under such Pledge Agreements, and (ii) appropriate stock powers for such shares signed in blank;
(c) An INTERCREDITOR AGREEMENT in substantially the form of Exhibit III-A duly executed by BELMONT and RELIANCE;
(d) A MORTGAGE covering each parcel of real property set forth on Schedule C duly executed by the PRINCIPAL which owns such real property;
(e) A subordination agreement in substantially the form of Exhibit V duly executed by JWP;
(f) Favorable opinions of Stroock & Stroock & Lavan, outside counsel to the INDEMNITORS, and Sheldon Cammaker, general counsel to the INDEMNITORS, addressing such other legal matters as RELIANCE may require;
(g) An officer's certificate of each INDEMNITOR certifying copies of each INDEMNITOR's appropriate corporate resolutions authorizing the execution, delivery and performance of this Agreement and the other UNDERWRITING DOCUMENTS to which such INDEMNITOR is a party and certifying incumbencies and true signatures of its officers so authorized;
(h) Evidence of the good standing of each INDEMNITOR in the jurisdiction in which such Person is incorporated;
(i) (i) Receipt of an order (the "INTERIM ORDER") of the
BANKRUPTCY COURT:
(1) granting JWP authority to enter into this Agreement, the other UNDERWRITING DOCUMENTS to which it is a party and other agreements, documents and instruments delivered in connection therewith to which it is a party and approving in all respects the Agreement, such other UNDERWRITING DOCUMENTS, such other agreements, documents and instruments delivered in connection therewith to which it is a party and the pledge by JWP of the capital stock of Dynalectric Company;
(2) declaring, pursuant to section 364(c)(1) of the Bankruptcy Code, that any and all claims against JWP arising under this Agreement or any other UNDERWRITING DOCUMENTS shall constitute expenses of administration of the kind specified in Sections 503(b) and 507(a) and (b) of the Bankruptcy Code with priority as discussed in clause (3) below;
(3) granting a superpriority claim to RELIANCE (junior to claims of the United States Trustee pursuant to 28 U.S.C. Section 1930 and to accrued and unpaid professional fees and disbursements incurred by the professionals retained by JWP and any Official Creditors' Committee(s) which may be appointed in this case not to exceed $1,500,000 (exclusive of fees paid during the pendency of the REORGANIZATION), but pari passu with superpriority claims granted to BELMONT and SEABOARD and to other surety bonding companies) over any and all administrative expenses specified in section 503(b) or 507(b) of the Bankruptcy Code in the chapter 11 proceeding or any subsequent chapter 7 proceeding;
(4) finding that approval of this Agreement and the other UNDERWRITING DOCUMENTS does not violate the terms of any existing orders entered in connection with the bankruptcy proceedings of JWP, including but not limited to any orders granting to any lenders LIENS upon the assets of JWP or other priorities;
(5) granting to RELIANCE the protections of Section 364(e) of the Bankruptcy Code;
(6) finding that applicable law excuses RELIANCE from accepting performance from or rendering performance to entities other than the PRINCIPALS or INDEMNITORS absent RELIANCE'S written waiver and consent and accordingly, finding that the Agreement and the other UNDERWRITING DOCUMENTS cannot be assumed or assigned without RELIANCE'S consent;
(7) providing that the terms of this Agreement and the other UNDERWRITING DOCUMENTS shall be binding upon any successor Examiner with expanded powers or Trustee appointed in JWP's chapter 11 proceeding and any trustee appointed in any chapter 7 proceeding in the event that JWP's chapter 11 proceeding is converted to a proceeding under chapter 7 or other successors or assigns of PRINCIPAL or INDEMNITORS; and
(8) providing that any sale of JWP's interest in the PRINCIPALS or INDEMNITORS shall not be inconsistent with the terms of this Agreement and the other UNDERWRITING DOCUMENTS and that any claims of RELIANCE against JWP under this AGREEMENT which are fixed and liquidated as of the EFFECTIVE DATE shall be paid in full in cash on such date or as otherwise may be agreed by RELIANCE and JWP, and that all of RELIANCE'S other claims against JWP under this AGREEMENT as of the EFFECTIVE DATE shall be unimpaired and shall not, pursuant to the plan, any order confirming such plan, section 1141 of the Bankruptcy Code or otherwise, be estimated, impaired or discharged, but rather shall constitute obligations of reorganized JWP; and
(ii) Evidence satisfactory to RELIANCE that the existing Official Creditors' Committee of the REORGANIZATION consents to the execution and delivery by JWP of this Agreement; and
(j) Such other information and documents as may reasonably be required by RELIANCE.
SECTION 4.2 CONDITIONS PRECEDENT TO ALL BONDS. The obligation of RELIANCE to issue any BOND shall be subject to the further conditions precedent that on the date of such issuance:
(a) The following statements shall be true and, by its request for the issuance of such BOND, PRINCIPAL shall be deemed to have certified to RELIANCE that as of the date of such issuance:
(i) The representations and warranties contained in Article V of this Agreement (other than Sections 5.6, 5.7, 5.8, 5.9 and 5.10), in Section 4 of each SECURITY AGREEMENT and in Section 4 of each PLEDGE AGREEMENT are correct in all material respects on and as of the date of such issuance as though made on and as of such date; and
No EVENT OF DEFAULT has occurred and is continuing, or would result from the issuance of such BOND;
(b) RELIANCE shall have received such other approvals, opinions, or documents as RELIANCE may reasonably request.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The INDEMNITORS represent and warrant to RELIANCE that
SECTION 5.1 INCORPORATION, GOOD STANDING, AND DUE QUALIFICATION. Each INDEMNITOR: (1) is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation; provided that JWP may not be in good standing in the State of Delaware due to its failure to pay certain Delaware franchise taxes accruing for periods prior to the commencement of the REORGANIZATION; (2) has the corporate power and authority, and has all material governmental licenses, authorizations, consents and approvals necessary to own its assets and to transact the business in which it is now engaged or proposed to be engaged, except to the extent the failure thereof would not be materially adverse to such INDEMNITOR; and (3) is duly qualified as a foreign corporation and in good standing under the laws of each other jurisdiction in which such qualification is required except to the extent the failure to so qualify would not result in a MATERIAL ADVERSE CHANGE to such INDEMNITOR.
SECTION 5.2 CORPORATE POWER AND AUTHORITY. The execution, delivery, and performance by each INDEMNITOR of the UNDERWRITING DOCUMENTS to which each is a party have been duly authorized by all necessary corporate and stockholder action and do not and will not (1) contravene such corporation's charter or bylaws; (2) violate any provision of any law, rule, regulation, order, writ, judgment, injunction, decree, determination, or award presently in effect having applicability to such corporation; (3) result in a breach of or constitute a default under any indenture or loan or credit agreement or any other agreement, lease, or instrument to which such corporation is a party or by which it or its properties may be bound or affected (except (i) where the appropriate consents have been obtained or, (ii) in the case of JWP, other than for agreements and instruments entered into by JWP prior to commencement of the REORGANIZATION with respect to which a breach or default thereof would not result in a Material Adverse Change); (4) result in, or require, the creation or imposition of any Lien (except Liens in favor of RELIANCE), upon or with respect to any of the properties now owned or hereafter acquired by such corporation; or (5) cause such corporation to be in default under any such law, rule regulation, order, writ, judgment, injunction, decree, determination, or award or any such indenture, agreement, lease, or instrument (except where the appropriate consents have been obtained).
SECTION 5.3 LEGALLY ENFORCEABLE AGREEMENT. This Agreement is, and each of the other UNDERWRITING DOCUMENTS when delivered under this Agreement will be, legal, valid, and binding obligations of each INDEMNITOR party thereto, enforceable against such INDEMNITOR, as the case may be, in accordance with their respective terms, except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency, and other similar laws affecting creditors' rights generally.
SECTION 5.4 APPROVALS. Except as set forth on Schedule B and except for filings and recordings of Liens created pursuant to the SECURITY AGREEMENT, no authorizations, approvals or consents of, and no filings or registrations with, any governmental or regulatory authority or agency are necessary for the execution, delivery or performance by each INDEMNITOR of the UNDERWRITING DOCUMENTS to which each is a party or for the validity or enforceability thereof.
SECTION 5.5 OWNERSHIP AND LIENS. Each INDEMNITOR has title
to, or valid leasehold interests in, all of its properties and
assets, real and personal, and none of the properties and assets
owned by such INDEMNITOR and none of their leasehold interests is
subject to any Lien, except such as may be permitted pursuant to
Section 6.15 of this Agreement.
SECTION 5.6 REAL PROPERTY. Schedule C contains a complete and accurate list, as of the date of this Agreement, of the address and legal descriptions of any real property owned by each PRINCIPAL.
SECTION 5.7 TAXES. Except as set forth on Schedule D, each INDEMNITOR has filed all tax returns (federal, state, and local) required to be filed and has paid all taxes, assessments, and governmental charges and levies thereon to be due, including interest and penalties, except to the extent the validity thereof is being contested in good faith by appropriate proceedings and for which adequate reserves have been set aside on the books of such INDEMNITOR.
SECTION 5.8 INSURANCE. Each PRINCIPAL represents that it has insurance in force as disclosed in Schedule E attached hereto and made a part hereof and that it will maintain the said insurance in force with good and substantial carriers acceptable to RELIANCE.
SECTION 5.9 COMPLIANCE. Each INDEMNITOR is in material compliance with all statutes and governmental rules and regulations applicable to them, including without limitation, ERISA insofar as ERISA applies to them, except to the extent the failure to be in compliance therewith would not be materially adverse to such INDEMNITOR. No condition exists or event or transaction has occurred in connection with any PLAN which could result in any material liability, fine or penalty being asserted against INDEMNITORS.
SECTION 5.10 LITIGATION. There is no action, suit or proceeding pending against, or to the knowledge of INDEMNITORS threatened against or affecting, any PRINCIPAL before any court or arbitrator or any government body, agency or official in which there is a reasonable likelihood of an adverse decision which could materially adversely affect the business, financial position or results of operations of PRINCIPAL or which in any manner draws into question the validity of this Agreement except those referred to in Schedule F attached hereto and made a part hereof.
SECTION 5.11 INTERCOMPANY INVESTMENTS. Each INDEMNITOR represents that it is not party to any indenture or loan or credit agreement or any other agreement, lease or instrument which limits the ability of JWP to make investments (whether in the form of equity or DEBT) in the PRINCIPALS to less than $8,000,000 in aggregate.
ARTICLE VI
COVENANTS
SECTION 6.1 CORPORATE EXISTENCE. Except as permitted by
Section 6.18, each PRINCIPAL will maintain its corporate
existence (in good standing where appropriate under state law)
and remain or become duly qualified or licensed (and in good
standing where appropriate under state law) as a foreign
corporation in each jurisdiction in which the conduct of its
businesses or location of its assets requires such qualification
or license, except for those jurisdictions where the failure to
so qualify would not result in a MATERIAL ADVERSE CHANGE to such
PRINCIPAL.
SECTION 6.2 MAINTENANCE OF RECORDS. Each PRINCIPAL will keep adequate records and books of account, in which complete entries will be made in accordance with GAAP consistently applied, reflecting all financial transactions of such PRINCIPAL.
SECTION MAINTENANCE OF PROPERTIES. Each PRINCIPAL will maintain, keep and preserve substantially all of its properties (tangible and intangible) necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted.
SECTION 6.4 MAINTENANCE OF INSURANCE. Subject to the self- insurance program of JWP each PRINCIPAL will maintain insurance with financially sound and reputable insurance companies or associations in such amounts and covering such risks as are usually carried by companies engaged in the same or a similar business and similarly situated, which insurance may provide for reasonable deductibility from coverage thereof. Each PRINCIPAL further agrees to furnish RELIANCE with an annual report on the insurance in force and with copies of the policies of said insurance evidencing the existence of the coverage called for by this Agreement.
SECTION 6.5 COMPLIANCE WITH LAWS. Each PRINCIPAL will comply in all material respects with all applicable laws, rules, regulations, and orders the failure to comply with which would result in a MATERIAL ADVERSE CHANGE to such PRINCIPAL, such compliance to include, without limitation, paying before the same become delinquent all taxes, assessments, and governmental charges imposed upon it or upon its property, except taxes, assessments and governmental charges being contested in good faith by appropriate proceedings.
SECTION 6.6 TAXES. Each PRINCIPAL will promptly pay all of its taxes, assessments and other governmental charges prior to the date on which all penalties are attached thereto, establish adequate reserves for the payment of taxes and assessments and make all required withholding and other tax deposits; provided, however that nothing herein contained shall be interpreted to require the payment of any tax, assessment or charge so long as its validity is being contested in good faith by appropriate proceedings.
SECTION 6.7 BOOKS AND RECORDS. Until RELIANCE shall have been furnished with evidence satisfactory to it of its discharge without LOSS, upon reasonable notice RELIANCE shall have the right at all reasonable times during normal business hours to free access to the papers of each INDEMNITOR including, without limitation, its books, records, accounts, computer software and other computer-stored information, for the purpose of examining, copying, or reproducing the same. Each PRINCIPAL authorizes and requests any and all depositories in which funds of such PRINCIPAL may be deposited to furnish to RELIANCE upon its written request (with copy to JWP) statements of account and any other documents reflecting receipts and disbursements and any PERSON, doing business with such PRINCIPAL is authorized to furnish any information requested by RELIANCE concerning any transaction. RELIANCE may furnish copies of any and all statements, agreements and FINANCIAL STATEMENTS and any information which it now has or may obtain concerning each of the INDEMNITORS to other PERSONS for the purpose of procuring co- suretyship or reinsurance.
SECTION 6.8 FINANCIAL RECORDS AND REPORTS. The PRINCIPALS on a consolidated basis will provide RELIANCE with copies of yearly audited FINANCIAL STATEMENTS of the PRINCIPALS as a group as soon as possible upon completion and in no event later than one hundred and five (105) days after the end of the period under audit. In addition, the PRINCIPALS will furnish RELIANCE on a consolidated basis with true copies of monthly unaudited FINANCIAL STATEMENTS of the PRINCIPALS, and such other financial information in a form as RELIANCE shall require, upon completion and in no event later than forty-five (45) days after the end of such calendar month; provided that, in the case of the last calendar month of each fiscal year of the PRINCIPALS, such FINANCIAL STATEMENTS shall be furnished within sixty (60) days after the end of such calendar month. JWP will provide RELIANCE with true copies of yearly audited FINANCIAL STATEMENTS of JWP on a consolidated basis as soon as possible upon completion and in no event later than one hundred five (105) days after the end of such yearly period. In addition, JWP will furnish RELIANCE on a consolidated basis with true copies of quarterly unaudited FINANCIAL STATEMENTS of JWP, and such other financial information in a form as RELIANCE shall require, upon completion and in no event later than sixty (60) days after the end of such quarterly period. The FINANCIAL STATEMENTS to be provided by INDEMNITORS will be prepared in conformity with GAAP applied on a basis consistent with that of the preceding fiscal year and in each instance will present fairly and accurately the financial condition of INDEMNITORS as at the dates of the statements and the results of their operations for the periods then ended. INDEMNITORS agree to immediately notify RELIANCE of the occurrence of any MATERIAL ADVERSE CHANGE with respect to the INDEMNITORS. INDEMNITORS represent that their books and records are kept accurately and in a timely manner and in accordance with good business practices.
SECTION 6.9 PRINCIPALS' REPRESENTATION. Each PRINCIPAL will
provide RELIANCE on a quarterly basis with a letter in which its
Chief Executive Officer represents that to his knowledge, as of
the date of such quarter end, as to such PRINCIPAL (a) the
representations and warranties contained in Article V of this
Agreement (other than Sections 5.6, 5.7, 5.8, 5.9 and 5.10), in
Section 4 of each SECURITY AGREEMENT and in Section 4 of each
PLEDGE AGREEMENT are correct as though made on and as of such
date and (b) no condition, event or act exists which constitutes,
or which with notice or the lapse of time, or both, would
constitute an EVENT OF DEFAULT. This letter shall accompany each
delivery of FINANCIAL STATEMENTS required by Section 6.8 hereof.
SECTION 6.10 NOTICE OF LITIGATION. Each PRINCIPAL shall promptly give notice in writing to RELIANCE of (a) the filing of an appeal to the FINAL ORDER or (b) any litigation filed or threatened against such PRINCIPAL involving an amount in excess of $100,000.00 which claim is not covered by insurance.
SECTION 6.11 WORKING CAPITAL LINE. Prior to the EFFECTIVE DATE JWP shall maintain the BELMONT FACILITY, and after the EFFECTIVE DATE the PRINCIPALS will collectively maintain the WORKING CAPITAL FACILITY providing a line of credit of at least $10,000,000 to be used exclusively by the PRINCIPALS for working capital needs accruing after the Effective Date.
SECTION 6.12 BOARD OF DIRECTORS AND MANAGEMENT. Each individual board member of each PRINCIPAL shall be, and each president and each vice president of each PRINCIPAL shall be, an individual acceptable to (a) Mr. Frank T. MacInnis so long as Mr. MacInnis remains the chief executive officer of JWP, and (b) thereafter, RELIANCE.
SECTION 6.13 TANGIBLE NET WORTH. On a consolidated basis,
the PRINCIPALS will not permit TANGIBLE NET WORTH to be less than
(a) $30,000,000 from the effective date of this Agreement through
and including December 31, 1995, and (b) $32,000,000 thereafter;
provided that the PRINCIPALS will not permit TANGIBLE NET WORTH
to be less than $35,000,000 at any time after any PRINCIPAL shall
have made any payment of SUBORDINATED DEBT pursuant to Section
6.16(m) or of any management fee to JWP pursuant to Section 6.22
or shall have paid any distribution to JWP pursuant to Section
6.19(f)(ii). At no time shall the PRINCIPALS permit the ratio of
(x) consolidated DEBT (excluding SUBORDINATED DEBT) plus LEASE
DEBT of all the PRINCIPALS to (y) TANGIBLE NET WORTH to be
greater than 3.0 to 1.0. In the event the PRINCIPALS fail to
maintain these levels they shall immediately notify RELIANCE and
shall have thirty days (30) in which to restore compliance with
such levels.
SECTION 6.14 NET CURRENT ASSETS. On a consolidated basis, the PRINCIPALS will not permit NET CURRENT ASSETS to be less than $25,000,000. At no time shall the PRINCIPALS permit the ratio of consolidated Current Assets of all the PRINCIPALS to consolidated Current Liabilities of all the PRINCIPALS to be less than 1.25 to 1.0. In the event the PRINCIPALS fail to maintain these levels they shall immediately notify RELIANCE and shall have thirty days (30) in which to restore compliance with such levels.
SECTION 6.15 LIENS. The PRINCIPALS will not create, incur, assume, or suffer to exist any LIEN upon any of its properties or assets now owned or hereafter acquired, except for PERMITTED LIENS.
SECTION 6.16 INDEBTEDNESS, ASSUMPTIONS, GUARANTEES. The PRINCIPALS will not incur, assume, or suffer to exist any DEBT or become contingently liable, including without limitation, liable by way of agreement, contingent or otherwise, to purchase assets, to provide funds for payment, to maintain net worth or working capital, to supply funds to or invest in any debtor, or otherwise for the purpose of assuring any creditor against loss for any obligation of any other person or entity, except:
(a) DEBT, assumptions, guaranties, endorsements, contingent liabilities, or other agreements existing at the effective date of this Agreement and disclosed in the FINANCIAL STATEMENTS or otherwise disclosed in writing prior to the effective date of this Agreement, and renewals, extensions or replacements thereof provided that the terms thereof are not amended or modified so as to impose more materially burdensome terms on PRINCIPAL or INDEMNITORS;
(b) guaranties by endorsement of negotiable instruments for deposit or collection in the ordinary course of business;
(c) guaranties in connection with third party leases, repurchase agreements or sales in the ordinary course of business;
(d) trade debt and other short term liabilities (other than indebtedness for borrowed money) incurred in the ordinary course of business;
(e) DEBT and LEASE DEBT incurred to finance the acquisition of equipment in the ordinary course of business in an aggregate outstanding principal amount not greater than $2,000,000 during any fiscal year;
(f) DEBT arising from the BELMONT FACILITY or the WORKING CAPITAL FACILITY; provided, however, that, in the case of the BELMONT FACILITY, the principal amount of DEBT for which the PRINCIPALS shall be liable shall in no event exceed the excess of (i) the aggregate amount of Intercompany Debt (as such term is defined in the Credit Agreement evidencing the BELMONT FACILITY, as in effect on the date hereof) from time to time owed by the PRINCIPALS to any AFFILIATES (other than the PRINCIPALS) over (ii) the aggregate amount of such Intercompany Debt as of February 14, 1994; and provided further that, in the case of the WORKING CAPITAL FACILITY, the lender of the WORKING CAPITAL FACILITY and RELIANCE shall have entered into an INTERCREDITOR AGREEMENT in substantially the form of Exhibit III-B;
(g) DEBT other than paragraphs (a) through (f) above in an aggregate outstanding principal amount not greater than $1,000,000 at any time;
(h) guaranties of bonds issued to PRINCIPALS pursuant to the terms hereof;
(i) indebtedness under capital leases or finance leases;
(j) indebtedness to another PRINCIPAL;
(k) indebtedness consisting of deferred payment obligations of a PRINCIPAL for insurance premiums or of funds borrowed for the payment of such premiums; and
(l) contingent obligations arising from the issuance of performance guarantees, assurances, indemnities or similar agreement in the ordinary course of business in respect of contracts of PRINCIPALS for the benefit of RELIANCE, sureties existing prior to the date hereof, or for the benefit of others to induce such others to forego the issuance of a surety bond in their favor;
(m) unsecured SUBORDINATED DEBT provided that (i) the terms
of such indebtedness comply with Section 6.21 and (ii)
no payments of principal or interest may be made with
respect to such indebtedness, (x) unless both before
and after giving effect to the payment thereof the
TANGIBLE NET WORTH shall equal or exceed $35,000,000 or
(y) following the occurrence and during the continuance
of an Event of Default unless such payments represent
proceeds from Lender Priority Collateral (as such term
is defined in the INTERCREDITOR AGREEMENT);
; provided, however, that in no event shall the PRINCIPALS execute a loan or credit agreement secured by equipment (other than a capital lease, financed lease or purchase money security agreement, in each case relating to equipment) unless such documents contain a provision which permits RELIANCE, at its option, to use the equipment to complete the CONTRACT(s). In the event RELIANCE exercises its option, RELIANCE agrees to maintain the equipment and pay reasonable rent or debt service, whichever is less, on the equipment during the period the equipment is used on the CONTRACT(s).
SECTION 6.17 DISPOSITION OF ASSETS. Except for PERMITTED LIENS and except as provided under Section 6.19, the PRINCIPALS will not sell, lease, transfer, or otherwise dispose of its assets whether now owned or hereafter acquired except for sales of inventory in the ordinary course of business and except for sales of equipment or real property (including appurtenances) not necessary for the conduct of its business provided that such sales of equipment or real property not necessary for the conduct of its business do not exceed in the aggregate in any fiscal year ten percent (10%) of the book value of all assets.
SECTION 6.18 MERGERS. The PRINCIPALS will not without the prior written consent of RELIANCE merge or consolidate with or into any PERSON other than another PRINCIPAL.
SECTION 6.19 INVESTMENTS, DIVIDEND RESTRICTIONS. The PRINCIPALS will neither make nor enter into any agreement to make any acquisition nor make or suffer to exist any investment in any PERSON whether in the form of equity or DEBT, or make any dividend or other distribution to any other PERSON, except:
(a) time deposits and certificates of deposit with maturities of one year or less of any of the Banks or of United States commercial banks with capital,surplus and undivided profits of $100,000,000.00 or more;
(b) securities issued, guaranteed or insured by the United States Government or an instrumentality or agency thereof maturing within one year from the date of acquisition thereof;
(c) commercial paper, demand notes or municipal bonds rated at least P2 or Aa, respectively, by Moody's Investors Service Inc., or rated at least A2 or AA, respectively, by Standard & Poor's Corporation, or commercial paper or municipal bonds receiving an equivalent rating from any other nationally recognized rating agency;
(d) investments existing on the effective date of this Agreement and disclosed in Schedule G;
(e) credit extended in connection with the sale of goods or rendering of services in the ordinary course of business and promissory notes or other instruments evidencing such credit (provided that the aggregate principal amount of such notes and instruments outstanding at any time shall not exceed $500,000);
(f) (i) distributions to JWP in an amount equal to the
amount the PRINCIPALS on a consolidated basis would pay
with respect to Federal or State taxes on the income of
the PRINCIPALS if the PRINCIPALS were filing federal
tax returns as a separate subchapter "C" corporation,
(ii) other distributions to JWP, provided that both
before and after giving effect to such distributions
the TANGIBLE NET WORTH shall equal or exceed
$35,000,000 and (iii) distributions to DYN Specialty
Contracting, Inc;
(g) investments in a PRINCIPAL;
(h) loans or advances to employees of PRINCIPALS made in the ordinary course of business consistent with past business practices; or
(i) investments made in the ordinary course of business in connection with its capacity as a co-joint venturer in a joint venture, corporation or similar pooling of efforts in respect of a specific project or series of projects for a limited or fixed duration to conduct a business of a type in which a PRINCIPAL is presently engaged consistent with past practices.
SECTION 6.20 PRINCIPAL'S ASSETS. The PRINCIPALS will not commingle their assets, particularly but not limited to cash and cash equivalents, with, and will hold such assets separately and distinctly from assets of any other PERSON (including JWP and any of its direct and indirect subsidiaries) other than amongst the PRINCIPALS.
SECTION 6.21 RESTRICTIONS UPON CONTRACTS WITH AFFILIATES. Other than amongst themselves, the PRINCIPALS will not without the prior written consent of RELIANCE enter into contracts, equipment leases or other agreements with any AFFILIATE except on an arms' length basis or except pursuant to written agreements with third party PERSONS from which the PRINCIPALS have been or are being benefitted, including but not limited to pension plans and other joint employee benefit programs, insurance programs and other similar joint programs or services.
SECTION 6.22 MANAGEMENT FEES. Notwithstanding the provisions set forth in Section 6.21 above, the PRINCIPALS may enter into a management agreement with JWP providing for certain management services to be performed by JWP and JWP may charge management fees for performance of such services, provided that such management fees may not be paid, but instead shall accrue, unless both before and after giving effect to the payment thereof the TANGIBLE NET WORTH shall equal or exceed $35,000,000.
SECTION 6.23 NATURE OF BUSINESS. The PRINCIPALS shall not engage in any business activities or operations substantially different from or unrelated to its present business activities and operations without the written consent of RELIANCE first obtained in advance. The PRINCIPALS likewise agree to use their best efforts to cause its subsidiaries to perform in accordance with this representation.
ARTICLE VII
RIGHTS OF RELIANCE
SECTION 7.1 FURTHER ASSURANCES/RELIANCE AS ATTORNEY-IN- FACT. INDEMNITORS agree to sign, execute, file and/or deliver to RELIANCE all documents, reports, papers, pleadings and/or instruments required to obtain, and/or perfect any of RELIANCE's rights under this Agreement. INDEMNITORS irrevocably nominate and appoint RELIANCE or any other PERSON(s) designated by RELIANCE true and lawful attorney-in-fact of INDEMNITORS, with full right and authority, upon the occurrence of an EVENT OF DEFAULT to execute on behalf of, and sign the names of each of the INDEMNITORS to any voucher, release, satisfaction, check, application for payment, bill of sale of any or all property assigned by this Agreement or any other UNDERWRITING DOCUMENT to RELIANCE or any other paper or contract necessary or desired to carry into effect the purposes of this Agreement or any other UNDERWRITING DOCUMENT, with full right and authority, to satisfy the performance of the CONTRACT(s); and each INDEMNITOR ratifies and confirms all that such attorney-in-fact or RELIANCE may lawfully do in the premises and further authorizes and empowers RELIANCE and such attorney-in-fact and each of them to enter upon and take possession of the tools, plant, equipment, materials and subcontracts and all other collateral security mentioned in this Agreement and enforce, use, employ and dispose thereof for the purposes set forth in this Agreement, INDEMNITORS recognize that the appointment of such attorney-in-fact constitutes a power coupled with an interest.
SECTION 7.2 CONTRACT FUNDS HELD IN TRUST. INDEMNITORS agree and expressly declare that all funds due or to become due under the CONTRACT(s) will immediately become trust funds, whether in possession of INDEMNITORS or another, for the benefit and the payment of all PERSONS to whom a PRINCIPAL incurs obligations in the performance of the CONTRACT(s), for which RELIANCE would be liable under the BOND(s). If RELIANCE discharges any such obligations, with or without a claim asserted against RELIANCE under the BOND(s), it shall be entitled to assert the right of such PERSON to the trust fund.
SECTION 7.3 APPLICATION OF COLLATERAL TO PAYMENT OF CLAIMS. After the occurrence and during the continuance of an EVENT OF DEFAULT, all collateral security held by or assigned to RELIANCE by INDEMNITORS may be used by RELIANCE at any time in payment of any LOSS. RELIANCE may sell or realize upon any or all such collateral security, at public or private sale, with or without notice to INDEMNITORS or any of them, and with the right to be purchaser itself at any such public sale, and shall be accountable to INDEMNITORS only for such surplus or remainder of such collateral security or the proceeds thereof as may be in RELIANCE's possession after it has been fully indemnified as provided in this Agreement. RELIANCE shall not be liable for, and INDEMNITORS agree to make no claim against RELIANCE for, decrease in value or loss or destruction of or damage to such security, however caused.
SECTION 7.4 RIGHT OF RELIANCE TO SETTLE CLAIMS. RELIANCE shall have the exclusive right for itself and for INDEMNITORS to decide and determine whether any claim, demand, suit or judgment on the BOND(s) shall be paid, settled, defended or appealed. Any payment or determination made by RELIANCE that either RELIANCE was or might be liable therefor or such payments were necessary or advisable to protect any of RELIANCE's rights or to avoid or lessen RELIANCE's liability or alleged liability, shall be final, conclusive and binding upon INDEMNITORS; and any LOSS which may be sustained or incurred shall be paid by INDEMNITORS upon demand by RELIANCE. In the event of any payment, settlement, compromise, or investigation, an itemized statement of LOSS sworn to by an officer or authorized representative of RELIANCE or voucher(s) or other evidence of such LOSS shall be prima facie evidence of the fact and extent of the liability of INDEMNITORS to RELIANCE in any claim or suit and in any and all matters arising between INDEMNITORS and RELIANCE.
SECTION 7.5 AUTHORITY OF RELIANCE TO MAKE LOANS TO PRINCIPAL. In addition to the other remedies provided herein, RELIANCE is authorized and empowered, but is not obligated, to advance or loan money or guarantee loans to any PRINCIPAL as RELIANCE may see fit for the purpose of any of the CONTRACT(s), or for the purpose of meeting operational expenses or paying other obligations, bonded or unbonded. Such funds may be advanced or guaranteed at anytime, whether before or after default of such PRINCIPAL under the CONTRACT(s). Upon demand by RELIANCE, each INDEMNITOR shall be responsible to reimburse RELIANCE for all funds so loaned, advanced, or guaranteed and all LOSS incurred by RELIANCE in relation thereto, notwithstanding the failure of any PRINCIPAL to so use those funds. INDEMNITORS waive all notice of such advance, loan, or guarantee.
SECTION 7.6 AUTHORITY OF RELIANCE TO AMEND BOND. RELIANCE shall have the right, and is hereby authorized and empowered, but not required: (a) upon the request of any INDEMNITOR to increase or decrease the penalty or penalties of any BOND(s), to change the OBLIGEE(s) therein, to execute any continuation, enlargements, modifications and renewals thereof or substitute therefor with the same or different conditions, provisions or OBLIGEE(s), and with the same, larger or smaller penalties, it being agreed that this instrument shall apply to and cover such new or changed BOND(s) or renewals even though the consent of RELIANCE may or does substantially increase the liability of the INDEMNITORS and the PRINCIPALS; or (b) to take such steps as it may deem necessary or proper to obtain release from liability under the BOND(s); or (c) to assent to any changes in any CONTRACT, including but not limited to, any change in the time for completion of any CONTRACT and to payments or advances thereunder; or (d) to assent to or take any assignment(s).
SECTION 7.7 RIGHTS OF RELIANCE TO TAKE POSSESSION OF THE WORK. Upon the occurrence of an EVENT OF DEFAULT, in addition to other remedies provided herein, RELIANCE is authorized and empowered, but is not obligated, to take possession of the work under any CONTRACT(s) and at the expense of INDEMNITORS to complete or to contract for the completion of the same, or to consent to the reletting of the completion thereof by OBLIGEE, or to take such other steps as in the discretion of RELIANCE may be advisable or necessary to obtain its release or to avoid LOSS.
SECTION 7.8 DEPOSITORY TRUST ACCOUNTS. Upon the occurrence of an EVENT OF DEFAULT, INDEMNITORS shall, upon demand of RELIANCE, open an account(s) with a bank or similar depository designated by INDEMNITORS and approved by RELIANCE, which account(s) shall be designated as trust account(s) for the deposit of such trust funds, and shall deposit therein all monies paid or to be paid under the CONTRACT(s). Withdrawals from such account(s) shall be by check or similar instruments signed by a representative of RELIANCE and, at RELIANCE's option, countersign by an INDEMNITOR. Said trust(s) shall terminate on the payment by INDEMNITORS of all the contractual obligations for the payment of which the trust(s) are created or upon the expiration of twenty (20) years from the date thereof, whichever shall first occur.
SECTION 7.9 PRESERVATION OF RELIANCE'S RIGHTS. RELIANCE shall have every right and remedy which a personal surety without compensation would have, including the right to secure its discharge from the suretyship, and nothing in this Agreement shall waive, abridge or diminish any right which RELIANCE might have if this Agreement were not executed.
SECTION 7.10 AUTHORITY OF RELIANCE TO ELECT REMEDIES. Each right, remedy and power of RELIANCE provided in this Agreement or by law, equity, or statute shall be cumulative, and the exercise by RELIANCE of any right, remedy or power shall not preclude RELIANCE's simultaneous or subsequent exercise of any or all other rights, powers or remedies. The failure or delay by RELIANCE to exercise any right, power or remedy shall not waive any right, power or remedy. No notice or demand upon RELIANCE by any INDEMNITOR shall limit or impair RELIANCE's right to take any action under this Agreement or to exercise any right, power or remedy, subject to the provisions of Section 3.5 herein.
SECTION 7.11 ADEQUATE PROTECTION. Regardless of whether an EVENT OF DEFAULT shall have occurred, in the event of a filing by or against any PRINCIPAL or any INDEMNITOR after the date hereof of a proceeding under Title 11 of the United States Code, the PRINCIPALS and the INDEMNITORS who are not the subject of such filing agree:
(a) RELIANCE is a "claimant" within the meaning of 11 U.S.C. Secton 101 (4) and as such has standing as a party in interest to be heard in all matters, including without limitation the right the seek relief pursuant to 11 U.S.C. Sections 361-365;
(b) An EVENT OF DEFAULT shall be deemed to continue to exist and shall not be deemed to be cured notwithstanding the payment by RELIANCE pursuant to the BONDS of claims, bills or other indebtedness incurred in, or in connection with, the performance of the CONTRACT(s);
(c) Time is of the essence in the PRINCIPALS' acceptance or rejection of CONTRACT(s) pursuant to 11 U.S.C. Section 365, and any delay in the PRINCIPALS' prompt acceptance or rejection of same will materially increase the LOSS;
(d) With respect to any CONTRACT(s) assumed by any PRINCIPAL pursuant to 11. U.S.C. Section 365, the adequate protection to which RELIANCE shall be entitled shall include, but not be limited to: (i) a deposit of collateral by INDEMNITORS as described in Section 3.3 of this Agreement in an amount not less than any reserve which RELIANCE may be required by statute or otherwise deems necessary to establish with respect to the CONTRACT(s) so assumed; and compliance by the PRINCIPALS with the provision of Section 7.2 of this Agreement; or (ii) INDEMNITORS may provide RELIANCE with an irrevocable letter of credit, financial guarantee or surety bond in a form and from a financial institution or corporate surety reasonably acceptable to RELIANCE in an amount not less than any reserve which RELIANCE may be required by statute or otherwise deem necessary to establish with respect to the CONTRACT(s) so assumed; and compliance by the PRINCIPALS with the provisions of Section 7.2 of this Agreement;
(e) The Agreement constitutes an agreement to extend credit under 11 U.S.C. Section 365 (c)(3) which cannot be assumed and for which the INDEMNITORS must provide immediate protection;
(f) The INDEMNITORS will join in any motion or other action which they are requested to join in by RELIANCE in connection with RELIANCE'S efforts to obtain adequate protection, cash collateral, exoneration or termination of RELIANCE'S obligations in respect to the Agreement; and
(g) In the event that this Agreement is rejected or deemed not to be a contract subject to 11 U.S.C. Section 365, RELIANCE, in its sole discretion, may treat such rejection or determination as an EVENT OF DEFAULT.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 BENEFICIAL PARTIES. This Agreement shall, in all its terms and agreements, be for the benefit of and protect any PERSON joining with RELIANCE in executing any BOND or BONDS or executing at the request of RELIANCE said BOND or BONDS as well as any PERSON assuming co-suretyship or reinsurance thereupon.
SECTION 8.2 JOINT AND SEVERAL. The agreements and covenants herein contained shall be binding upon the undersigned, both jointly and severely, upon their successors and assigns jointly and severely, provided, that the PRINCIPALS and the INDEMNITORS may not assign their rights hereunder without the prior written consent of RELIANCE.
SECTION 8.3 ATTORNEYS FEES. The INDEMNITORS agree hereby to pay the attorneys fees and expenses incurred by RELIANCE in the preparation and enforcement of this Agreement and the other UNDERWRITING DOCUMENTS.
SECTION 8.4 APPLICABLE LAW. The terms and conditions of this Agreement shall be construed under the laws of Pennsylvania.
SECTION 8.5 JURISDICTION FOR SUITS UNDER THIS AGREEMENT. Separate suits may be brought hereunder as causes of action may accrue, and the pendency or termination of any such suit shall not bar any action, whether previously or subsequently arising. INDEMNITORS consent to the jurisdiction of the court selected by RELIANCE to bring any action against them under this Agreement or the BOND(s). Each PRINCIPAL and each INDEMNITOR are the agents for all PRINCIPALS and all INDEMNITORS for the purpose of accepting service of process.
SECTION 8.6 INDEMNITORS WAIVE DEFENSE OF SUBSEQUENT EXECUTION. INDEMNITORS waive any defense that this Agreement was executed subsequent to any BOND, admitting that such BOND was executed pursuant to each INDEMNITOR'S request and in reliance upon INDEMNITORS' promise to execute this Agreement.
SECTION 8.7 VALIDITY OF AGREEMENT. Failure to execute, or defective execution, by any party shall not affect the validity of this Agreement as to any other party executing the same and each other party shall remain fully bound and liable hereunder. Invalidity of any portion or provision of this Agreement by reason of the laws of any state or for any other reason shall not render the other provisions or portions invalid. Executions of any application or submission for any BOND by any PRINCIPAL, or of any other indemnity agreement by any INDEMNITOR for the PRINCIPALS shall not abrogate, waive or diminish any rights of RELIANCE under this Agreement. This Agreement may be executed simultaneously in one or more counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument.
SECTION 8.8 ORAL MODIFICATIONS INEFFECTIVE. This Agreement may not be changed or modified orally. No change or modification to this Agreement shall be effective unless specifically agreed to in writing and executed by RELIANCE.
SECTION 8.9 NOTICES. It is mutually agreed that any and all notices or demands herein provided for must be given in writing (including via facsimile) and shall be deemed given if and when delivered in person, when transmitted via facsimile to the facsimile number of such party shown in this Agreement or when duly deposited in the United States mails, postage prepaid for regular or certified mail, properly addressed to the party to whom given at the address of such party shown in this Agreement; provided, however, that any party may specify any other post office address in the United States or other facsimile number by giving at least ten (10) days written notice thereof to the other party.
Notice to RELIANCE shall be sent to:
Reliance Insurance Company
4 Penn Center Plaza
Philadelphia, PA 19103
Attention: Surety Department
Facsimile No.: (215) 864-4557
Notice to PRINCIPAL shall be sent to:
Dynalectric Company
1420 Spring Hill Road, Suite 500
McLean, Virginia 22102-3006
Attention: Mr. Donald Penner, President Facsimile No.: (703) 556-0890
with copy to:
JWP Inc.
Six International Drive
Rye Brook, New York 10573
Attention: Frank T. MacInnis, President Facsimile No.: (914) 935-4178
Notice to INDEMNITORS shall be sent to:
JWP Inc.
Six International Drive
Rye Brook, New York 10573
Attention: Frank T. MacInnis, President Facsimile No.: (914) 935-4178
IN WITNESS WHEREOF, this Agreement is executed by the parties on
the day and date first set forth above.
JWP INC., as debtor-in-possession
BY: ________________________
Its President
DYN SPECIALTY CONTRACTING, INC.
BY: ________________________
Its President
B&B CONTRACTING & SUPPLY COMPANY
BY: ________________________
Its President
DYNALECTRIC COMPANY
BY: ________________________
Its President
DYNALECTRIC COMPANY OF NEVADA
BY: ________________________
Its President
CONTRA COSTA ELECTRIC, INC.
BY: ________________________
Its President
JWP SYSTEMS/KIRKWOOD ELECTRIC
CO., INC.
BY: ________________________
Its President
RELIANCE SURETY COMPANY
By:______________________
Vincent G. Fasano
Its Senior Vice President
RELIANCE INSURANCE COMPANY
UNITED PACIFIC INSURANCE COMPANY
RELIANCE NATIONAL INDEMNITY
COMPANY
RELIANCE NATIONAL INSURANCE
COMPANY OF NEW YORK
RELIANCE INSURANCE COMPANY OF ILLINOIS
By:__________________________
Vincent G. Fasano
Its Vice President
SCHEDULE "A"
PERMITTED LIENS
SCHEDULE "B"
GOVERNMENTAL AUTHORIZATIONS
SCHEDULE "C"
REAL PROPERTY
SCHEDULE "D"
TAXES
SCHEDULE "E"
INSURANCE
SCHEDULE "F"
LITIGATION
SCHEDULE "G"
INVESTMENTS
EXHIBIT 10(w)
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is dated as of November 22, 1994 and is made by _______________, a _________ corporation ("Debtor"), in favor of and for the benefit of Reliance Surety Company, a Delaware corporation, Reliance Insurance Company, a Pennsylvania corporation, United Pacific Insurance Company, a Pennsylvania corporation, Reliance National Indemnity Company, a Wisconsin corporation, and Reliance Insurance Company of Illinois, an Illinois corporation (collectively, the "Secured Party").
RECITALS
WHEREAS, concurrently herewith the Debtor is entering into that certain Underwriting and Continuing Indemnity Agreement dated as of even date herewith (as it may hereafter be amended, supplemented, restated or otherwise modified from time to time, being the "Underwriting Agreement"; capitalized terms defined therein and not otherwise defined herein being used herein as therein defined) with the Secured Party.
WHEREAS, the Debtor desires to secure all obligations of the Debtor now or hereafter existing under the Underwriting Agreement and the other Underwriting Documents;
WHEREAS, the Debtor desires to grant security interests in certain of its personal property in favor of the Secured Party; and
WHEREAS, it is a condition precedent to the effectiveness of the Underwriting Agreement, that the Debtor shall have granted the security interest contemplated by this Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to induce the Secured Party to issue Bonds in connection with the Underwriting Agreement, the parties hereto agree as follows:
AGREEMENT
SECTION 1. Grant of Security. The Debtor hereby assigns and pledges to the Secured Party for its benefit a security interest in all of the Debtor's right, title and interest in and to the following, in each case whether now existing or hereafter arising, whether now owned or hereafter acquired and wherever the same may be located (the "Collateral") to secure the Secured Obligations (as defined in Section 2):
(a) All Equipment and all Inventory (as such terms are defined in the Uniform Commercial Code in effect in the State of Pennsylvania (the "Code")), including, without limitation, all right, title and interest of Debtor in and to all machinery, vehicles, equipment, inventory, fuel, plant and tools owned by Debtor, and all material in any way related to any Contract, and whether completed or in the process of construction or manufacture;
(b) All Accounts (as such term is defined in the Code), (i) including, without limitation, all right, title and interest to all monies due or to become due to Debtor arising out of or in any way relating to any Contract, including, but not limited to progress payments, deferred payments, retained percentages, compensation for other work, and claims and the proceeds thereof, together with any and all sums due or which may become due under or on all contracts not bonded by the Secured Party in which the Debtor has an interest (ii) but not including any Accounts the assignment of which for collateral security purposes is prohibited by applicable local, state or Federal law;
(c) All General Intangibles (as such term is
defined in the Code), including, without limitation,
all rights, actions, causes of action, claims and
demands of the Debtor in, or arising from or out of,
(i) any Contract or any extensions, modifications,
changes or alterations thereof or additions thereto or
(ii) any subcontract in connection with a Contract or
against any subcontractor or any Person, furnishing or
agreeing to furnish or supply labor, materials,
supplies, machinery, tools, or other equipment in
connection with or on account of a Contract or against
any surety or sureties of any such materialman,
subcontractor, laborer or other Person;
(d) All Chattel Paper, Instruments and Documents (as such terms are defined in the Code);
(e) All books, records, ledger cards, files, correspondence, computer programs, tapes, disks and related data processing software (owned by the Debtor or in which it has an interest) that at any time evidence or contain information relating to any of the Collateral or are otherwise necessary or helpful in the collection thereof or realization thereupon;
(f) All plant fixtures, business fixtures and other fixtures and storage and office facilities, and all additions and accessions thereto and replacements thereof and products thereof;
(g) All now existing or hereafter acquired trademarks, trade names, patent applications, patents, copyrights, rights and interests in copyrights and works protectable by copyright, trade secrets, inventions, designs, franchises, customer lists, and other confidential information relating to the business of the Debtor owned by the Debtor or held by the Debtor pursuant to licenses, to the extent permitted by such licenses;
(h) All proceeds of any and all of the foregoing Collateral and, to the extent not otherwise included, all payments under insurance (whether or not the Secured Party is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral. For purposes of this Agreement, the term "proceeds" includes whatever is receivable or received when Collateral or proceeds are sold, collected, exchanged or otherwise disposed of, whether such disposition is voluntary or involuntary, and includes, without limitation, all rights to payment, including returned premiums, with respect to any insurance relating thereto.
SECTION 2. Security for Obligations. This Agreement secures and the Collateral is collateral security for the prompt payment or performance in full when due (including the payment of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a)) of all obligations of every nature of the Debtor now or hereafter existing under the Underwriting Agreement, the other Underwriting Documents, whether now existing or hereafter arising, voluntary or involuntary, whether or not jointly owed with others, direct or indirect, absolute or contingent, liquidated or unliquidated, and whether or not from time to time decreased or extinguished and later increased, created or incurred and all or any portion of such obligations that are paid, to the extent all or any part of such payment is avoided or recovered directly or indirectly from the Secured Party as a preference, fraudulent transfer or otherwise, (all such obligations being the "Underlying Debt"), and all obligations of every nature of the Debtor now or hereafter existing under this Agreement (all such obligations of the Debtor, together with the Underlying Debt, being the "Secured Obligations").
SECTION 3. The Debtor Remains Liable. Anything herein to the contrary notwithstanding, (a) the Debtor shall remain liable under any contracts and agreements included in the Collateral, to the extent set forth therein, to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Secured Party of any of the rights hereunder shall not release the Debtor from any of its duties or obligations under the contracts and agreements included in the Collateral and (c) the Secured Party shall not have any obligation or liability under any contracts and agreements included in the Collateral by reason of this Agreement, nor shall the Secured Party be obligated to perform any of the obligations or duties of the Debtor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.
SECTION 4. Representations and Warranties. The Debtor represents and warrants as follows:
(a) Location of Equipment and Inventory. All of the Equipment and Inventory is located within the United States of America.
(b) Delivery of Certain Collateral. Unless otherwise agreed, all Chattel Paper, Instruments and Documents (excluding checks) comprising any and all items of Collateral have been delivered to the Secured Party duly endorsed and accompanied by duly executed instruments of transfer or assignment in blank.
(c) Ownership of Collateral. Except for the security interest created by this Agreement and Liens otherwise permitted under the Underwriting Agreement, the Debtor owns the Collateral free and clear of any Lien. Except such as may have been filed in favor of the Secured Party relating to this Agreement or in favor of a secured party permitted by the Underwriting Agreement, no effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any filing or recording office.
(d) Validity. This Agreement creates a valid security interest in the Collateral securing the payment of the Secured Obligations, except to the extent any filings or other actions are required under state law to create a valid security interest in motor vehicles.
(e) Governmental Authorizations. Other than those authorizations and approvals which have been obtained, no authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required (other than the filing of UCC-1 financing statements) either (i) for the grant by the Debtor of the security interest granted hereby or for the execution, delivery or performance of this Agreement by the Debtor or (ii) for the perfection of or the exercise by the Secured Party of its rights and remedies hereunder (except as may have been taken by or at the direction of the Debtor).
(f) Other Information. All information heretofore, herein or hereafter supplied to the Secured Party by or on behalf of the Debtor with respect to the Collateral is accurate and complete in all material respects.
(g) Office Locations; Fictitious Names. The chief place of business, the chief executive office and the office where the Debtor keeps its records regarding the Accounts and all originals of all Chattel Paper that evidence Accounts is located at the address of the Debtor set forth on Schedule I hereto. The Debtor does not do business under any trade-name or fictitious business name except for those names set forth on Schedule I.
(h) Incorporation of Underwriting Agreement Representations and Warranties. Each representation and warranty of the Debtor set forth in Article V of the Underwriting Agreement is true and correct and such representations and warranties are hereby incorporated herein by this reference with the same effect as though set forth in their entirety herein.
SECTION 5. Further Assurances. (a) The Debtor agrees that from time to time, at the expense of the Debtor, the Debtor will promptly execute and deliver all further instruments and documents, and take all further action, that may be reasonably necessary or desirable, or that the Secured Party may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Secured Party to exercise and enforce its rights and remedies hereunder with respect to any Collateral.
(b) The Debtor hereby authorizes the Secured Party to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of the Debtor, to the extent permitted under applicable law. A carbon, photographic or other reproduction of this Agreement or a financing statement signed by the Debtor shall be sufficient as a financing statement.
(c) The Debtor will furnish to the Secured Party from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Secured Party may reasonably request, all in reasonable detail.
SECTION 6. Covenants of Debtor. The Debtor shall:
(a) Not use or permit any Collateral to be used in violation of any provision of this Agreement, any policy of insurance covering the Collateral or any applicable statute, regulation or ordinance noncompliance with which could reasonably be expected to result in an Event of Default;
(b) Notify the Secured Party of any change in the Debtor's name, identity or corporate structure which would cause the financing statements filed in connection herewith to be misleading prior to such change;
(c) Give the Secured Party 30 days' prior written notice of any change in the Debtor's chief place of business;
(d) If the Secured Party makes a loan under the Underwriting Agreement to enable the Debtor to acquire rights in or the use of any Collateral, use the proceeds thereof for such purposes; and
(e) Pay promptly when due all material property and other taxes, assessments and governmental charges or levies imposed upon, and all claims (including claims for labor, materials and supplies) against, the Collateral, and except to the extent the validity thereof is being contested in good faith; provided that the Debtor shall in any event pay all taxes, assessments, governmental charges or levies not later than five days prior to the date of any proposed sale under any judgement, writ or warrant of attachment entered or filed against the Debtor as a result of the failure to make such payment.
SECTION 7. Special Covenants With Respect to Equipment and Inventory. The Debtor shall:
(a) Keep the Equipment and Inventory (other than Inventory sold in the ordinary course of business) within the United States of America; and
(b) Cause the Equipment to be maintained and preserved in the same condition, repair and working order as when new, ordinary wear and tear excepted, in accordance with the Debtor's past practices, and shall forthwith, or in the case of any loss or damage to any of the Equipment as quickly as practicable after the occurrence thereof, make or cause to be made all repairs, replacements, and other improvements in connection therewith that are necessary or desirable to such end, in the ordinary course of business and in accordance with the Debtor's past practices. The Debtor shall promptly furnish to the Secured Party a report in respect of any material loss or damage to any material amount of the Equipment.
SECTION 8. Insurance. (a) Subject to the self- insurance program of JWP the Debtor will maintain or cause to be maintained, with financially sound and reputable insurers, insurance with respect to its properties and business against loss or damage of the kinds customarily insured by corporations of established reputation engaged in the same or similar businesses and similarly situated, of such types and in such amounts as are customarily carried under similar circumstances by such other corporations. Such insurance shall include, without limitation, property damage insurance and liability insurance. The Debtor shall, if so requested by the Secured Party, deliver to the Secured Party original or duplicate policies of such insurance and, as often as the Secured Party may reasonably request, a report of a reputable insurance broker with respect to such insurance.
(b) Reimbursement under any liability insurance
maintained by the Debtor pursuant to this Section 8 may be paid
directly to the Person who shall have suffered the liability
covered by such insurance. In the case of any loss involving
damage to Equipment and Inventory when subsection (c) of this
Section 8 is not applicable, the Debtor shall make or cause to be
made the necessary and desirable repairs to or replacements of
such Equipment and Inventory.
(c) Upon the occurrence and during the continuance of any Event of Default, except as otherwise agreed by the Secured Party, all insurance payments in respect of such Equipment and Inventory shall be paid to and applied by the Secured Party as specified in Section 14.
SECTION 9. Special Covenants With Respect to Accounts.
(a) The Debtor shall keep its chief places of business and chief executive office and the offices where it keeps its records concerning the Accounts at the location therefor specified in Section 4 or, upon 30 days' prior written notice to the Secured Party, at such other locations in a jurisdiction where all action that may be reasonably necessary or desirable or that the Secured Party may reasonably request in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Secured Party to exercise and enforce its rights and remedies hereunder with respect to such Accounts shall have been taken. The Debtor will hold and preserve such records and will permit representatives of the Secured Party at any time during normal business hours to inspect and make abstracts from such records and the Debtor agrees to render to the Secured Party, at the Debtor's cost and expense, such clerical and other assistance as may be reasonably requested with regard thereto.
(b) Except as otherwise provided in this subsection
(b) of this Section 9, the Debtor shall continue to collect, at
its own expense, all amounts due or to become due the Debtor
under the Accounts. In connection with such collections, the
Debtor may take (and, at the Secured Party's direction, shall
take) such action as the Debtor or the Secured Party may deem
necessary or advisable to enforce collection of the Accounts;
provided, however, that Secured Party shall have the right at any
time, upon the occurrence and during the continuance of an Event
of Default and upon written notice to the Debtor of its intention
to do so, to notify the account debtors or obligors under any
Accounts of the assignment of such Accounts to the Secured Party
and to direct such account debtors or obligors to make payment of
all amounts due or to become due to the Debtor thereunder
directly to the Secured Party, upon such notification and at the
expense of the Debtor, to enforce collection of any such Accounts
and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as the Debtor
might have done. After receipt by the Debtor of the notice from
the Secured Party referred to in the proviso to the preceding
sentence, (i) all amounts and proceeds (including checks and
other instruments) received by the Debtor in respect of the
Accounts shall be received in trust for the benefit of the
Secured Party hereunder, shall be segregated from other funds of
the Debtor and shall be forthwith paid over or delivered to the
Secured Party in the same form as so received (with any necessary
endorsement) to be held as cash collateral and applied as
provided in Section 14, and (ii) the Debtor shall not adjust,
settle or compromise the amount or payment of any Accounts, or
release wholly or partly any account debtor or obligor thereof,
or allow any credit or discount thereon.
SECTION 10. Secured Party Appointed Attorney-in-Fact. The Debtor hereby irrevocably appoints the Secured Party the Debtor's attorney-in-fact, with full authority in the place and stead of the Debtor and in the name of the Debtor, the Secured Party or otherwise, from time to time in the Secured Party's discretion to take any action and to execute any instrument that the Secured Party may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation:
(a) to obtain and adjust insurance required to be maintained by the Debtor or paid to the Secured Party pursuant to Section 8,
(b) to ask, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral,
(c) to receive, endorse, and collect any drafts or other Instruments, Documents and Chattel Paper, in connection with clauses (a) and (b) above,
(d) to file any claims or take any action or institute any proceedings that the Secured Party may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Secured Party with respect to any of the Collateral,
(e) to pay or discharge taxes or Liens, levied or placed upon or threatened against the Collateral, the legality or validity thereof and the amounts necessary to discharge the same to be determined by the Secured Party in its sole discretion, and such payments made by the Secured Party to become obligations of the Debtor to the Secured Party, due and payable immediately without demand,
(f) to sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications and notices in connection with accounts and other documents relating to the Collateral,
(g) generally to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Secured Party were the absolute owner thereof for all purposes, and to do, at the Secured Party's option and the Debtor's expense, at any time, or from time to time, all acts and things that the Secured Party deems necessary to protect, preserve or realize upon the Collateral and the Secured Party's security interest therein, in order to effect the intent of this Agreement, all as fully and effectively as the Debtor might do;
provided, that the Secured Party shall not exercise the foregoing appointment as Debtor's attorney-in-fact until Secured Party shall have given notice to the Debtor following the occurrence and during the continuance of an Event of Default.
SECTION 11. Secured Party May Perform. If the Debtor fails to perform any agreement contained herein, after notice thereof from the Secured Party, the Secured Party may itself perform, or cause performance of, such agreement, and the reasonable expenses of Secured Party incurred in connection therewith shall be payable by the Debtor under Section 15.
SECTION 12. Secured Party's Duties and Liabilities.
(a) The powers conferred on the Secured Party hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Secured Party shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. The Secured Party shall be deemed to exercise reasonable care in the custody and preservation of such Collateral if such Collateral is accorded treatment substantially equal to that which the Secured Party accords its own property.
(b) The Secured Party shall not be liable to the
Debtor (i) for any loss or damage sustained by it, or
(ii) for any loss, damage, depreciation or other
diminution in the value of any of the Collateral, that
may occur as a result of, in connection with or that is
in any way related to (x) any exercise by the Secured
Party of any right or remedy under this Agreement or
(y) any other act of or failure to act by the Secured
Party, except to the extent that the same shall be
determined by a judgment of a court of competent
jurisdiction to be the result of acts or omissions on
the part of the Secured Party constituting gross
negligence or willful misconduct.
(c) NO CLAIM MAY BE MADE BY THE DEBTOR AGAINST THE SECURED PARTY OR ANY OF ITS AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES, OR ATTORNEYS FOR ANY SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES IN RESPECT OF ANY BREACH OR WRONGFUL CONDUCT (WHETHER THE CLAIM THEREFOR IS BASED ON CONTRACT, TORT OR DUTY IMPOSED BY LAW) IN CONNECTION WITH, ARISING OUT OF OR IN ANY WAY RELATED TO THE TRANSACTIONS CONTEMPLATED AND RELATIONSHIP ESTABLISHED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH; AND THE DEBTOR HEREBY EXPRESSLY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY SUCH CLAIM FOR ANY SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.
SECTION 13. Remedies. If any Event of Default shall have occurred and be continuing, the Secured Party may exercise in respect of the Collateral, (a) all the rights and remedies of a secured party on default under the Code (whether or not the Code applies to the affected Collateral), (b) all of the rights and remedies provided for in this Agreement, the Underwriting Agreement and any other agreement between the Debtor and the Secured Party and (c) such other rights and the remedies as may be provided by law or otherwise (such rights and remedies of the Secured Party to be cumulative and non-exclusive). If an Event of Default shall have occurred and be continuing, the Secured Party also may (i) require the Debtor to, and the Debtor hereby agrees that it will at its expense and upon request of the Secured Party forthwith, assemble all or part of Collateral as directed by Secured Party and make it available to the Secured Party at a place to be designated by the Secured Party that is reasonably convenient to such parties, (ii) enter onto the property where any Collateral is located and take possession thereof with or without judicial process, (iii) prior to the disposition of the Collateral, store, process, repair or recondition the Collateral or otherwise prepare the Collateral for disposition in any manner to the extent the Secured Party deems appropriate, (iv) take possession of the Debtor's premises or place custodians in exclusive control thereof, remain on such premises and use the same and any equipment of the Debtor for the purpose of completing any work in process, taking any actions described in the preceding clause (iii) and collecting any Secured Obligation, and (v) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Secured Party's offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as the Secured Party may deem commercially reasonable. The Debtor agrees that, at least ten days' notice to the Debtor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Secured Party shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Secured Party may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.
After the occurrence and during the continuance of an Event of Default and in connection with the disposition of Collateral, the Secured Party may retain any directors, officers and employees of the Debtor, in each case upon such terms as the Secured Party and any such person may agree, notwithstanding the provisions of any employment, confidentiality or non-disclosure agreement between any such person and the Debtor, and for such purpose the Debtor hereby waives its rights under any such agreement and consent to each such retention.
SECTION 14. Application of Proceeds. Except as expressly provided elsewhere in this Agreement, all proceeds received by the Secured Party in respect of any sale of, collection from or other realization upon all or any part of the Collateral may, in the discretion of the Secured Party, be held by the Secured Party as Collateral for, and/or then, or at any other time thereafter applied, in full or in part by the Secured Party against the Secured Obligations in the following order of priority:
FIRST: To the payment of all reasonable costs and expenses of such sale, collection or other realization and all other expenses, liabilities and advances made or incurred by the Secured Party in connection therewith and all amounts for which the Secured Party is entitled to indemnification hereunder and all advances made by the Secured Party hereunder for the account of the Debtor and for the payment of all costs and expenses paid or incurred by the Secured Party in connection with the exercise of any right or remedy hereunder, all in accordance with Section 16;
SECOND: To the payment in full of the Secured Obligations owing to the Secured Party; and
THIRD: After payment in full of the amounts specified in the preceding paragraphs, to the payment to or upon the order of the Debtor, or whomsoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds.
All applications of proceeds to the Secured Obligations shall be applied to the payment of interest before application of payment to principal.
SECTION 15. Indemnity and Expenses.
(a) The Debtor agrees to indemnify the Secured Party from and against any and all claims, losses and liabilities growing out of or resulting from this Agreement (including, without limitation, enforcement of this Agreement), except claims, losses or liabilities resulting from the Secured Party's gross negligence or willful misconduct.
(b) The Debtor will upon demand pay to the Secured Party the amount of any and all reasonable expenses, including the reasonable fees and disbursements of its counsel and of any experts and agents, that the Secured Party may incur in connection with (i) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, any of the Collateral, (ii) the exercise or enforcement of any of the rights of the Secured Party hereunder or (iii) the failure by the Debtor to perform or observe any of the provisions hereof.
SECTION 16. Other Waivers by the Debtor, Etc.
The Debtor waives any right to require the Secured Party to make or give any presentments, demands for performance, notices of nonperformance, protests, notices of protests or notices of dishonor in connection with any obligation or evidences of indebtedness held by the Secured Party as collateral, or in connection with any obligations or evidences of indebtedness that constitute in whole or in part the Underlying Debt, or in connection with the creation of new or additional indebtedness.
The Debtor waives any defense arising by reason of, and agrees that the rights of the Secured Party and the obligations of the Debtor shall be absolute and unconditional irrespective of, (a) any disability or other defense of any other Person; (b) the unenforceability or cessation from any cause whatsoever, other than the indefeasible payment in full, of the Underlying Debt; (c) the application by the Debtor of the proceeds of any Underlying Debt for purposes other than the purposes represented by the Debtor to the Secured Party or intended or understood by the Secured Party; (d) any modification of the Underlying Debt, in any form whatsoever, including without limitation the renewal, extension, acceleration or other changes in time for payment of the Underlying Debt, or other change in the terms of the Underlying Debt or any part thereof, including any increase or decrease of the rate of interest thereon; (e) any right to deferral or modification of the Debtor's obligations hereunder by reason of any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding; and (f) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any other Person in respect of the Underlying Debt.
The Debtor waives any right to enforce any remedy that the Secured Party now has or may hereafter have against any other Person, and waives any benefit of, or any right to participate in, any security whatsoever now or hereafter held by the Secured Party.
SECTION 17. Waiver of Jury Trial. THE DEBTOR AND THE SECURED PARTY HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including, without limitation, contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. The Debtor and the Secured Party each acknowledge that this waiver is a material inducement for the Debtor and the Secured Party to enter into a business relationship, that the Debtor and the Secured Party have already relied on the waiver in entering into this Agreement and that each will continue to rely on the waiver in their related future dealings. The Debtor and the Secured Party further warrant and represent that each has reviewed this waiver with its legal counsel, and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court.
SECTION 18. Continuing Security Interest. This Agreement shall create a continuing security interest in the Collateral and shall (a) remain in full force and effect until the indefeasible payment in full of the Secured Obligations, (b) be binding upon the Debtor, its successors and assigns and (c) inure, together with the rights and remedies of the Secured Party hereunder, to the benefit of the Secured Party and its successors, transferees and assigns. Upon the termination of the Underwriting Agreement, the security interest granted hereby shall terminate and all rights to the Collateral shall revert to the Debtor. In addition, upon the disposition of any Collateral in compliance with Section 6.17 of the Underwriting Agreement, such Collateral is hereby released by the Secured Party from the security interest granted herein. Upon any such termination or release, the Secured Party will, at the Debtor's expense, execute and deliver to the Debtor such documents as the Debtor shall reasonably request to evidence such termination.
SECTION 19. Amendments; Etc. No amendment or waiver of any provision of this Agreement nor consent to any departure by the Debtor herefrom, shall in any event be effective unless the same shall be in writing and signed by the Secured Party and the Debtor, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.
SECTION 20. Addresses for Notices. All notices and other communications provided for hereunder shall be made in accordance with Section 8.9 of the Underwriting Agreement.
SECTION 21. Consent to Jurisdiction and Service of Process. Each of the Debtor and the Secured Party hereby submits to the nonexclusive jurisdiction of the state courts of the State of Pennsylvania and the federal courts located in the State of Pennsylvania for all matters arising under this Agreement and related documents. Service of process sufficient for personal jurisdiction in any action against the Debtor in Pennsylvania may be made by registered or certified mail, return receipt requested, to the address specified pursuant to Section 21.
SECTION 22. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF PENNSYLVANIA WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. Unless otherwise defined herein or in the Underwriting Agreement, terms used in Article 9 of the Code as in effect in the State of Pennsylvania are used herein as therein defined.
SECTION 23. Headings. Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement or be given any substantive effect.
SECTION 24. Severability. In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation and in any other jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 25. No Other Writing. This writing is intended by the Debtor and the Secured Party as the final expression of this Agreement and is also intended as a complete and exclusive statement of the terms of their agreement with respect to the matters covered hereby. No course of dealing, course of performance or trade usage, and no parol evidence of any nature, shall be used to supplement or modify and terms of this Agreement. There are no conditions to the full effectiveness of this Agreement.
SECTION 26. Counterparts. This Agreement may be executed in one or more counterparts, each of which when so executed shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the Debtor and the Secured Party have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first above written.
[NAME OF COMPANY]
a __________ corporation
By:________________________________
Title:
Address:
Attention:
RELIANCE SURETY COMPANY
By:
Title:
RELIANCE INSURANCE COMPANY
UNITED PACIFIC INSURANCE COMPANY
RELIANCE NATIONAL INDEMNITY COMPANY
RELIANCE NATIONAL INSURANCE
COMPANY OF ILLINOIS
By:________________________________
Title:
SCHEDULE I
TO SECURITY AGREEMENT
I. Chief Executive Office
II. Locations of records
III. Tradenames and Fictitious Names
EXHIBIT 10(x)
JWP INC. AS DEBTOR-IN-POSSESSION
PLEDGE AGREEMENT
PLEDGE AGREEMENT dated November 22, 1994 between JWP Inc., as Debtor-in-Possession, a Delaware corporation (the "Pledgor") and Reliance Surety Company, a Delaware corporation, Reliance Insurance Company, a Pennsylvania corporation, United Pacific Insurance Company, a Pennsylvania corporation, Reliance National Indemnity Company, a Wisconsin corporation, and Reliance Insurance Company of Illinois, an Illinois corporation (collectively, "Reliance").
WHEREAS, the Pledgor is the owner of 100 shares, fully paid, in the issued capital stock of DYN Specialty Contracting, Inc., a Virginia corporation (the "Pledged Shares"); and
WHEREAS, DYN Specialty Contracting, Inc. ("DYN Specialty"), B&B Contracting & Supply Company, Dynalectric Company, Dynalectric Company of Nevada, Contra Costa Electric, Inc., JWP Systems/Kirkwood Electric Co., Inc. (individually, a "Principal," and collectively, the "Principals"), the Pledgor and Reliance have entered into an Underwriting and Continuing Indemnity Agreement dated as of even date herewith (said Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, being the "Underwriting Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined); and
WHEREAS, it is a condition precedent to the underwriting of bonds by Reliance for the Principals that the Pledgor shall have made the pledge contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce Reliance to issue bonds for the Principals under the Underwriting Agreement, the Pledgor hereby agrees with Reliance as follows:
1. Pledge. The Pledgor hereby pledges to Reliance, and grants to Reliance a security interest in, the following (the "Pledged Collateral"):
(a) The Pledged Shares and the certificates representing the Pledged Shares and all dividends, cash instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Shares, subject to the provisions of Section 6 and except for distributions permitted by the Underwriting Agreement;
(b) all additional shares of DYN Specialty and of any other
Principal from time to time acquired by the Pledgor in any manner
or to which the Pledgor becomes entitled, and the certificates
representing such additional shares and all dividends, cash,
instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange
for any or all of such shares, subject to the provision of
Section 6 and except for distributions permitted by the
Underwriting Agreement; and
(c) all additional shares of any Principal from time to time acquired by Reliance in any manner or to which Reliance becomes entitled, and all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Shares, subject to the provision of Section 6 and except for distributions permitted by the Underwriting Agreement.
2. Security for Loss. This Agreement secures the payments of any Loss now and hereafter existing under the Underwriting Agreement. The terms Loss and Event of Default are intended to be used as defined in the Underwriting Agreement.
3. Delivery of Pledged Collateral. (a) Prior to or
concurrently herewith, the Pledgor has delivered or shall deliver
possession of the Pledged Shares, together with undated stock
powers executed in blank, to the Designated Agent referenced in
Section 3(b) below. For the better perfection of the rights of
Reliance in and to the Pledged Collateral, at the request of
Reliance at any time after the occurrence and during the
continuance of an Event of Default, the Pledgor shall forthwith
cause such Pledged Collateral to be registered in the name of the
Designated Agent, as Pledgee (including, without limitation, the
execution of stock transfer forms and all other instruments as
may be necessary or advisable in order to effect such transfer),
subject only to the rights specified in Section 6(a). In
addition, the Designated Agent shall have the right at any time
to exchange certificates or instruments representing or
evidencing Pledged Collateral for certificates or instruments of
smaller or larger denominations. The Pledgor hereby consents to
the appointment of the Designated Agent as the custodian of the
Pledged Stock subject to Section 6 hereof for the purposes of
holding the Pledged Collateral and all rights attaching thereto
and all dividends and other distributions payable thereon in
trust to perfect the security interest herein granted and for the
purpose of transferring the Pledged Collateral to the Designated
Agent and otherwise dealing with the Pledged Collateral or acting
in relation to the Pledged Collateral as decided by RELIANCE
subject to the terms of this Agreement.
(b) Reliance may designate from time to time any Person (including Reliance) to act as agent (the "Designated Agent") for purposes of receiving and holding the Pledged Collateral and exercising certain other rights of Reliance as herein specified. Reliance may change the identity of the Designated Agent upon written notice to the Pledgor and to the Person acting as Designated Agent at the time of such change. Any written notice pursuant to this Section shall include an address for notice of the Person identified as Designated Agent therein. Reliance hereby designates as the initial Designated Agent, Belmont Capital Partners, II, L.P., with an address for notice of:
Belmont Capital Partners II, L.P.
82 Devonshire Street F7C
Boston, Massachusetts 02109
Attention: Portfolio Manager
with a copy to:
Morgan, Lewis & Bockius 2000 One Logan Square Philadelphia, Pennsylvania 19103 Attention: Michael A. Bloom, Esq.
4. Representations and Warranties. The Pledgor represents and warrants as follows:
(a) There is no stamp duty, tax, levy, impost, charge, withholding or similar duty, tax or fee imposed on or by virtue of the execution or delivery of this Agreement or any other document to be furnished hereunder or in connection herewith;
(b) To ensure the legality, validity, enforceability or admissibility in evidence of this Agreement, it is not necessary that this Agreement or any other document be filed or recorded with any governmental, administrative or judicial authority or regulatory body;
(c) The Pledged Shares have been duly authorized and validly issued and are fully paid and non-assessable;
(d) The Pledgor is the legal and beneficial owner of the Pledged Collateral free and clear of any lien, security interest, option or other charge or encumbrance except for the security interest created by this Agreement and security interests permitted by the Underwriting Agreement;
(e) The pledge of the Pledged Shares pursuant to this Agreement creates a valid security interest in the Pledged Shares, securing the payment of Loss;
(f) Except as set forth on Schedule B to the Underwriting Agreement, no authorization, approval or other action by, and no notice to or filing with, any governmental, administrative or judicial authority or regulatory body is required either for the pledge by the Pledgor of the Pledged Collateral pursuant to the Agreement or for the execution, delivery or performance of this Agreement by the Pledgor; and
(g) The Pledged Shares constitute 100% of the issued and outstanding shares of the DYN Specialty.
5. Further Assurances. The Pledgor agrees that at any
time and from time to time, at the reasonable expense of the
Pledgor, the Pledgor will promptly execute and deliver all
further instruments and documents, and take all further action,
that may be necessary or desirable, or that Reliance may request,
in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable Reliance to exercise
and enforce its rights and remedies hereunder with respect to any
Pledged Collateral. If Reliance shall determine to exercise its
rights to sell all or any of the Pledged Collateral pursuant to
Section 10, the Pledgor agrees that, upon request of Reliance,
the Pledgor will at its own reasonable expense, do or cause to be
done all such acts and things as may reasonably be necessary or
desirable, or that Reliance may reasonably request, to make any
sale of the Pledged Collateral or any part thereof valid and
binding and in compliance with applicable law.
6. Voting Rights; Dividends; etc. (a) So long as no Event of Default as defined in the Underwriting Agreement shall have occurred and be continuing:
(i) The Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement or the Underwriting Agreement; provided, however, that the Pledgor shall not exercise or shall refrain from exercising any such right if, in the reasonable judgment of Reliance, such action would have a material adverse effect on the value of the Pledged Collateral or any part thereof; and provided further, that the Pledgor shall give Reliance at least five days written notice of the manner in which it intends to exercise, or its reasons for refraining from exercising, its voting rights with respect to any shareholder votes which require greater than a simple majority of shareholder votes for passage.
(ii) The Pledgor shall be entitled, subject to the terms of the Underwriting Agreement, to receive and retain any and all dividends and interest paid in respect to the Pledged Collateral, provided however, that any and all
(A) dividends and interest paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Pledged Collateral,
(B) dividends and other distributions paid or payable in cash in respect of any Pledged Collateral in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus, so long as the Principals remain in compliance with the financial covenants of the Underwriting Agreements, and
(C) cash paid, payable or otherwise distributed in respect of principal of, or in redemption of, or in exchange for any Pledged Collateral,
shall be paid and shall be forthwith delivered to the Designated
Agent to hold as, Pledged Collateral and shall, if received by
the Pledgor, be received in trust for the benefit of Reliance, be
segregated from the other property or funds of the Pledgor, and
be forthwith delivered to the Designated Agent as Pledged
Collateral in the same form as so received (with any necessary
endorsement). The Pledgor shall, upon request by Reliance
promptly execute such documents and do such acts as may be
necessary or advisable to give effect to the provisions of this
Section 6(a)(ii).
(iii) Reliance shall execute and deliver (or cause to be executed and delivered) to the Pledgor all such proxies and other instruments as the Pledgor may reasonably request for the purpose of enabling the Pledgor to exercise the voting and other rights which it is entitled to exercise pursuant to paragraph (i) above and to receive the dividends or interest payments which it is authorized to receive and retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuation of an Event of Default as defined in the Underwriting Agreement:
(i) All rights of Pledgor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 6(a)(i) and to receive the dividends and interest payments which it would otherwise be authorized to receive and retain pursuant to Section 6(a)(ii) shall cease and all such rights shall thereupon become vested in the Designated Agent who shall thereupon have the sole right to exercise such voting and other consensual rights and to receive and hold as Pledged Collateral such dividends and interest payments.
(ii) All dividends and interest payments which are received by the Pledgor contrary to the provisions of Section 6(b)(i) shall be received in trust for the benefit of Reliance, shall be segregated from other funds of the Pledgor and shall be forthwith paid over to the Designated Agent as Pledged Collateral in the same form as so received (with any necessary endorsement).
7. Transfer and Other Liens; Additional Shares.
(a) The Pledgor agrees that it will not (i) sell, transfer or otherwise dispose of, or grant any option with respect to any of the Pledged Collateral, or (ii) create or permit to exist any lien, security interest, or other charge or encumbrance upon or with respect to any of the Pledged Collateral except for the security interest created under this Agreement and such other security interests permitted by the Underwriting Agreement.
(b) The Pledgor agrees that it will (i) cause the Principals not to issue any shares or other equity securities in addition to or in substitution for the Pledged Shares, except with the prior written consent of Reliance and (ii) pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all additional shares or other equity securities issued by the Principals or otherwise acquired by the Pledgor in any manner.
8. Reliance Appointed Attorney-in-Fact. The Pledgor hereby irrevocably appoints Reliance the Pledgor's attorney-in- fact, with full authority in the place and stead of the Pledgor and in the name of the Pledgor or otherwise, from time to time in the discretion of Reliance to take any action and to execute any instrument which it may reasonably deem necessary or advisable to accomplish the purposes of this Agreement including, without limitation, subject to the provisions of Section 6 hereof to receive, endorse and collect all instruments made payable to the Pledgor representing any dividend, interest payment or other distribution in respect of the Pledged Collateral or any part thereof and to give full discharge for the same.
9. Reliance May Perform If the Pledgor fails to perform any agreement contained herein, Reliance may itself perform, or cause performance of, such agreement, and the reasonable expenses of Reliance incurred in connection therewith shall be payable by the Pledgor under Section 11.
10. Remedies Upon Default. If any Event of Default as defined in the Underwriting Agreement shall have occurred and be continuing:
(a) Reliance may exercise in respect of the Pledged Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the Uniform Commercial Code (the "Code") in effect in the State of Pennsylvania at the time, and Reliance may also, without notice except as specified below, sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker's board or at any of the offices of Reliance or elsewhere, for cash, on credit or for future delivery, and upon such other terms as Reliance may deem commercially reasonable, provided Reliance shall afford Pledgor a period of thirty (30) days to redeem any of the Pledged Collateral. The Pledgor agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to the Pledgor of the time and place of any public sale or of the time after which any private sale is to be made shall constitute reasonable notification. Reliance shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. Reliance may adjourn any public or private sale from time to time by announcing at the time and place fixed therefor.
(b) Any cash held by Reliance as Pledged Collateral and all cash proceeds received by it in respect of any sale of, collection from, or other realization upon all or any part of the Pledged Collateral may, in the discretion of Reliance, be held by it as collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable to Reliance pursuant to Section 11) in whole or in part by Reliance against, all or any part of the Loss in such order as it shall elect. Any surplus of such cash or cash proceeds held by Reliance and remaining after payment in full of all the Loss shall be paid over to Pledgor or to whomsoever may be lawfully entitled to receive such surplus.
11. Indemnity and Expenses. (a) The Pledgor agrees to indemnify Reliance from and against any and all claims, damages, losses, liabilities and reasonable expenses arising out of or in connection with or resulting from this Agreement (including, without limitation, enforcement of this Agreement), unless and to the extent such claim, damage, loss, liability or expense was attributable to Reliance's gross negligence or wilful misconduct as determined by a final judgement of a court of competent jurisdiction.
(b) The Pledgor will upon demand pay to Reliance the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, which they may incur in connection with (i) the administration of this Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Pledged Collateral, (iii) the exercise or enforcement of any of the rights of the sureties, (iv) the failure by the Pledgor to perform or observe any of the provisions hereof.
12. Amendments, Waivers, Etc. No amendment or waiver of any provision of this Agreement nor consent to any departure by the Pledgor herefrom shall in any event be effective unless the same shall be in writing and signed by Reliance, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. The waiver (whether expressed or implied) by Reliance of any breach of the terms or conditions of this Agreement shall not prejudice any remedy of Reliance in respect of any continuing or other breach of the terms and conditions hereof, and shall not be construed as a bar to any right or remedy which Reliance would otherwise have on any future occasion under this Agreement. No failure to exercise, nor any favor, delay, relaxation, or indulgence on the part of Reliance in exercising, any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other power, right or privilege.
13. Security Interest Absolute. All rights of Reliance and security interests hereunder, and all obligations of the Pledgor hereunder, shall be absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of the Underwriting Agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the obligations, or any other amendment or waiver of or any consent to any departure from the Underwriting Agreement or the Pledge Agreement;
(iii) any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to departure from any other terms of the Underwriting Agreement; or
(iv) any other circumstance other than payment in full of Loss which might otherwise constitute a defense available to, or a discharge of, the Pledgor or a third party pledgor.
14. Amount of Loss. The entries in the books and records of Reliance shall be prima facie evidence of the amount of Loss secured by this Agreement and the rights arising therefrom of Reliance as pledgee of the Pledged Collateral under this Agreement.
15. Addresses for Notices. All notices and other communications provided for hereunder shall be made in accordance with Section 8.9 of the Underwriting Agreement.
16. Continuing Security Interest. This Agreement shall create a continuing security interest in the Pledged Collateral and shall (i) be binding upon the Pledgor, its successors and assigns, (ii) inure, together with the rights and remedies of Reliance, to be benefit of successors, transferees and assigns of Reliance, and (iii) remain in full force and effect until payment in full of the Loss called for by the Underwriting Agreement and discharge of Reliance under all bonds issued pursuant thereto. Thereafter the Pledgor shall be entitled to the return, upon its request, of such of the Pledged Collateral as shall not have been sold or otherwise applied pursuant to the terms hereof.
17. Severability. If any terms or provisions of this Agreement is or shall become illegal, invalid or unenforceable in any jurisdiction, all other terms and provisions of this Agreement shall remain legal, valid or enforceable in such jurisdiction and such illegal, invalid or unenforceable provision shall be legal, valid and enforceable in any other jurisdiction.
18. Governing Law; Terms. This Agreement shall be governed by, and construed in accordance with, the law of the State of Pennsylvania. Unless otherwise defined herein or in the Underwriting Agreement, terms defined in Article 9 of the Uniform Commercial Code of the State of Pennsylvania are used herein as therein defined.
IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.
Attest:
JWP INC.
___________________________ ___________________________
Its:_______________________
Attest: RELIANCE SURETY COMPANY
____________________________ _____________________________
Vincent G. Fasano
Its Senior Vice President
Attest: RELIANCE INSURANCE COMPANY
|
UNITED PACIFIC INSURANCE COMPANY
________________________RELIANCE NATIONAL INDEMNITY COMPANY
RELIANCE NATIONAL INSURANCE COMPANY
OF ILLINOIS
EXHIBIT 10(y)
DYN SPECIALTY CONTRACTING, INC.
PLEDGE AGREEMENT
PLEDGE AGREEMENT dated November 22, 1994 between DYN
Specialty
Contracting, Inc. a Virginia corporation (the "Pledgor") and
Reliance
Surety Company, a Delaware corporation, Reliance Insurance
Company, a
Pennsylvania corporation, United Pacific Insurance Company, a
Pennsylvania corporation, Reliance National Indemnity Company, a
Wisconsin corporation, and Reliance Insurance Company of
Illinois, an
Illinois corporation (collectively, "Reliance").
WHEREAS, the Pledgor is the owner of (i) 1,000 shares, fully
paid, in the issued capital stock of B&B Contracting & Supply
Company,
a Texas corporation; (ii) 500 shares, fully paid, in the issued
capital
stock of Dynalectric Company, a Florida corporation; (iii) 166.5
shares, fully paid, in the issued capital stock of Dynalectric
Company
of Nevada, a Nevada corporation; (iv) 100 shares, fully paid, in
the
issued capital stock of Contra Costa Electric, Inc., a California
corporation; and (v) 8,333 shares, fully paid, in the issued
capital
stock of JWP Systems/Kirkwood Electric Co., Inc., a California
corporation (collectively the "Pledged Shares"); and
WHEREAS, the Pledgor, B&B Contracting & Supply Company,
Dynalectric Company, Dynalectric Company of Nevada, Contra Costa
Electric, Inc., JWP Systems/Kirkwood Electric Co., Inc.
(individually,
a "Principal" and collectively, the "Principals") and JWP Inc.,
as
debtor-in-possession, and Reliance have entered into an
Underwriting
and Continuing Indemnity Agreement dated as of even date herewith
(said
Agreement, as it may hereafter be amended, supplemented or
otherwise
modified from time to time, being the "Underwriting Agreement";
the
terms defined therein and not otherwise defined herein being used
herein as therein defined); and
WHEREAS, it is a condition precedent to the underwriting of
bonds
by Reliance for the Principals that the Pledgor shall have made
the
pledge contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in
order to
induce Reliance to issue bonds for the Principals under the
Underwriting Agreement, the Pledgor hereby agrees with Reliance
as
follows:
1. Pledge. The Pledgor hereby pledges to Reliance, and grants to Reliance a security interest in, the following (the "Pledged Collateral"):
(a) The Pledged Shares and the certificates representing the Pledged Shares and all dividends, cash instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Shares, subject to the provisions of Section 6 and except for distributions permitted by the Underwriting Agreement;
(b) all additional shares of any Principal (other than Pledgor) from time to time acquired by the Pledgor in any manner or to which the Pledgor becomes entitled, and the certificates representing such additional shares and all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares, subject to the provision of Section 6 and except for distributions permitted by the Underwriting Agreement; and
(c) all additional shares of any Principal from time to time acquired by Reliance in any manner or to which it becomes entitled, and all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Shares, subject to the provision of Section 6 and except for distributions permitted by the Underwriting Agreement.
2. Security for Loss. This Agreement secures the payments of any Loss now and hereafter existing under the Underwriting Agreement. The terms "Loss" and "Event of Default" are intended to be used as defined in the Underwriting Agreement.
3. Delivery of Pledged Collateral. (a) Prior to or concurrently herewith, the Pledgor has delivered or shall deliver possession of the Pledged Shares, together with undated stock powers executed in blank, to the Designated Agent referenced in Section 3(b) below. For the better perfection of the rights of Reliance in and to the Pledged Collateral, at the request of Reliance at any time after the occurrence and during the continuance of an Event of Default, the Pledgor shall forthwith cause such Pledged Collateral to be registered in the name of the Designated Agent, as Pledgee, (including, without limitation, the execution of stock transfer forms and all other instruments as may be necessary or advisable in order to effect such transfer), subject only to the rights specified in Section 6(a). In addition, the Designated Agent shall have the right at any time to exchange certificates or instruments representing or evidencing Pledged Collateral for certificates or instruments of smaller or larger denominations. The Pledgor hereby consents to the appointment of the Designated Agent as the custodian of the Pledged Stock subject to Section 6 hereof for the purposes of holding the Pledged Collateral and all rights attaching thereto and all dividends and other distributions payable thereon in trust to perfect the security interest herein granted and for the purpose of transferring the Pledged Collateral to the Designated Agent and otherwise dealing with the Pledged Collateral or acting in relation to the Pledged Collateral as decided by Reliance subject to the terms of this Agreement.
(b) Reliance may designate from time to time any Person (including Reliance) to act as agent (the "Designated Agent") for purposes of receiving and holding the Pledged Collateral and exercising certain other rights of Reliance as herein specified. Reliance may change the identity of the Designated Agent upon written notice to the Pledgor and to the Person acting as Designated Agent at the time of such change. Any written notice pursuant to this Section shall include an address for notice of the Person identified as Designated Agent therein. Reliance hereby designates, as the initial Designated Agent, Belmont Capital Partners, II, L.P., with an address for notice of:
Belmont Capital Partners II, L.P.
82 Devonshire Street F7C
Boston, Massachusetts 02109
Attention: Portfolio Manager
with a copy to:
Morgan, Lewis & Bockius 2000 One Logan Square Philadelphia, Pennsylvania 19103 Attention: Michael A. Bloom, Esq.
4. Representations and Warranties. The Pledgor represents and warrants as follows:
(a) There is no stamp duty, tax, levy, impost, charge, withholding or similar duty, tax or fee imposed on or by virtue of the execution or delivery of this Agreement or any other document to be furnished hereunder or in connection herewith;
(b) To ensure the legality, validity, enforceability or admissibility in evidence of this Agreement, it is not necessary that this Agreement or any other document be filed or recorded with any governmental, administrative or judicial authority or regulatory body;
(c) The Pledged Shares have been duly authorized and validly issued and are fully paid and non-assessable;
(d) The Pledgor is the legal and beneficial owner of the Pledged Collateral free and clear of any lien, security interest, option or other charge or encumbrance except for the security interest created by this Agreement and the security interest permitted by the Underwriting Agreement;
(e) The pledge of the Pledged Shares pursuant to this Agreement creates a valid security interest in the Pledged Shares, securing the payment of Loss;
(f) No authorization, approval or other action by, and no notice to or filing with, any governmental, administrative or judicial authority or regulatory body is required either for the pledge by the Pledgor of the Pledged Collateral pursuant to the Agreement or for the execution, delivery or performance of this Agreement by the Pledgor; and
(g) The Pledged Shares constitute 100% of the issued and outstanding shares of each Principal owned by Pledgor.
5. Further Assurances. The Pledgor agrees that at any time and from time to time, at the reasonable expense of the Pledgor, the Pledgor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that Reliance may request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable Reliance to exercise and enforce its rights and remedies hereunder with respect to any Pledged Collateral. If Reliance shall determine to exercise its rights to sell all or any of the Pledged Collateral pursuant to Section 10, the Pledgor agrees that, upon request of Reliance, the Pledgor will at its own reasonable expense, do or cause to be done all such acts and things as may reasonably be necessary or desirable, or that Reliance may reasonably request, to make any sale of the Pledged Collateral or any part thereof valid and binding and in compliance with applicable law.
6. Voting Rights; Dividends; etc. (a) So long as no Event of Default as defined in the Underwriting Agreement shall have occurred and be continuing:
(i) The Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement or the Underwriting Agreement; provided, however, that the Pledgor shall not exercise or shall refrain from exercising any such right if, in the reasonable judgment of Reliance, such action would have a material adverse effect on the value of the Pledged Collateral or any part thereof; and provided further, that the Pledgor shall give Reliance at least five days written notice of the manner in which it intends to exercise, or its reasons for refraining from exercising, its voting rights with respect to any shareholder votes which require greater than a simple majority of shareholder votes for passage.
(ii) The Pledgor shall be entitled, subject to the terms of the Underwriting Agreement, to receive and retain any and all dividends and interest paid in respect to the Pledged Collateral, provided however, that any and all
(A) dividends and interest paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Pledged Collateral,
(B) dividends and other distributions paid or payable in cash in respect of any Pledged Collateral in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus, so long as the Principals remain in compliance with the financial covenants of the Underwriting Agreements, and
(C) cash paid, payable or otherwise distributed in respect of principal of, or in redemption of, or in exchange for any Pledged Collateral, shall be paid and shall be forthwith delivered to the Designated Agent to hold as, Pledged Collateral and shall, if received by the Pledgor, be received in trust for the benefit of Reliance, be segregated from the other property or funds of the Pledgor, and be forthwith delivered to the Designated Agent as Pledged Collateral in the same form as so received (with any necessary endorsement). The Pledgor shall, upon request by Reliance promptly execute such documents and do such acts as may be necessary or advisable to give effect to the provisions of this Section 6(a)(ii).
(iii) Reliance shall execute and deliver (or cause to be executed and delivered) to the Pledgor all such proxies and other instruments as the Pledgor may reasonably request for the purpose of enabling the Pledgor to exercise the voting and other rights which it is entitled to exercise pursuant to paragraph (i) above and to receive the dividends or interest payments which it is authorized to receive and retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuation of an Event of Default as defined in the Underwriting Agreement:
(i) All rights of Pledgor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 6(a)(i) and to receive the dividends and interest payments which it would otherwise be authorized to receive and retain pursuant to Section 6(a)(ii) shall cease and all such rights shall thereupon become vested in the Designated Agent who shall thereupon have the sole right to exercise such voting and other consensual rights and to receive and hold as Pledged Collateral such dividends and interest payments.
(ii) All dividends and interest payments which are received by the Pledgor contrary to the provisions of Section 6(b)(i) shall be received in trust for the benefit of Reliance, shall be segregated from other funds of the Pledgor and shall be forthwith paid over to the Designated Agent as Pledged Collateral in the same form as so received (with any necessary endorsement).
7. Transfer and Other Liens; Additional Shares.
(a) The Pledgor agrees that it will not (i) sell, transfer or otherwise dispose of, or grant any option with respect to any of the Pledged Collateral, or (ii) create or permit to exist any lien, security interest, or other charge or encumbrance upon or with respect to any of the Pledged Collateral except for the security interest created under this Agreement and such other security interests permitted by the Underwriting Agreement.
(b) The Pledgor agrees that it will (i) cause the Principals not to issue any shares or other equity securities in addition to or in substitution for the Pledged Shares, except with the prior written consent of Reliance and (ii) pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all additional shares or other equity securities issued by the Principals (other than Pledgor) or otherwise acquired by the Pledgor in any manner.
8. Reliance Appointed Attorney-in-Fact. The Pledgor hereby irrevocably appoints Reliance the Pledgor's attorney-in-fact, with full authority in the place and stead of the Pledgor and in the name of the Pledgor or otherwise, from time to time in the discretion of Reliance to take any action and to execute any instrument which it may reasonably deem necessary or advisable to accomplish the purposes of this Agreement including, without limitation, subject to the provisions of Section 6 hereof to receive, endorse and collect all instruments made payable to the Pledgor representing any dividend, interest payment or other distribution in respect of the Pledged Collateral or any part thereof and to give full discharge for the same.
9. Reliance May Perform If the Pledgor fails to perform any agreement contained herein, Reliance may itself perform, or cause performance of, such agreement, and the reasonable expenses of Reliance incurred in connection therewith shall be payable by the Pledgor under Section 12.
10. Remedies Upon Default. If any Event of Default as defined in the Underwriting Agreement shall have occurred and be continuing:
(a) Reliance may exercise in respect of the Pledged Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the Uniform Commercial Code (the "Code") in effect in the State of Pennsylvania at the time, and Reliance may also, without notice except as specified below, sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker's board or at any of the offices of Reliance or elsewhere, for cash, on credit or for future delivery, and upon such other terms as Reliance may deem commercially reasonable, provided Reliance shall afford Pledgor a period of thirty (30) days to redeem any of the Pledged Collateral. The Pledgor agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to the Pledgor of the time and place of any public sale or of the time after which any private sale is to be made shall constitute reasonable notification. Reliance shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. Reliance may adjourn any public or private sale from time to time by announcing at the time and place fixed therefor.
(b) Any cash held by Reliance as Pledged Collateral and all cash proceeds received by it in respect of any sale of, collection from, or other realization upon all or any part of the Pledged Collateral may, in the discretion of Reliance, be held by it as collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable to Reliance pursuant to Section 11) in whole or in part by Reliance against, all or any part of the Loss in such order as it shall elect. Any surplus of such cash or cash proceeds held by Reliance and remaining after payment in full of all the Loss shall be paid over to Pledgor or to whomsoever may be lawfully entitled to receive such surplus.
11. Indemnity and Expenses. (a) The Pledgor agrees to indemnify Reliance from and against any and all claims, damages, losses, liabilities and reasonable expenses arising out of or in connection with or resulting from this Agreement (including, without limitation, enforcement of this Agreement), unless and to the extent such claim, damage, loss, liability or expense was attributable to Reliance's gross negligence or wilful misconduct as determined by a final judgement of a court of competent jurisdiction.
(b) The Pledgor will upon demand pay to Reliance the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, which they may incur in connection with (i) the administration of this Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Pledged Collateral, (iii) the exercise or enforcement of any of the rights of the sureties, (iv) the failure by the Pledgor to perform or observe any of the provisions hereof.
12. Amendments, Waivers, Etc. No amendment or waiver of any provision of this Agreement nor consent to any departure by the Pledgor herefrom shall in any event be effective unless the same shall be in writing and signed by Reliance, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. The waiver (whether expressed or implied) by Reliance of any breach of the terms or conditions of this Agreement shall not prejudice any remedy of Reliance in respect of any continuing or other breach of the terms and conditions hereof, and shall not be construed as a bar to any right or remedy which Reliance would otherwise have on any future occasion under this Agreement. No failure to exercise, nor any favor, delay, relaxation, or indulgence on the part of Reliance in exercising, any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other power, right or privilege.
13. Security Interest Absolute. All rights of Reliance and security interests hereunder, and all obligations of the Pledgor hereunder, shall be absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of the Underwriting Agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the obligations, or any other amendment or waiver of or any consent to any departure from the Underwriting Agreement or the Pledge Agreement;
(iii) any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to departure from any other terms of the Underwriting Agreement; or
(iv) any other circumstance other than payment in full of Loss which might otherwise constitute a defense available to, or a discharge of, the Pledgor or a third party pledgor.
14. Amount of Loss. The entries in the books and records of Reliance shall be prima facie evidence of the amount of Loss secured by this Agreement and the rights arising therefrom of Reliance as pledgee of the Pledged Collateral under this Agreement.
15. Addresses for Notices. All notices and other communications provided for hereunder shall be made in accordance with Section 8.9 of the Underwriting Agreement.
16. Continuing Security Interest. This Agreement shall create a continuing security interest in the Pledged Collateral and shall (i) be binding upon the Pledgor, its successors and assigns, (ii) inure, together with the rights and remedies of Reliance, to be benefit of successors, transferees and assigns of Reliance, and (iii) remain in full force and effect until payment in full of the Loss called for by the Underwriting Agreement and discharge of Reliance under all bonds issued pursuant thereto. Thereafter the Pledgor shall be entitled to the return, upon its request, of such of the Pledged Collateral as shall not have been sold or otherwise applied pursuant to the terms hereof.
17. Severability. If any terms or provisions of this Agreement is or shall become illegal, invalid or unenforceable in any jurisdiction, all other terms and provisions of this Agreement shall remain legal, valid or enforceable in such jurisdiction and such illegal, invalid or unenforceable provision shall be legal, valid and enforceable in any other jurisdiction.
18. Governing Law; Terms. This Agreement shall be governed by, and construed in accordance with, the law of the State of Pennsylvania. Unless otherwise defined herein or in the Underwriting Agreement, terms defined in Article 9 of the Uniform Commercial Code of the State of Pennsylvania are used herein as therein defined.
IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.
Attest: RELIANCE SURETY COMPANY
____________________________ ________________________________
Vincent G. Fasano
Its Senior Vice President
Attest: RELIANCE INSURANCE COMPANY
|
UNITED PACIFIC INSURANCE COMPANY
___________________RELIANCE NATIONAL INDEMNITY COMPANY
RELIANCE NATIONAL INSURANCE COMPANY
OF ILLINOIS
EXHIBIT 10(z)
SUBORDINATION AGREEMENT
SUBORDINATION AGREEMENT dated November 22, 1994 between DYN
Specialty Contracting, Inc., B&B Contracting & Supply Company,
Dynalectric Company, Dynalectric Company of Nevada, Contra Costa
Electric, Inc. and JWP Systems/Kirkwood Electric Co., Inc.
(collectively, the "Principals"), JWP Inc. (the "Creditor") and
Reliance Surety Company, Reliance Insurance Company, United
Pacific
Insurance Company, Reliance National Indemnity Company and
Reliance
Insurance Company of Illinois (collectively, the "Surety").
WHEREAS, from time to time hereafter the Principals may
incur
indebtedness for borrowed money from the Creditor and shall
accrue fees
payable to Creditor arising from the performance of management
services
by the Creditor on behalf of the Principal (hereinafter called
the
"Indebtedness");
WHEREAS, the Principals, the Surety and the Creditor are
parties
to that certain Underwriting and Continuing Indemnity Agreement
dated
November 22, 1994 (as amended, modified or restated from time to
time,
the "Underwriting Agreement") pursuant to which the Surety has
agreed
to consider issuing Bonds (as such term is defined in the
Underwriting
Agreement) from time to time on behalf of the Principals;
WHEREAS, to induce Surety to issue Bonds pursuant to the
Underwriting Agreement, the Creditor is willing to subordinate
the
Indebtedness to any obligations of the Principals arising under
the
Underwriting Agreement;
NOW, THEREFORE, in consideration of the furnishings of any
Bond by
Surety, Principals and Creditor hereby agree as follows:
SECTION 1. Definitions. Unless otherwise defined herein
capitalized terms used herein shall have the meaning assigned
thereto
in the Underwriting Agreement.
SECTION 2. Subordination. Creditor hereby subordinates all
rights and claims against Principals on account of the
Indebtedness to
any and all rights and claims of Surety on account of any Loss.
SECTION 3. Payment of Indebtedness. Except as expressly
permitted pursuant to the Underwriting Agreement, no payments
shall be
made by Principals with respect to Indebtedness. Following the
occurrence of an Event of Default under the Underwriting
Agreement,
Surety's Loss shall be paid in full out of the assets of
Principals
before any payment on account of the Indebtedness is made to or
realized by Creditor.
SECTION 4. Assignment of Claims. Creditor hereby assigns
to
Surety its rights and claims on account of such Indebtedness so
that in
the event of receivership, bankruptcy, or insolvency of any of
the
Principals, or in the event that Surety has received notice or
knowledge of facts giving rise to a reasonable belief that it has
sustained or may sustain or incur a Loss, Surety may enforce such
rights and claims and may have payments thereon until Surety is
reimbursed in full for its Loss.
SECTION 5. Funds in Trust. Creditor agrees that in the
event of
the breach of any of the terms of this Agreement, all funds and
the
value of any property and any benefit received by Creditor in
connection with such breach shall be held in trust by Creditor
for the
benefit of Surety, to be paid by Creditor to Surety on demand in
reimbursement of its Loss. Creditor further agrees to compensate
Surety for all Loss sustained by it and caused or contributed to
by
such breach.
SECTION 6. Miscellaneous. (a) This Agreement shall apply
to
Bonds executed and furnished by Surety and where procured by
Surety, to
Bonds executed by any other Surety as sole Surety or as
Co-Surety, and
the rights hereunder shall inure to the benefit of Surety, such
other
Surety, if any, and their reinsurers, if any.
(b) This Agreement shall apply to Bonds provided or furnished before, on, and after the date of this Agreement, and all alterations, renewals, extensions, and modifications thereof.
(c) Creditor and Principals agree that Surety's rights under this Agreement are in addition to, and not in lieu of any and all rights which Surety may have under other agreements, including the Underwriting Agreement, or by law, equity or statute.
(d) Creditor reserves the right to terminate this Agreement as a continuing inducement to Surety for the furnishing of Bonds, upon written notice by certified mail, return receipt requested, to Surety at its Home Office, 4 Penn Center Plaza, Philadelphia, Pennsylvania 19103 Attention: Bond Claim Department, such notice not to become effective until thirty (30) days after receipt by Surety, whereupon the effect of this Agreement shall be limited to the Bonds furnished before the effective date of such notice.
Executed this 22nd day of November, 1994
Witness: JWP INC.
By:
Name:
Title: President
Witness: DYN SPECIALTY CONTRACTING, INC.
By:
Name:
Title: President
Witness: B&B CONTRACTING & SUPPLY COMPANY
By:
Name:
Title: President
Witness: DYNALECTRIC COMPANY
By:
Name:
Title: President
Witness: DYNALECTRIC COMPANY OF NEVADA
By:
Name:
Title: President
Witness: CONTRA COSTA ELECTRIC, INC.
By:
Name:
Title: President
Witness: JWP SYSTEMS/KIRKWOOD ELECTRIC Co.,
INC.
By:
Name:
Title: President
Witness: Reliance Surety Company
Reliance Insurance Company
United Pacific Insurance
Company
Reliance National Indemnity
Company
Reliance Insurance Company of
Illinois
By:
Name:
Title:
|
EXHIBIT 10(aa)
CREDIT AGREEMENT
among
JWP INC.,
MES HOLDINGS CORPORATION,
As Borrowers
CERTAIN SUBSIDIARIES THEREOF,
As Guarantors
and
THE LENDERS NAMED HEREIN
December 14, 1994
TABLE OF CONTENTS
Page
I. CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . .2
1.1 Definitions.. . . . . . . . . . . . . . . . . . . . .2
1.2 Accounting Terms. . . . . . . . . . . . . . . . . . .14
II. THE CREDIT . . . . . . . . . . . . . . . . . . . . . . . 14
2.1 The Loans . . . . . . . . . . . . . . . . . . . . . 14
2.2 The Notes . . . . . . . . . . . . . . . . . . . . . 14
2.3 Funding Procedures. . . . . . . . . . . . . . . . . 15
2.4 Interest. . . . . . . . . . . . . . . . . . . . . . 15
(a) Non-Default Rate . . . . . . . . . . . . . . . 15
(b) Default Rate.. . . . . . . . . . . . . . . . . 15
2.5 Commitment Fee. . . . . . . . . . . . . . . . . . . 15
2.6 Reduction or Termination of Loan Commitment . . . . 16
(a) Notice . . . . . . . . . . . . . . . . . . . . 16
(b) Mandatory Reduction. . . . . . . . . . . . . . 16
2.7 Prepayments . . . . . . . . . . . . . . . . . . . . 16
(a) Mandatory Prepayments. . . . . . . . . . . . . 16
(b) Voluntary Prepayments. . . . . . . . . . . . . 16
2.8 Payments. . . . . . . . . . . . . . . . . . . . . . 16
(a) Interest and Principal.. . . . . . . . . . . . 16
(b) Form of Payments, Application of Payments, Payment
Administration, Etc. . . . . . . . . . . . . . 16
(c) Depositary Procedures. . . . . . . . . . . . . 17
(d) Net Payments.. . . . . . . . . . . . . . . . . 18
2.9 Priority and Liens. . . . . . . . . . . . . . . . . 18
III. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . 19
3.1 Organization, Standing. . . . . . . . . . . . . . . 19
3.2 Corporate Authority, Etc. . . . . . . . . . . . . . 19
3.3 Validity of Documents . . . . . . . . . . . . . . . 20
3.4 Litigation. . . . . . . . . . . . . . . . . . . . . 20
3.5 ERISA.. . . . . . . . . . . . . . . . . . . . . . . 20
3.6 Financial Statements. . . . . . . . . . . . . . . . 21
3.7 Use of Proceeds . . . . . . . . . . . . . . . . . . 21
3.8 Not in Default. . . . . . . . . . . . . . . . . . . 22
3.9 Taxes. . . . . . . . . . . . . . . . . . . . . . . 22
3.10 Permits, Licenses, Etc. . . . . . . . . . . . . . . 22
3.11 Compliance With Laws. . . . . . . . . . . . . . . . 22
3.12 Amounts Owed to or from Affiliates; Intercompany
Agreements. . . . . . . . . . . . . . . . . . . . . 23
(a) Affiliates . . . . . . . . . . . . . . . . . . 23
(b) Intercompany Agreements. . . . . . . . . . . . 24
(c) Dividends. . . . . . . . . . . . . . . . . . . 24
3.13 Title to Assets . . . . . . . . . . . . . . . . . . 24
3.14 Indebtedness for Borrowed Money . . . . . . . . . . 24
3.15 Guarantees. . . . . . . . . . . . . . . . . . . . . 24
3.16 Insurance and Surety Bonds. . . . . . . . . . . . . 24
3.17 Subsidiaries, Etc.. . . . . . . . . . . . . . . . . 25
3.18 Patents, Trademarks, Etc. . . . . . . . . . . . . . 26
3.19 Accounts. . . . . . . . . . . . . . . . . . . . . . 26
3.20 Inventory.. . . . . . . . . . . . . . . . . . . . . 26
3.21 Equipment.. . . . . . . . . . . . . . . . . . . . . 26
3.22 Real Property.. . . . . . . . . . . . . . . . . . . 26
3.23 Corporate and Fictitious Names. . . . . . . . . . . 26
V. SECURITY.. . . . . . . . . . . . . . . . . . . . . . . . 26
4.1 Security Documents. . . . . . . . . . . . . . . . .27
4.2 Release of Collateral.. . . . . . . . . . . . . . . 27
V. CONDITIONS PRECEDENT.. . . . . . . . . . . . . . . . . . 27
5.1 Conditions to First Loan. . . . . . . . . . . . . . 27
(a) Articles, Bylaws . . . . . . . . . . . . . . . 27
(b) Evidence of Authorization. . . . . . . . . . . 28
(c) Legal Opinions.. . . . . . . . . . . . . . . . 28
(d) Incumbency.. . . . . . . . . . . . . . . . . . 28
(e) Note. . . . . . . . . . . . . . . . . . . . . 28
(f) Confirmation and Effectiveness of the
Reorganization Plan. . . . . . . . . . . . . . 28
(g) Consents.. . . . . . . . . . . . . . . . . . . 28
(h) Change . . . . . . . . . . . . . . . . . . . . 28
(i) Continued Bonding. . . . . . . . . . . . . . . 28
(j) Other Agreements.. . . . . . . . . . . . . . . 29
(k) Absence of Defaults. . . . . . . . . . . . . . 29
(l) Documents. . . . . . . . . . . . . . . . . . . 29
5.2 All Loans Subsequent to the First Loan. . . . . . . 29
(a) Documents. . . . . . . . . . . . . . . . . . . 29
(b) Covenants; Representations . . . . . . . . . . 29
(c) Defaults . . . . . . . . . . . . . . . . . . . 30
(d) Legal Proceedings. . . . . . . . . . . . . . . 30
(e) Continued Bonding. . . . . . . . . . . . . . . 30
(f) Absence of Defaults. . . . . . . . . . . . . . 30
VI. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . 30
6.1 Financial Statements and Reports. . . . . . . . . . 30
(a) Quarterly Statements.. . . . . . . . . . . . . 30
(b) Annual Statements. . . . . . . . . . . . . . . 31
(c) No Default.. . . . . . . . . . . . . . . . . . 31
(d) ERISA. . . . . . . . . . . . . . . . . . . . . 32
(e) Net Cash Proceeds. . . . . . . . . . . . . . . 32
(f) Material Changes. . . . . . . . . . . . . . . 32
(g) Other Information. . . . . . . . . . . . . . . 32
6.2 Taxes and Other Charges.. . . . . . . . . . . . . . 32
6.3 Corporate Existence.. . . . . . . . . . . . . . . . 32
6.4 Compliance with ERISA . . . . . . . . . . . . . . . 33
6.5 Compliance with Regulations. . . . . . . . . . . . 34
6.6 Notice of Events. . . . . . . . . . . . . . . . . . 34
6.7 Maintenance of Records; Audits. . . . . . . . . . . 35
6.8 Generally Accepted Accounting Principles. . . . . . 35
|
6.9 Sale of Assets by Core Subsidiaries and Non-Guarantor
MES
Subsidiaries. . . . . . . . . . . . . . . . . . . . 35
VII. NEGATIVE COVENANTS.. . . . . . . . . . . . . . . . . . . 36
7.1 Merger, Consolidation . . . . . . . . . . . . . . . 36
7.2 Indebtedness for Borrowed Money.. . . . . . . . . . 36
7.3 Liens. . . . . . . . . . . . . . . . . . . . . . . 38
7.4 Guarantees. . . . . . . . . . . . . . . . . . . . . 38
7.5 Sale of Stock . . . . . . . . . . . . . . . . . . . 39
7.6 Judgment, Attachment. . . . . . . . . . . . . . . . 40
7.7 Loans, Advances and Investments . . . . . . . . . . 40
7.8 Transfer of Assets. . . . . . . . . . . . . . . . . 42
7.9 Modification of Loan Agreements or Policies; Payment of
Debt. . . . . . . . . . . . . . . . . . . . . . . . 42
7.10 Claims. . . . . . . . . . . . . . . . . . . . . . . 42
7.11 Accounting Change. . . . . . . . . . . . . . . . . 43
7.12 Backlog.. . . . . . . . . . . . . . . . . . . . . . 43
7.13 Losses from Operations. . . . . . . . . . . . . . . 43
7.14 Maintenance of Coverage Ratios. . . . . . . . . . . 43
VIII. DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . 45
8.1 Events of Default.. . . . . . . . . . . . . . . . . 45
(a) Principal, Interest or Other Amounts.. . . . . 45
(b) Covenants. . . . . . . . . . . . . . . . . . . 45
(c) Representations, Warranties, Etc.. . . . . . . 46
(d) Bankruptcy, Etc. of Borrowers, any Material
Guarantor or Core
Subsidiary.. . . . . . . . . . . . . . . . . 46
(e) Failure to Maintain Bonding in the Ordinary Course
46
(f) Material Adverse Change. . . . . . . . . . . 46
(g) Default under the Dyn Facility . . . . . . . . 46
(h) Certain Other Defaults . . . . . . . . . . . . 47
IX. GUARANTY.. . . . . . . . . . . . . . . . . . . . . . . 47
9.1 Guaranty. . . . . . . . . . . . . . . . . . . . . 47
9.2 No Impairment of Guaranty.. . . . . . . . . . . . 48
9.3 Continuation and Reinstatement, Etc.. . . . . . . 49
9.4 Representations and Warranties. . . . . . . . . 49
X. MISCELLANEOUS.. . . . . . . . . . . . . . . . . . . . 49
10.1 Waiver. . . . . . . . . . . . . . . . . . . . . . 49
10.2 Amendments. . . . . . . . . . . . . . . . . . . . 50
10.3 Governing Law.. . . . . . . . . . . . . . . . . . 50
10.4 Assignments and Participations. . . . . . . . . . 50
10.5 Captions. . . . . . . . . . . . . . . . . . . . . 50
10.6 Notices . . . . . . . . . . . . . . . . . . . . . 50
10.7 Expenses of the Agent and the Lenders; Indemnification
of the Agent and
the Lenders.. . . . . . . . . . . . . . . . . . .. 51
10.8 Survival of Warranties and Certain Agreements.. .. 52
10.9 Severability. . . . . . . . . . . . . . . . . . .. 52
10.10 CONSENT TO JURISDICTION AND SERVICE OF PROCESS 52
10.11 WAIVER OF JURY TRIAL.. . . . . . . . . . . . . 53
10.12 Counterparts; Effectiveness. . . . . . . . . . 54
10.13 Use of Defined Terms . . . . . . . . . . . . . 54
10.14 Lender Obligations.. . . . . . . . . . . . . . 54
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EXHIBITS
A Depositary Agreement
B Guarantor Security Agreement
C Pledge and Security Agreement
D Form of Note
E Loan Requests
F Opinion of Counsel of the Parent
G Opinion of Counsel of the MES Companies
|
SCHEDULES
A TCW Special Credits, as agent and nominee for
certain
entities
2.1 Loan Commitments
2.8(c) Depositary Accounts and Concentration
Accounts
3.1 Standing
3.2 Consents
3.4 Litigation
3.5 ERISA
3.6 Financial Statements
3.9 Taxes
3.11 Compliance with Laws; Licenses, Permits, Etc.
3.12 Intercompany Debt; Intercompany Agreements;
Dividends
3.13 Existing Liens
3.14 Existing Indebtedness for Borrowed Money
3.15 Existing Guarantees
3.16 Sureties
3.17 Subsidiaries; Location of Inventory and Equipment;
Corporate and
Fictitious Names
3.18 Patents, Trademarks
3.22 Real Property
5.1 Change
10.6 Address for Notice
|
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of December 14, 1994 (this "Agreement"), is entered into by and among JWP INC., a Delaware corporation (the "Parent"), MES HOLDINGS CORPORATION, a Delaware corporation (the "MES Borrower") and a wholly owned subsidiary of the Parent, certain of the MES Borrower's subsidiaries (each, a "Guarantor" and collectively the "Guarantors"), BELMONT CAPITAL PARTNERS II, L.P. ("Belmont"), TCW SPECIAL CREDITS, a California general partnership, as agent and nominee for the entities (each a "Fund") set forth in Schedule A hereto, ALBERT FRIED & COMPANY, UBS MORTGAGE FINANCE INC. and KEVIN C. TONER (each, a "Lender" and collectively, the "Lenders"). Parent and the MES Borrower are sometimes referred to herein collectively as the "Borrowers" and individually as a "Borrower".
WITNESSETH:
WHEREAS, on December 21, 1993 (the "Petition Date"), certain creditors of the Parent initiated an involuntary bankruptcy proceeding against the Parent in the United States District Court for the Southern District of New York (the "Bankruptcy Court");
WHEREAS, on February 14, 1994, the Parent moved the Bankruptcy Court to convert the involuntary bankruptcy proceeding to a voluntary chapter 11 proceeding and an order for relief was entered by the Bankruptcy Court on February 14, 1994;
WHEREAS, the Parent has continued to operate its business
and manage its assets as a debtor-in-possession pursuant to
Section 1107 and 1108 of the Bankruptcy Code;
WHEREAS, on September 30, 1994, the Bankruptcy Court confirmed the Third Amended Joint Plan of Reorganization of JWP Inc. and SellCo Corporation, as modified;
WHEREAS, it is a condition precedent to the effectiveness of the Reorganization Plan that the Borrowers obtain a written agreement for a working capital facility to become available upon the Effective Date of such Reorganization Plan;
WHEREAS, the Borrowers have requested, and the Lenders have agreed to provide credit facilities to the Parent and certain of its subsidiaries in the maximum aggregate principal amount of $45,000,000 and, as a portion of such facilities, for the Lenders to provide a secured revolving loan facility in the maximum aggregate principal amount of $35,000,000.
NOW, THEREFORE, in consideration of the premises and intending to be legally bound hereby, the parties hereto agree as follows:
I. CERTAIN DEFINITIONS.
1.1 Definitions. As used in this Agreement, the following terms shall have these meanings:
"Accounts" shall mean any "accounts," as such term is defined in the Uniform Commercial Code as in effect from time to time in the State of New York.
"Affiliate" shall mean any Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, the Parent. A Person shall be deemed to control another person if such Person possesses, directly or indirectly, the power (i) to vote 10% or more of the outstanding stock or other ownership interests having ordinary voting power for the election of directors of such other Person or (ii) to direct or cause the direction of the management and policies of such corporation, whether by contract or otherwise.
"Agent" shall mean CoreStates Bank, N.A., in its capacity as agent for the Lenders under each of the Pledge and Security Agreement and the Guarantor Security Agreement.
"Aggregate Loan Commitment" shall have the meaning set forth in Section 2.1(a).
"Asset Sale" shall mean the sale, lease, conveyance or other disposition of any of the assets of either of the Borrowers or the MES Subsidiaries.
"Bankruptcy Code" shall mean the Bankruptcy Reform Act of 1978 as heretofore and hereafter amended and codified as 11 U.S.C. section 101 et seq.
"Bankruptcy Court" shall mean the United States Bankruptcy Court for the Southern District of New York having jurisdiction over the Case from time to time.
"Business Day" shall mean any day that is not a Saturday, a Sunday, any day on which banks are required or permitted to be closed in the State of New York or any day on which the New York Stock Exchange is required or permitted to be closed.
"Capital Expenditures" shall mean, for any Person for any period, the aggregate (without duplication) of (a) all expenditures by such Person, except interest capitalized during construction, during such period for property, plant or equipment, including, without limitation, renewals, improvements, replacements and capitalized repairs, that would be reflected as additions to property, plant or equipment on a consolidated balance sheet of such Person prepared in conformity with Generally Accepted Accounting Principles, and (b) the principal amount of all Indebtedness for Borrowed Money incurred or assumed in connection with any such additions to property, plant and equipment. For the purpose of this definition, the purchase price of equipment which is acquired simultaneously with the trade-in of existing equipment owned by such Person or with insurance proceeds shall be included in Capital Expenditures only to the extent of the gross amount of such purchase price less the credit granted by the seller of such equipment being traded in at such time or the amount of such proceeds, as the case may be.
"Capital Leases" shall have the meaning set forth in Section 7.2(d).
"Case" shall mean Case No. 93 B 46404 before the Bankruptcy Court.
"Cash Collateral Account" shall have the meaning set forth in Section 7.8.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collateral" shall have the meanings set forth in the Pledge and Security Agreement and each Guarantor Security Agreement and any other personal property, tangible or intangible, now existing or hereafter acquired, including accessions, substitutions and proceeds (including insurance proceeds) that may at any time be or become subject to a security interest or Lien in favor of the Agent or the Lenders to secure the Obligations.
"Commitment Fee" shall have the meaning set forth in Section 2.5.
"Commitment Percentage" shall mean, as to each Lender, the percentage such Lender's Loan Commitment represents of the Aggregate Loan Commitment.
"Comstock" shall mean, so long as it is a Subsidiary of the Parent, Comstock Canada, Ltd., a Canadian limited partnership, and its successors.
"Concentration Account" shall have the meaning set forth in
Section 2.8(c).
"Concentration Bank" shall have the meaning set forth in
Section 2.8(c)
"Confirmation Order" shall mean the order of the Bankruptcy Court, dated September 30, 1994, confirming the Reorganization Plan.
"Consolidated Cash Interest Expense" shall mean, for any period, total accrued interest expense (including the interest component of Capital Lease Obligations) of the Operating Companies on a consolidated basis during such period, including, without limitation, all commissions, discounts and other fees and charges (to the extent such commissions, fees and charges are included in "interest" under Generally Accepted Accounting Principles) owed with respect to letters of credit, and net costs under interest rate contracts, but excluding, amortization of debt discount, interest paid in property other than cash, any other interest expense not payable in cash, interest on $16,000,000 principal amount of the Series C Notes, or Commitment Fees payable hereunder or in connection with the Dyn Facility.
"Consolidated EBIT" shall mean for any period, Consolidated Net Income (Loss) for such period increased (to the extent already deducted therefrom) by the sum, on a consolidated basis, of (a) all income tax expense for such period to the extent included in Consolidated Net Income (Loss), and (b) all interest expense for such period to the extent included in Consolidated Net Income (Loss).
"Consolidated Fixed Charge Coverage Ratio" at any date shall mean ratio of (a) Consolidated EBIT plus depreciation and amortization of the Operating Companies less any Capital Expenditures of the Operating Companies for the applicable quarters immediately preceding such determination date (the "Reference Period") to (b) the sum of (i) Consolidated Cash Interest Expense incurred by the Operating Companies calculated on a pro forma basis for the Reference Period, (ii) (A) for the Reference Period from January 1, 1995 through December 31, 1995, stated interest on the Series A Notes, the Series B Notes and the Series C Notes, excluding interest on $16 million principal amount of the Series C Notes, accreted during the period from October 1, 1995 through December 31, 1995 (B) for the Reference Period from April 1, 1995 through March 31, 1996, stated interest on the Series A Notes, the Series B Notes and the Series C Notes, excluding interest on $16 million principal amount of the Series C Notes, accreted from October 1, 1995 through March 31, 1996, (C) for the Reference Period from July 1, 1995 through June 30, 1996, stated interest on the Series A Notes, the Series B Notes and the Series C Notes, excluding interest on $16 million principal amount of the Series C Notes, accreted from October 1, 1995 through June 30, 1996, (D) for the Reference Period from October 1, 1995 through September 30, 1996, and for each Reference Period thereafter, stated interest on the Series A Notes, the Series B Notes and the Series C Notes, excluding interest on $16 million principal amount of the Series C Notes, accreted during such Reference Period, and (iii) cash dividends (including on any preferred stock) paid by the Operating Companies during the Reference Period to a Person other than an Operating Company. For purposes of this definition, the factors set forth in (a) and (b) above (other than cash dividends) shall be calculated after giving effect on a pro forma basis (as if the same occurred at the beginning of the Reference Period) to (i) the acquisition by any Operating Company of any Person which, as a result of such acquisition, becomes a wholly-owned Subsidiary or the acquisition of assets constituting a business by any Operating Company during such Reference Period and (ii) any Asset Sales by an Operating Company (excluding gains or losses recognized from such Asset Sales) occurring during the Reference Period. In calculating cash interest expense for purposes of determining the denominator of this ratio interest on "Indebtedness" (as defined in the indenture applicable to the Series A Notes) of any Operating Company determined on a fluctuating basis, to the extent such interest is covered by an agreement relating to an interest swap obligation, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreement.
"Consolidated Net Income (Loss)" shall mean, for any period, the aggregate of the net income (loss) of the Operating Companies for such period, determined on a consolidated basis in accordance with Generally Accepted Accounting Principles, provided that there shall be excluded from such net income (to the extent otherwise included therein) (a) any gain or loss realized upon the sale or other disposition (including without limitation dispositions pursuant to sale-leaseback transactions and costs related to closings of operations, if incurred) of any real property or equipment of the Operating Companies which is not sold or otherwise disposed of in the ordinary course of business or of any capital stock of any Person owned by any Operating Company, (b) the net income (loss) of any such Person accounted for by the equity method of accounting, (other than a venture permitted under Section 7.7(l)) except to the extent of the amount of dividends or distributions paid to an Operating Company, and (c) the net income (loss) of any other Person acquired by any Operating Company in a pooling of interests transaction for any period prior to the date of such acquisition.
"Core Subsidiaries" shall mean JWSC, Sea Cliff Water Company, Jamaica Water Supply Company, JWP U.K. Ltd., Drake & Scull Holdings Ltd., Drake & Scull Engineering Ltd., Drake & Scull Airport Services Ltd., Comstock Limited, 923452 Ontario Limited and Comstock Canada L.P., in each case so long as they are Subsidiaries of the Parent.
"Covered Plan" shall have the meaning set forth in Section 3.5.
"Debt" shall mean, with respect to any Person, without
duplication, (i) all items (excluding reserves for deferred
income taxes) which in accordance with Generally Accepted
Accounting Principles would be included in determining total
liabilities as shown on the liability side of a balance sheet of
such Person as of the date on which Debt is to be determined,
(ii) all indebtedness secured by any Lien on any property or
asset owned or held by such Person subject thereto, whether or
not the indebtedness secured thereby shall have been assumed,
(iii) all indebtedness of others with respect to which
such Person has become liable by way of a guarantee, and (iv) all
outstanding letters of credit and payment and performance bonds
with respect to which, if drawn upon, such Person would have any
repayment or reimbursement obligations.
"Default Rate" shall mean a 2% per annum increase above the interest rate otherwise applicable on all Loans.
"Depositary Account" shall have the meaning set forth in
Section 2.8(c).
"Depositary Agreement" shall mean an agreement in substantially the form of Exhibit A hereto among each Borrower, the Agent and the Concentration Bank providing, among other things, that the Agent shall have a security interest in funds held in the Concentration Account and that, upon the terms and conditions provided therein, the Agent may require the Concentration Bank to transfer funds deposited into the Concentration Account solely in accordance with the instructions of the Agent, and authorizing the Agent to cause the Concentration Bank to remit to the Agent amounts necessary to pay the Agent any amount payable under this Agreement, the Notes or any other Loan Document which is not paid in a timely manner.
"Dollars" and "$" shall mean the lawful currency of the United States of America.
"Domestic MES Subsidiaries" shall mean all MES Subsidiaries that are not Foreign MES Subsidiaries.
"Dyn" shall mean Dyn Specialty Contracting, Inc., a direct wholly-owned subsidiary of the Parent.
"Dyn Companies" shall mean Dyn and its direct and indirect subsidiaries.
"Dyn Facility" shall mean the credit facility, dated as of the date hereof, provided by the Lenders to the Parent and the Dyn Companies.
"Effective Date" shall mean the effective date of the Reorganization Plan.
"Equipment" shall mean "equipment," as such term is defined in the Uniform Commercial Code as in effect from time to time in the State of New York.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time.
"ERISA Affiliate" shall mean any corporation which is a member of the same controlled group of corporations as either of the Borrowers within the meaning of Section 414(b) of the Code, or any trade or business which is under common control with either of the Borrowers within the meaning of Section 414(c) of the Code.
"Event of Default" shall have the meaning set forth in
Section 8.1.
"Excluded Subsidiary" shall mean each Foreign MES Subsidiary.
"Financial Statements" shall have the meaning set forth in
Section 3.6.
"Foreign MES Subsidiaries" shall mean Comstock, each U.K. Subsidiary, each Middle-East Subsidiary, each Malaysian Subsidiary, and any other subsidiary of any MES Company permitted hereunder, incorporated and organized in a jurisdiction other than the United States of America, and each of their respective subsidiaries.
"Generally Accepted Accounting Principles" shall mean generally accepted accounting principles as in effect on the date hereof, for purposes of computing compliance with all financial covenants contained herein, and as in effect from time to time, for all other purposes of this Agreement, in each case consistently applied.
"Guarantor Security Agreement" shall mean the Guarantor Security Agreement, dated as of the date hereof, between the Agent, the Lenders and each Guarantor in substantially the form of Exhibit B hereto.
"Guarantors" shall have the meaning set forth in the recitals hereto.
"Imprest Account" shall have the meaning set forth in
Section 7.3(f).
"Indebtedness for Borrowed Money" shall mean (i) all indebtedness, liabilities, and obligations, now existing or hereafter arising, for money borrowed by a Person, whether or not evidenced by any note, indenture or agreement (including, without limitation, the Notes and any indebtedness for money borrowed from an Affiliate) and (ii) all indebtedness, liabilities and obligations of others (including an Affiliate) now existing or hereafter arising for money borrowed with respect to which a Person has become liable by way of a guarantee or indemnity.
"Intercompany Agreements" shall have the meaning set forth in Section 3.12(b).
"Intercompany Debt" shall mean any debt, loan or advance to, investment in, or guarantee of the obligations of, an Affiliate, other than indebtedness (i) arising in the ordinary course of business under normal trade practices, (ii) on terms no less favorable than could be obtained between independent parties on an arm's-length basis and (iii) not for borrowed money.
"Intercompany Note" shall mean a promissory note evidencing Intercompany Debt (which Intercompany Debt may be in the nature of a revolving loan).
"Inventory" shall mean any "inventory," as such term is defined in the Uniform Commercial Code as in effect from time to time in the State of New York now or hereafter owned or acquired, whenever located, and, in any event, including all inventory, merchandise, goods and other personal property that are held by or on behalf of a Person for sale or lease or to be furnished under a contract of service, in each case in the ordinary course of business.
"Investment" in any Person shall mean:
(a) the acquisition (whether for cash, property, services or securities or otherwise) of capital stock, bonds, notes, debentures, partnership or other ownership interests or other securities of such Person; and
(b) any deposit with, or advance, loan or other
extension of credit to, such Person (other than (i) any such
deposit securing obligations under real or personal property
leases or securing obligations to utilities, in each case in
the ordinary course of business and (ii) any such advance,
loan or extension of credit representing the purchase price
of inventory or supplies purchased, or services rendered, in
the ordinary course of business upon payment terms
consistent with past practice in similar transactions) or
guarantee or assumption of, or other contingent obligation
with respect to, Indebtedness for Borrowed Money or other
liability of such Person, except as expressly permitted by
Section 7.2, 7.4 or 7.7; and
(c) (without duplication of the amounts included in
(a) and (b) above) any amount that may, pursuant to the
terms of such investment, be required to be paid, deposited,
advanced, lent or extended to or guaranteed or assumed on
behalf of such Person.
"JWSC" shall mean Jamaica Water Securities Corp., a Subsidiary of the Parent.
"Lien" shall mean any lien, mortgage, security interest, chattel mortgage, pledge or other encumbrance (statutory or otherwise) of any kind securing satisfaction of an obligation, including any agreement to give any of the foregoing, any conditional sales or other title retention agreement, any lease in the nature thereof, and the filing of or the agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction or similar evidence of any encumbrance, whether within or outside the United States.
"Lines of Credit" shall have the meaning set forth in
Section 7.2(c).
"Loan" shall have the meaning set forth in Section 2.1(a).
"Loan Commitment" shall have the meaning set forth in
Section 2.1(a).
"Loan Documents" shall mean this Agreement, the Notes, the Pledge and Security Agreement, the Guarantor Security Agreement, the Depositary Agreement and each other agreement, document and instrument necessary or required to implement the terms of this Agreement.
"Majority Lenders" shall mean Lenders holding Commitment Percentages aggregating 51%.
"Malaysian Subsidiaries" shall mean, so long as such corporation is a Subsidiary of the Parent, (a) the corporation to be organized by the Parent or any Subsidiary of the Parent in Malaysia in connection with the operation and maintenance of power plants in Malaysia, and (b), if organized by a Subsidiary, the immediate parent corporation of such corporation so long as the principal asset of such parent corporation is such corporation, each of such corporation's subsidiaries, and their respective successors.
"Material Guarantor" shall mean each Guarantor with total assets, determined in accordance with Generally Accepted Accounting Principles, of not less than $10,000,000.
"Maturity Date" shall mean the earliest of (i) the date that is eighteen months after the date of this Agreement; (ii) termination of the Loan Commitments and repayment in full of the Obligations; or (iii) such earlier date as provided in Section 8.1 hereof.
"MES Companies" shall mean the MES Borrower and the MES Subsidiaries.
"MES Subsidiary" shall mean a direct or indirect Subsidiary of the MES Borrower.
"Middle-East Subsidiaries" shall mean, so long as such Persons are Subsidiaries of the Parent, Lunar Drake & Scull (UAE), a United Arab Emirates corporation, Drake & Scull Assarain, an Omani corporation, Drake & Scull (Cayman Islands) Ltd., a Cayman Islands corporation, JWP-Nesma Ltd., a Saudi Arabia corporation, JWP (Cayman Islands), Ltd., a Cayman Islands corporation and their respective successors.
"Multiemployer Plan" shall mean a multiemployer plan as defined in ERISA Section 4001(a)(3).
"Net Cash Proceeds" shall mean, (i) with respect to the
sale, lease, transfer or disposition of any asset, tangible or
intangible, now existing or hereafter acquired, by either of the
Borrowers or a Domestic MES Subsidiary from and after the date
hereof, the aggregate amount of cash received (including cash
payments received by way of deferred payment pursuant to any note
or installment receivable or otherwise in respect of such
transaction) and state and federal income
tax refunds attributable to such sale, lease, transfer or
disposition, but in each case only as and when received by the
Borrower or such MES Subsidiary in respect of such transaction,
and (ii) with respect to the sale, lease, transfer or disposition
of the stock or of any asset, tangible or intangible, of a Core
Subsidiary or a non-Guarantor MES Subsidiary from and after the
date hereof, the aggregate amount of cash distributed to the
Parent pursuant to Section 6.9 hereof, minus, as to
each of clause (i) and (ii) above, the sum of (A) reasonable
fees and commissions incurred in connection with such transaction
and not payable to an Affiliate, (B) taxes incurred in connection
with such transactions, (C) employee severance costs incurred in
connection with the sale, lease, transfer or disposition of such
assets to the extent such costs are due and payable within ninety
(90) days following such transaction, (D) fixed liabilities,
determined in accordance with Generally Accepted Accounting
Principles, retained by a Borrower or such MES Subsidiary in
connection with such sale, lease, transfer or
disposition to the extent such liabilities are due and payable
within ninety (90) days following such transaction, and (E) if
such sale or disposition relates to the assets of a Core
Subsidiary, Indebtedness for Borrowed Money of such Core
Subsidiary permitted by this Agreement to the extent such
Indebtedness for Borrowed Money is required by its
terms to be repaid upon such sale or disposition.
"Note" shall have the meaning set forth in Section 2.2 hereof.
"Obligations" shall mean all now existing or hereafter arising debts, obligations, covenants and duties of payment or performance of every kind, matured or unmatured, direct or contingent, owing, arising, due or payable to any Lender by or from the Borrowers and the Guarantors arising out of this Agreement or any other Loan Document, including, without limitation, all obligations to repay principal of and interest on all Loans and to pay interest, fees, costs, charges, expenses, professional fees, and all sums chargeable to the Borrowers and the Guarantors under the Loan Documents, whether or not evidenced by any note or other instrument.
"Operating Companies" shall mean the Parent, each of the MES Companies and each of the Dyn Companies, on a consolidated basis.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Pension Plan" shall mean, at any time, any Plan (including a Multiemployer Plan), subject to the funding requirements of ERISA Section 302 or Code Section 412, which requirements are, or at any time within the six years immediately preceding the time in question were, in whole or in part, the responsibility of either of the Borrowers, any Guarantor or any ERISA Affiliate.
"Permitted Disposition" shall mean (i) as to the MES Companies, the sale, lease, transfer or disposition by an MES Company of (a) Inventory in the ordinary course of business, (b) machinery and equipment that is (1) obsolete, damaged or no longer used or useful in the conduct of the business of such MES Company and the disposition of which is in the ordinary course of business or (2) replaced with comparable machinery or equipment within three months of such disposition and (c) other assets, provided that the aggregate fair market value of all assets sold, leased, transferred or disposed by the MES Companies as provided in this clause (c) from and after the date of this Agreement shall not exceed $600,000 and (ii) as to the Parent, the sale of the stock of the Software House Companies, SellCo, the MES Borrower, Dyn, the Series A Substitute Collateral and the Series B Substitute Collateral, as such terms are defined herein or in the Reorganization Plan and sale of the stock of JWSC to the extent the Net Cash Proceeds of such sale (a) exceed $15,000,000 or (b) reduce the outstanding commitment under the Dyn Facility as provided in Section 2.6(b) hereof.
"Permitted Lien" shall mean:
(a) any Liens for current taxes, assessments and other governmental charges not yet due and payable or being contested in good faith by the Borrowers or an MES Subsidiary by appropriate proceedings and for which adequate reserves in accordance with Generally Accepted Accounting Principles have been established by the Borrowers or such MES Subsidiary;
(b) any mechanic's, materialman's, carrier's, warehousemen's or similar Liens for sums not yet due or being contested in good faith by the Borrowers or an MES Subsidiary by appropriate proceedings and for which adequate reserves in accordance with Generally Accepted Accounting Principles have been established by the Borrowers or such MES Subsidiary;
(c) Liens in favor of the Agent under the Loan Documents to secure the Obligations;
(d) Liens granted by the Parent pursuant to the Reorganization Plan to secure the Series A Notes, the Series B Notes and related obligations under the indentures therefor and under the documents executed in connection therewith;
(e) Liens granted by the Parent in favor of the Agent to secure the Dyn Facility and any refinancing thereof;
(f) easements, rights-of-way, restrictions and other similar encumbrances on the real property or fixtures of the Borrowers or an MES Subsidiary incurred in the ordinary course of business which individually or in the aggregate are not substantial in amount and which do not in any case materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of either of the Borrowers or any MES Subsidiary;
(g) Liens (other than Liens imposed on any property of the Borrower or an MES Subsidiary or any ERISA Affiliate pursuant to ERISA or section 412 of the Code) incurred or deposits made in the ordinary course of business, including Liens in connection with workers' compensation, unemployment insurance and other types of social security and Liens to secure performance of tenders, statutory obligations, appeal bonds, bids, leases that are not capitalized leases, sales contracts and other similar obligations, in each case, not incurred in connection with the obtaining of credit or the payment of a deferred purchase price, and which do not, in the aggregate, result in a material adverse effect on the business, operations, assets or condition (financial or otherwise) of either of the Borrowers or any of the Guarantors;
(h) Liens existing upon the date hereof and the extension, renewal or replacement of any such Lien without any increase in the Debt (including drawn and undrawn Lines of Credit) secured by such Lien or the assets subject to such Lien;
(i) Liens applicable to assets of the MES Companies arising as a matter of law or equity securing the obligations of the MES Companies under now existing or hereafter established performance and payment bonds; and
(j) unperfected Liens arising out of that certain Indemnity Agreement between Seaboard and the MES Borrower to be entered into as of the Effective Date.
"Person" shall mean any individual, corporation, partnership, joint venture, association, company or entity.
"Petition Date" shall have the meaning set forth in the recitals hereto.
"Plan" shall mean an employee benefit plan as defined in
Section 3(3) of ERISA, other than a Multiemployer Plan.
"Pledge and Security Agreement" shall mean the Pledge and Security Agreement, dated as of the date hereof, between each of the Borrowers, the Lenders and the Agent in the form of Exhibit C hereto.
"Potential Default" shall mean an event that with the giving of notice or lapse of time or both would become an Event of Default.
"Prohibited Transaction" shall mean a transaction that is prohibited under Code Section 4975 or ERISA Section 406 and not exempt under Code Section 4975 or ERISA Section 408.
"Regulation" shall mean any statute, law, ordinance, regulation, order or rule of any foreign, federal, state, local or other government or governmental body, including, without limitation, those covering or related to banking, financial transactions, securities, public utilities, environmental control, energy, safety, health, transportation, bribery, record keeping, zoning, antidiscrimination, antitrust, wages and hours, employee benefits, and price and wage control matters.
"Reorganization Plan" shall mean the Parent's confirmed plan of reorganization in the Case.
"Reportable Event" shall mean, with respect to a Pension
Plan:
(a) any of the events set forth in ERISA Sections 4043(b) (other
than a reportable event as to which the provision of 30 days'
notice to the PBGC is waived under applicable regulations) or
4063(a) or the regulations thereunder, (b) an event requiring
either of the Borrowers, any MES Subsidiary or any ERISA
Affiliate to provide security to a Pension Plan under Code
Section 401(a)(29) and (c) any failure by
either of the Borrowers, any MES Subsidiary or any ERISA
Affiliate to make payments required by Code Section 412(m).
"Seaboard" shall mean Seaboard Surety Company.
"SellCo" shall mean SellCo Corporation, a wholly owned subsidiary of the Parent.
"SellCo Companies" shall mean SellCo, each of the subsidiaries of SellCo and Software House Companies.
"Series A Notes" shall mean the Parent's 7% Senior Secured Notes, Series A, due 1997.
"Series B Notes" shall mean the Parent's 7% Senior Secured Notes, Series B, due 1997.
"Series C Notes" shall mean the Parent's 11% Series C Notes, due 2001.
"Software House Companies" shall mean those corporations described as "Non-debtor Subsidiaries listed on Schedule 4" in the Reorganization Plan, as long as they are Subsidiaries of the Parent.
"Solvent" shall mean that the aggregate present fair saleable value of a Person's assets is in excess of the total amount of its probable liability on its existing debts as they become absolute and matured, such Person has not incurred debts beyond its foreseeable ability to pay such debts as they mature, and such Person has capital adequate to conduct the business in which it is presently or is about to engage in.
"Subsidiary" shall mean any Person at least 50% of the voting stock of which is held, directly or indirectly by either of the Borrowers.
"Termination Event" shall mean, with respect to a Pension
Plan:
(a) a Reportable Event, (b) the termination of a Pension Plan, or
the filing of a notice of intent to terminate a Pension Plan, or
the treatment of a Pension Plan amendment as a termination under
ERISA Section 4041(e), (c) the institution of proceedings to
terminate a Pension Plan under ERISA Section 4042 or (d) the
appointment of a trustee to administer any Pension Plan under
ERISA Section 4042.
"Transaction" shall mean the establishment of the facility contemplated by this Agreement.
"U.K. Subsidiaries" shall mean, so long as such Persons are Subsidiaries of the Parent, JWP U.K. Ltd., a United Kingdom corporation, and each of its subsidiaries (other than any Middle East Subsidiary or any Malaysian Subsidiary) and their respective successors.
"Unfunded Pension Liabilities" shall mean, with respect to any Pension Plan at any time, the amount determined by taking the accumulated benefit obligation, as disclosed in accordance with Statement of Accounting Standards No. 87, over the fair market value of Pension Plan assets.
"Unrecognized Retiree Welfare Liability" shall mean with respect to any Plan that provides post-retirement benefits other than pension benefits, the amount of the accumulated post-retirement benefit obligation, as determined in accordance with Statement of Financial Accounting Standards No. 106, as of the most recent valuation date, which has not previously been recognized. Prior to the date such statement is applicable to either of the Borrowers or any MES Subsidiary, such amount of the obligation shall be based on an estimate made in good faith. For purposes of determining the aggregate amount of the Unrecognized Retiree Welfare Liability, Plans maintained by an MES Subsidiary that is not otherwise a ERISA Affiliate shall be taken into account.
"Unrestricted Cash Coverage Ratio" at any date shall mean
the ratio of (a) Consolidated EBIT (other than Consolidated EBIT
attributable to the Foreign MES Subsidiaries) plus depreciation
and amortization of the Operating Companies (other than
depreciation and amortization attributable to the Foreign MES
Subsidiaries) plus any cash received by any Operating Company
(other than the Foreign MES Subsidiaries from any Water Company
or any Foreign MES Subsidiary) during the applicable quarters
immediately preceding such determination date (the "Reference
Period") less any Capital Expenditures of the
Operating Companies (other than Capital Expenditures of the
Foreign MES Subsidiaries not funded by the Parent) for the
Reference Period, to (b) the sum of (i) Consolidated Cash
Interest Expense incurred by the Operating Companies (other than
the Foreign MES Subsidiaries) calculated on a pro forma basis for
the Reference Period, and (ii) cash dividends (including on any
preferred stock) paid by the Operating
Companies (other than the Foreign MES Subsidiaries) during the
Reference Period to a Person other than an Operating Company
(other than a Foreign MES Subsidiary). For purposes of this
definition, the factors set forth in (a) and (b) above (other
than cash dividends) shall be calculated after giving effect on a
pro forma basis (as if the same occurred at the beginning of the
Reference Period) to (i) the acquisition by an Operating Company
of any Person which, as a result of such acquisition, becomes a
wholly-owned Subsidiary or the acquisition
of assets constituting a business by any Operating Company during
such Reference Period and (ii) any Asset Sale by an Operating
Company (excluding gains or losses recognized from such Asset
Sales) occurring during the Reference Period. In calculating
cash interest expense for purposes of determining the denominator
of this ratio interest on "Indebtedness" (as defined in the
indenture applicable to the Series A
Notes) of any Operating Company determined on a fluctuating
basis, to the extent such interest is covered by an agreement
relating to an interest on a fluctuating basis, to the extent
such interest is covered by an agreement relating to an interest
swap obligation, shall be deemed to accrue at the rate per annum
resulting after giving effect to the operation of such agreement.
"Water Companies" shall mean, so long as it is a Subsidiary of the Parent, each of JWSC, Jamaica Water Supply Company, and Sea Cliff Water Company, and their successors.
1.2 Accounting Terms. All accounting terms used herein shall be construed in accordance with Generally Accepted Accounting Principles.
II. THE CREDIT
2.1 The Loans.
(a) Subject to the terms and conditions hereof, each of the Lenders agrees to make revolving credit loans (collectively called the "Loans" and individually a "Loan") to either Borrower from time to time during the period commencing on the date hereof and ending on the Maturity Date in outstanding principal amounts not to exceed at any time each such Lenders' commitment set forth on Schedule 2.1 (such Lender's "Loan Commitment") and the aggregate of all such Loans shall not exceed at any time $35,000,000 (the "Aggregate Loan Commitment"). The failure of any one or more of the Lenders to make Loans in accordance with its or their obligations shall not relieve the other Lenders of their several obligations under this subsection, but in no event shall the aggregate amount at any one time outstanding which any Lender shall be required to lend under this Section 2.1(a) exceed the sum of the amount of such Lender's Loan Commitment at that time.
(b) Except a Loan that exhausts the full remaining amount of the Aggregate Loan Commitment, each Loan when made shall be in an amount at least equal to $5,000,000 or, if greater, then in such minimum amount plus $1,000,000 multiples.
(c) Within the limits of the Aggregate Loan Commitment the Borrowers may borrow, prepay (in accordance with Section 2.7) and reborrow Loans, provided that total the number of borrowings hereunder (including the initial Loan) shall not exceed ten, and no more than one borrowing hereunder shall occur in any 30-day period. All Loans shall, in any event, be repaid by the Borrowers on the Maturity Date.
(d) All Loans shall be made by the Lenders simultaneously and pro rata in accordance with the Loan Commitments.
2.2 The Notes. The Loans made by each Lender shall be
evidenced by a single promissory note of the Borrowers (each a
"Note" and collectively, the "Notes") in principal face amount
equal to such Lender's Loan Commitment, payable to the order of
such Lender and otherwise in the form attached hereto as Exhibit
D. Each Note shall be dated the date the first Loan is made and
shall bear interest at the rate per annum and be repayable in
accordance with the terms hereof and as specified in such Note.
Each Note shall mature upon the Maturity Date, and, upon
maturity, each outstanding Loan evidenced thereby
shall be due and payable. Each Lender shall maintain records of
all Loans evidenced by its Note and of all payments thereon,
which records shall be conclusive absent manifest error.
2.3 Funding Procedures.
(a) Each request for a Loan shall be made not later than 11:00 a.m. (Eastern Standard Time) on a Business Day by notice by telephone to each Lender to the attention of the person(s) identified on the signature page hereto or such other person as they shall instruct the Borrowers in writing, and by delivery to each Lender of a written request signed by the Borrowers, in substantially the form attached hereto as Exhibit E, specifying the date and amount of the Loan to be made and wiring instructions for disbursement of such Loan. Subject to the terms and conditions stated herein, Loans shall be made seven Business Days following receipt by each Lender of a request for such Loan (or on such earlier date as all of the Lenders shall agree, with the Lenders using reasonable efforts to agree upon a date that is as soon as possible within such period but in no event shall any Lender be required to make a Loan in fewer than seven Business Days following receipt by such Lender of a request for such Loan). No request shall be effective until actually received by each Lender.
(b) On the date of a Loan, each Lender shall wire to the bank designated by the Borrowers the amount of such Loan in immediately available funds.
2.4 Interest.
(a) Non-Default Rate. Each Loan shall bear interest on the principal amount thereof from the date made until such Loan is paid in full at the rate of 15% per annum, calculated on the basis of the actual number of days elapsed in a year of 360 days.
(b) Default Rate.
(i) If any Event of Default specified in Section 8.1(a) or Section 8.1(d) shall occur; or
(ii) If any other Event of Default occurs and the Majority Lenders declare the Notes to be immediately due and payable;
THEN the rate of interest applicable to each Loan then outstanding shall be the Default Rate. Unless waived by the Lenders, the Default Rate shall apply from the date of the Event of Default (notwithstanding any delay in the declaration of such Event of Default) until the date such Event of Default is cured, and interest accruing at the Default Rate shall be payable upon demand.
2.5 Commitment Fee. The Borrower shall pay to the Lenders as compensation for the Lenders' Loan Commitments a fee (the "Commitment Fee") payable as follows: (i) $700,000 on the date of this Agreement; and (ii) $350,000 on each of the ninety-first, one hundred and eighty-first, two hundred and seventy-first, three hundred and sixty-first, and four hundred and fifty-first day following the date of this Agreement. In the event that all Obligations shall not have been paid on the Maturity Date, the Commitment Fee will include an additional fee of $350,000 due and payable on each of the first day following the Maturity Date and the first day of each three month period following the Maturity Date until payment in full of all Obligations.
2.6 Reduction or Termination of Loan Commitment.
(a) Notice. The Borrowers may at any time, on not less than one Business Day's written notice, terminate or permanently reduce the Aggregate Loan Commitment, provided that any reduction shall be in the amount of $1,000,000 or a multiple thereof.
(b) Mandatory Reduction. The Aggregate Loan Commitment shall be reduced from time to time by the portion, if any, of Net Cash Proceeds received by either of the Borrowers or any Domestic MES Subsidiary on or after the date hereof that is not (A) proceeds of a Permitted Disposition or (B) promptly deposited in the Cash Collateral Account pursuant to Section 7.8; provided, however, that if any such Net Cash Proceeds relate to the disposition of the stock or assets of JWSC, 77.7% of the first $15,000,000 thereof shall be applied as follows: first, to reduce the Aggregate Loan Commitment up to the aggregate principal amount of Loans then outstanding; second, to reduce the "Aggregate Loan Commitment" under the Dyn Facility up to the aggregate principal amount of "Loans" then outstanding thereunder (after the application of the portion of the Net Cash Proceeds initially allocable to the Dyn Facility); and third, to the further reduction of the Aggregate Loan Commitment.
2.7 Prepayments.
(a) Mandatory Prepayments. In the event the Aggregate Loan Commitment is reduced, the Borrowers shall, simultaneously with such reduction, make a prepayment of principal and interest in respect of the Loans in such amount as is necessary to assure that the aggregate principal amount of Loans outstanding immediately after such reduction will not exceed the Aggregate Loan Commitment as reduced. In the event the Aggregate Loan Commitment is terminated, the Borrowers shall, simultaneously with such termination, make a prepayment of all principal of and interest on all Loans, and shall pay all other Obligations then outstanding (including, without limitation, the then unpaid Commitment Fee).
(b) Voluntary Prepayments. In addition, on one Business Day's notice to the Lender, the Borrowers may, at their option, prepay the Loans in whole at any time or in part from time to time, provided that each partial prepayment shall be in the principal amount of $1,000,000 or, if greater, then in $100,000 multiples.
2.8 Payments.
(a) Interest and Principal. Accrued interest on all Loans shall be due and payable in arrears on the first Business Day of each month and on the Maturity Date. The principal amount of all Loans then outstanding shall be due and payable on the Maturity Date.
(b) Form of Payments, Application of Payments, Payment Administration, Etc. All payments (including prepayments) of principal of or interest on any Loan and all fees and other amounts payable by the Borrowers hereunder shall be made in Dollars, shall be allocated among the Lenders in accordance with their respective Commitment Percentage and, except as otherwise provided herein, shall be remitted to the Lender by wire transfer to the account set forth opposite each Lender's name on the signature page hereof or at such office or account as any such Lender shall specify to the Parent, in immediately available funds not later than 11:00 a.m. (Eastern Time) on the day when due. Whenever any payment is stated as due on a day which is not a Business Day, the maturity of such payment shall be extended to the next succeeding Business Day and interest shall continue to accrue during such extension.
(c) Depositary Procedures.
(i) From and after the date hereof all receipts and other amounts received by the MES Borrower or any Domestic MES Subsidiary, from any source, including, without limitation payments from any account debtor but excluding (A) funds contained in an Imprest Account, (B) funds held in payroll accounts, employee benefit payment accounts, petty cash accounts, miscellaneous checking accounts, accounts holding retentions, escrow accounts, and accounts required by customers of MES Subsidiaries to be excluded from these depositary procedures to the extent the aggregate amount held in all such accounts does not exceed $10,000,000 at any time during the sixty-day period immediately following the Effective Date, $8,000,000, at any time during the period commencing on the 61st day, and ending on the 120th day following the Effective Date, and $5,000,000 at any time thereafter (excluding from such calculation amounts remitted to any payroll account not more than three days prior to the date of a payroll necessary to fund such payroll) and (C) funds disbursed by the Parent to a "zero-balance" account of the MES Borrower or an MES Subsidiary, by the MES Borrower to a "zero-balance" account of an MES Subsidiary or by the MES Borrower or an MES Subsidiary to a "zero-balance" account of the Parent, in each case to cover disbursements in the ordinary course of business drawn on such account, upon receipt, shall be deposited into a depositary account in the name of the MES Borrower or such MES Subsidiary and listed on Schedule 2.8(c) or as set forth in clause (ii) below (each, a "Depositary Account"). All available amounts on deposit in any Depositary Account of the MES Borrower or any Domestic MES Subsidiary, and amounts at any time held by the Parent, shall be transferred by same-day or next-day wire transfer to one of the concentration depositary accounts listed on Schedule 2.8(c) (each, a "Concentration Account") maintained by the MES Borrower at NationsBank, N.A. (the "Concentration Bank") for application in accordance with this Agreement and the Depositary Agreement and for use by the MES Borrower and the Domestic MES Subsidiaries. As of the date of this Agreement, the only depositary accounts maintained by the MES Borrower and the MES Subsidiaries, other than the Excluded Subsidiaries, are as set forth on Schedule 2.8(c) hereto. Notwithstanding the provisions of this subsection 2.8(c)(i), Hansen Mechanical Contractors, Inc. shall not be required to comply with this subsection 2.8(c)(i) until the date 21 days from the Effective Date.
(ii) The MES Borrower and any Domestic MES Subsidiary may close Depositary Accounts and/or open new Depositary Accounts only with prior written notice to the Lenders. The MES Borrower shall not open any new concentration depositary account without the prior written consent of the Majority Lenders.
(iii) A Lender may at any time request that the Concentration Bank confirm the Agent's security interest in the Concentration Account and the funds and items contained therein granted pursuant to the Depositary Agreement.
(d) Net Payments. All payments made to the Lenders by the Borrowers hereunder, under the Notes or under any other Loan Document will be made without setoff, counterclaim or other defense. All such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or any political subdivision or taxing authority thereof or therein (but excluding, except as provided below, any tax imposed on or measured by the gross or net income of any Lender or its partners (including all interest, penalties or similar liabilities related thereto) pursuant to the laws of the United States of America or any State or political subdivision thereof, or taxing authority of the United States of America or any State or political subdivision thereof, in which the principal office of such Lender is located), and all interest, penalties or similar liabilities with respect thereto (collectively, together with any amounts payable pursuant to the next sentence, "Taxes"). The Borrowers shall also reimburse the Lenders, upon the written request of any Lender, for Taxes imposed on or measured by the gross or net income of such Lender or its partners pursuant to the laws of the United States of America (or any State or political subdivision thereof), or the jurisdiction (or any political subdivision or taxing authority thereof) in which the principal office of such Lender is located as such Lender shall determine are payable by such Lender in respect of Taxes paid to or on behalf of such Lender or its partners pursuant to the preceding sentence. If any Taxes are so levied or imposed, the Borrowers agree to pay the full amount of such Taxes, and such additional amounts as may be necessary so that every payment of all amounts due hereunder, under any Note or under any other Loan Document, after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein or in such Note. The Borrowers will furnish to a Lender upon request certified copies of tax receipts evidencing such payment by the Borrowers. The Borrowers will indemnify and hold harmless each Lender, and reimburse each Lender upon its written request, for the amount of any Taxes so levied or imposed and paid or withheld by such Lender or its partners.
2.9 Priority and Liens.
(a) The Borrowers and the MES Subsidiaries hereby covenant, represent and warrant that the Obligations of the Borrowers shall be secured by (i) a valid Lien upon and security interest in all assets of the Parent (other than the stock of the MES Borrower, Dyn, the Software House Companies, SellCo, the Series A Substitute Collateral and the Series B Substitute Collateral), the MES Borrower and the Guarantors, including a pledge of all stock of the Domestic MES Subsidiaries (other than the stock of those MES Subsidiaries expressly excepted as provided by the Guarantor Security Agreement and the Pledge and Security Agreement), which Lien shall be perfected other than (A) the Lien granted in vehicles to the extent such Lien cannot be perfected by the filing of financing statements and (B) the Lien granted in certain securities and instruments of the Parent and the Guarantors to the extent such Lien is not perfected by possession and cannot be perfected by the filing of financing statements, which may be unperfected, and (ii) a security interest in the contractual right to the Concentration Accounts of the Parent and the MES Borrower and in the first $15,000,000 of the proceeds of the sale of the stock or assets of JWSC, which Lien and security interests will be superior to and have priority over the Liens of all other Persons, except Permitted Liens. The proceeds of collateral subject to the Lien granted hereby shall be allocated to the repayment of the Obligations and the repayment of obligations arising under the Dyn Facility in the manner provided in the Pledge and Security Agreement and the Guarantor Security Agreements.
(b) The security interest described above will be granted to the Agent as secured party on behalf of the Lenders.
(c) Upon the maturity (whether by acceleration or otherwise) of any of the Obligations, the Borrowers shall immediately pay all such Obligations and the Lenders shall be entitled to immediately exercise all remedies available to it under this Agreement and the other Loan Documents or otherwise (including remedies against the Guarantors or any Collateral owned by a Guarantor).
III. REPRESENTATIONS AND WARRANTIES
The Borrowers represent and warrant to the Lenders that:
3.1 Organization, Standing. Except as set forth on Schedule 3.1, each Borrower, Material Guarantor and Core Subsidiary (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (ii) has the corporate power and authority necessary to own its assets, carry on its business and, if such Subsidiary is a Guarantor, enter into and perform its obligations hereunder and under each Loan Document to which it is a party and (iii) is qualified to do business and is in good standing in each jurisdiction where the nature of its business or the ownership of its properties requires such qualification except where the failure to be so qualified would not have a material adverse effect on the business, operations, assets or condition (financial or otherwise) of either of the Borrowers, any Material Guarantor, any Core Subsidiary, or the MES Companies taken as a whole.
3.2 Corporate Authority, Etc. The making and performance of the Loan Documents to which it is a party are within the power and authority of each of the Borrowers and the Material Guarantors and have been duly authorized by all necessary corporate action. Except as set forth on Schedule 3.2, the making and performance of the Loan Documents do not and under present law will not require any consent or approval of either of the Borrowers' shareholders or Board of Directors or shareholders of any Material Guarantor or any other Person whose consent or approval has not heretofore been obtained, do not and under present law will not violate any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award, do not violate any provision of the charter or by-laws of either of the Borrowers, any Material Guarantor or any Core Subsidiary, do not and will not result in any breach of any material agreement, lease or instrument to which either of the Borrowers, any Material Guarantor or any Core Subsidiary is a party, by which any of them is bound or to which any of their respective assets are or may be subject, and do not and will not give rise to any Lien upon any of the assets of either of the Borrowers, any Material Guarantor or any Core Subsidiary except in favor of the Agent. Further, except as set forth on Schedule 3.2, neither the Borrowers nor any Material Guarantor or any Core Subsidiary is in default under any such agreement, lease or instrument except to the extent such default is not likely to have a material adverse effect on the business, operations, assets or condition (financial or otherwise) of either of the Borrowers, or the MES Companies, taken as a whole. Except as set forth on Schedule 3.2, no authorizations, approvals or consents of, and no filings or registrations with, any governmental or regulatory authority or agency (other than filings or notices required to perfect any security interests in favor of the Agent) are necessary for the execution, delivery or performance by either of the Borrowers or any Material Guarantor of any Loan Document to which either of the Borrowers or such Material Guarantor is a party or for the validity or enforceability thereof.
Validity of Documents. This Agreement is, and each other Loan Document when executed and delivered, will be, the legal, valid and binding obligation of the Borrowers and each Guarantor that is a party thereto, enforceable against the Borrowers and/or such Guarantor in accordance with its terms.
3.4 Litigation. Except as set forth in Schedule 3.4 hereto, as of the date of this Agreement, there is no action, suit or proceeding pending or, to the best knowledge of either of the Borrowers, threatened against or affecting the Borrowers, any Domestic MES Subsidiary or any assets of the Borrowers or any Domestic MES Subsidiary before any court, government agency, or other tribunal, involving claims against the Borrowers or any Domestic MES Subsidiary that are uninsured, exceed insurance coverage, comprise the deductible portion of any such insurance coverage or are otherwise not expressly accepted for coverage without reservation by any applicable insurer, in each case in an amount in excess of $1,700,000. The status (including the tribunal, the nature of the claim and the amount in controversy) of each such litigation matter as of the date of this Agreement is set forth in such Schedule.
3.5 ERISA. The provisions of each Plan in which either of
the Borrowers, any Guarantor or any ERISA Affiliate participates
or to which either of the Borrowers, any Guarantor or any ERISA
Affiliate contributes, whether or not they are the sole
participant or contributor, comply, in all material respects,
with all applicable requirements of ERISA and of the Code, and
with all applicable rulings and regulations issued under the
provisions of ERISA and the Code setting forth those
requirements. No event has occurred with respect
to any Plan in which either of the Borrowers, any Guarantor or
any ERISA Affiliate participates or to which any of them
contributes (hereinafter referred to as a "Covered Plan") that
constitutes a Reportable Event, or, if such event has occurred,
the employer and plan administrator have complied with Section
4043 of ERISA and the regulations thereunder, and have discharged
all notification obligations, if any, imposed on either of them
by Section 4043 of ERISA, to the extent that the employer or plan
administrator has not been relieved of such obligations by
regulation or otherwise by the PBGC; there does not exist with
respect to any Covered Plan any accumulated funding deficiency
within the meaning of Section 412 of the Code nor has there been
issued either a variance or a waiver of the minimum funding
standards imposed by the Code with respect to any
Covered Plan, nor are there any excise taxes due or hereafter to
become due under Section 4971 of the Code with respect to the
funding of any covered Plan for any plan year or fiscal period
ending prior to the date hereof; except as described on Schedule
3.5, no Covered Plan to which Section 4021 of ERISA applies has
been terminated or, if such termination has occurred, the
requirements of ERISA Sections 4041 and
4044 have been satisfied and the Internal Revenue Service has
issued a letter of determination that the Covered Plan met the
requirements of Code Section 401(a) at the time of such
termination; no Covered Plan has incurred any liability to the
PBGC under Sections 4062, 4063 or 4064 of ERISA which has not
been satisfied or discharged; and, to the
best knowledge of either of the Borrowers or any Guarantor, no
Covered Plan has engaged in any Prohibited Transaction. Except
as described on Schedule 3.5, none of the Borrower, any Guarantor
or any ERISA Affiliate has withdrawn from any Multiemployer Plan
or incurred any withdrawal liability within the meaning of
Section 4201 of ERISA which has not been fully satisfied. As of
the date hereof, except as described on Schedule 3.5, there are
no actual or potential withdrawal liability payments for
withdrawals that have occurred, as determined in
accordance with Title IV of ERISA, by either of the Borrowers,
any Guarantor or any ERISA Affiliate with respect to all
Multiemployer Plans. Except as described on Schedule 3.5, as of
the date of this Agreement, none of the Borrowers, any Guarantor
or any ERISA Affiliate has established or maintained any Plan or
arrangement which provides post-employment welfare benefits or
coverage (other than (i) severance benefits or (ii) health care
benefits as required pursuant to Section
4980B of the Code). Except as described on Schedule 3.5, as of
the date of this Agreement, none of the Borrowers, any Guarantor
or any ERISA Affiliate has ever established, maintained or
contributed to, or has any liability, actual or contingent, with
respect to, a Plan subject to Title IV of ERISA. Each of the
Borrowers, each Guarantor and each ERISA Affiliate has, as of the
date of this Agreement, made all contributions or payments to or
under each such Plan required by law or the terms of such Plan.
3.6 Financial Statements. Except as set forth on Schedule 3.6, the audited consolidated financial statements of the Parent and its subsidiaries, including the MES Companies, as of and for the fiscal years ended December 31, 1993 and December 31, 1992, consisting in each case of a balance sheet, a statement of operations, a statement of shareholders' equity, a statement of cash flows and accompanying footnotes, and the interim unaudited consolidated financial statements of the Parent and its subsidiaries, including the MES Companies, as of September 30, 1994 and September 30, 1993 furnished to the Lenders in connection herewith (the "Financial Statements"), present fairly, in all material respects, the financial position, results of operations and cash flows of the Parent and its Subsidiaries as of the dates and for the periods referred to, in conformity with Generally Accepted Accounting Principles (subject, in the case of interim statements, to changes resulting from audits and year-end adjustments). There are no liabilities, fixed or contingent, which are not reflected in such financial statements, other than liabilities which are not required to be reflected in such balance sheets in accordance with Generally Accepted Accounting Principles and which do not have a material impact on the financial statements taken as a whole. Except as disclosed on Schedule 5.1, there has been no material adverse change in the business, operations or assets or condition (financial or otherwise) of either of the Borrowers or the MES Companies taken as a whole since September 30, 1994. The Summary Work in Progress Report, as of September 30, 1994 as to each of the Domestic MES Companies provided by the Borrowers to the Lenders is true, complete and correct in all material respects as of the date thereof (subject to changes resulting from audits and annual and quarterly adjustments).
3.7 Use of Proceeds. The proceeds of the Loans shall be
used only (i) for general working capital of the Borrowers, (ii)
to fund loans giving rise to Intercompany Debt to be made by the
MES Borrower to the MES Subsidiaries to the extent permitted by
Section 7.2(k), which Intercompany Debt shall be used by such MES
Subsidiaries for general working capital, (iii) to repay amounts
outstanding under the Credit Agreement, dated February 14, 1994,
as amended, and (iv) to pay fees, expenses and other obligations
incurred in connection with the Loan Documents and confirmation
of the Reorganization Plan. In no event shall the proceeds of
any Loan be used by either of the Borrowers
to provide loans or other distributions to any Excluded
Subsidiary, to any Person that is not an MES Subsidiary or to any
MES Subsidiary that is not Solvent at the time of such loan or
distribution from the Borrowers.
3.8 Not in Default. No Event of Default or Potential Default under any Loan Document has occurred and is continuing.
3.9 Taxes. Except as set forth on Schedule 3.9, each Borrower and Domestic MES Subsidiary has filed all federal, state, local and foreign tax returns and reports which it is required by law to file and has paid all taxes, including wage taxes, assessments, withholdings and other governmental charges which are presently due and payable (other than those being contested in good faith by appropriate proceedings). The tax charges, accruals and reserves reflected on the Financial Statements relating to taxes that have accrued but are not presently due and payable are in accordance with Generally Accepted Accounting Principles. The Borrowers and the Domestic MES Subsidiaries are members of an affiliated group of corporations filing consolidated returns for United States federal income tax purposes, and the Parent is the "common parent" of such group.
3.10 Permits, Licenses, Etc. Each Borrower, Material Guarantor and Core Subsidiary possesses all permits, licenses, franchises, trademarks, trade names, copyrights and patents necessary to the conduct of its business as presently conducted or as presently proposed to be conducted, except where the failure to possess the same is not likely to have a material effect on the financial condition, operations or assets of either of the Borrowers or the MES Companies taken as a whole.
3.11 Compliance With Laws.
(a) Except as set forth on Schedule 3.11 hereto, each Borrower, Material Guarantor and Core Subsidiary is in compliance in all material respects with all Regulations applicable to its business (including obtaining all authorizations, consents, approvals, orders, licenses, exemptions from, and making all filings or registrations or qualifications with, any court or governmental department, public body or authority, commission, board, bureau, agency, or instrumentality), the noncompliance with which is likely to have a material adverse effect on the business, operations, assets or condition (financial or otherwise) of either of the Borrowers or the MES Companies taken as a whole.
(b) Except as set forth on Schedule 3.11 hereto, each Borrower, Material Guarantor and Core Subsidiary has obtained all permits, licenses and other authorizations required under any Regulation relating to pollution or protection of the environment, including laws relating to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment (including, without limitation, ambient air, surface water, groundwater, or land), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes except where the failure to possess the same is not likely to have a material adverse effect on the business, operations, assets or condition (financial or otherwise) of either of the Borrowers or the MES Companies taken as a whole. Except as set forth on Schedule 3.11 hereto, each Borrower, Material Guarantor and Core Subsidiary is in compliance in all material respects with all terms and conditions of the required permits, licenses and authorizations, and is also in compliance in all respects with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in any Regulation, order, decree, judgment, injunction, notice or demand letter issued, entered, promulgated or approved thereunder which has the force of law, the failure to comply with which is likely to have a material adverse effect on the business, operations, assets or conditions (financial or otherwise) of either of the Borrowers or the MES Companies taken as a whole. Except as described on Schedule 3.11 hereto neither of the Borrowers is aware of, or has received written notice of, any past or present events, conditions, circumstances, activities, practices, incidents or actions which may interfere with or prevent compliance or continued compliance with those laws or with any regulation, code, plan, order, decree, judgment, injunction, notice or demand letter issued, entered, promulgated or approved thereunder which has the force of law, or which may give rise to any common law or legal liability, or otherwise form the basis of any claim, action, demand, suit, proceeding, hearing, study or investigation, based on or related to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling, or the emission, discharge, release or threatened release into the environment, of any pollutant, contaminant, chemical, or industrial, toxic or hazardous substance or waste, except where such events, conditions, circumstances, activities, practices, incidents or actions are not likely to have a material adverse effect on the business, operations, assets or condition (financial or otherwise) of either of the Borrowers or the MES Companies taken as a whole.
3.12 Amounts Owed to or from Affiliates; Intercompany Agreements.
(a) Affiliates. Except as disclosed on Schedule 3.12, as of September 30, 1994, there is not outstanding and unpaid any Intercompany Debt (i) by either of the Borrowers or any Guarantor to or for the benefit of any Affiliate or (ii) to or for the benefit of either of the Borrowers or any Guarantor from any Affiliate and since September 30, 1994, there has not been paid by either of the Borrowers or any Guarantor to or for the benefit of any Affiliate any amount for management, administrative, operational, consulting, brokerage or other services other than services provided in the ordinary course of business on terms that could be obtained on an arm's-length basis with a Person that is not an Affiliate and other than compensation paid to officers and directors of the Borrowers and of the Subsidiaries in the ordinary course of business. Since September 30, 1994, none of the Borrowers or the MES Subsidiaries has paid to or for the benefit of any Affiliate any amount for management, administrative, operational, consulting, brokerage or other services other than payments for such services in the ordinary course. All existing Intercompany Debt owing to either of the Borrowers or any Guarantor from any Affiliate is evidenced by an Intercompany Note.
(b) Intercompany Agreements. Except as disclosed on Schedule 3.12 hereto as of the date of this Agreement, there are no agreements between either of the Borrowers or any Guarantor and any Affiliate relating to the extension of any funds to or from either of the Borrowers or any Guarantor, the sharing of any costs among either of the Borrowers, the Guarantors and any Affiliate or the provision of any management, administrative, operational, consulting, brokerage or other services to either of the Borrowers or any Guarantor ("Intercompany Agreements").
(c) Dividends. Except as disclosed on Schedule 3.12
hereto, during the period from September 30, 1994 through the
date of this Agreement, none of the Borrowers, any Guarantor and
any Core Subsidiary declared or paid any dividend on, or
purchased, redeemed, retired or otherwise acquired for value any
of the Borrowers', Guarantors', or Core Subsidiaries' capital
stock then outstanding, returned any capital stock to its
stockholders, or made any distribution with respect
to its shares, whether in cash, property or obligations, except
(i) to either of the Borrowers and the Guarantors or (ii) in
accordance with the Reorganization Plan.
3.13 Title to Assets. Each Borrower, Guarantor and Core Subsidiary has good and marketable title to all of its properties and assets, free and clear of all Liens, other than Permitted Liens. To the best knowledge of each Borrower and Guarantor, all existing Liens included within the Permitted Liens are set forth on Schedule 3.13. Such Schedule includes all Liens securing Debt in excess of $250,000.
3.14 Indebtedness for Borrowed Money. To the best knowledge of each Borrower and Guarantor, all existing Indebtedness for Borrowed Money of either Borrower or any MES Subsidiary is set forth on Schedule 3.14. Such Schedule 3.14 includes all Indebtedness for Borrowed Money with an aggregate principal amount in excess of $500,000.
3.15 Guarantees. To the best knowledge of each Borrower and Guarantor, all existing guarantees of each Borrower and MES Subsidiary are set forth on Schedule 3.15. Schedule 3.15 includes all existing guarantees of each Borrower and MES Subsidiary of Indebtedness for Borrowed Money in an aggregate principal amount in excess of $500,000.
3.16 Insurance and Surety Bonds.
(a) Except as disclosed on Schedule 3.16, each Borrower and Guarantor has obtained in commercially reasonable kind and form and with reputable insurers, all risk of physical loss or damage insurance covering the assets of the Borrowers and the Guarantors wherever the same may be located, insuring against the risks of fire, explosion, theft and such other risks as are prudently insured against by corporations engaged in the same business and similarly situated with the Borrowers and the Guarantors (and specifically including vandalism, malicious mischief coverage, loss overboard and breakage), in an amount usually carried by corporations engaged in the same business and similarly situated with the Borrowers and the Guarantors.
(b) Set forth on Schedule 3.16 is a complete and correct list, as of September 30, 1994, of the "backlog" of those contracts of the Borrower and the Domestic MES Subsidiaries then subject to bonding. Except as set forth on Schedule 3.16 and other than the obligations of the principal of all bonds relating to contracts of the Borrowers and the MES Subsidiaries and the guaranty by either of the Borrowers or any MES Subsidiary of the obligations of the MES Subsidiaries thereunder and the liability of any Excluded Subsidiary under any letters of credit issued in support thereof, there are no letters of credit or other financial accommodations securing the Borrowers' or any Domestic MES Subsidiary's obligations under such bonds. To the best knowledge of the Borrowers, Seaboard or comparable successor bonding companies are making, and will continue to make, available to the MES Subsidiaries performance and payment bonds required for the conduct in the ordinary course of business of the MES Subsidiaries.
3.17 Subsidiaries, Etc. Set forth in Schedule 3.17 hereto is a complete and correct list, as of the date of this Agreement, of all of the MES Subsidiaries, and of all Investments held by either of the Borrowers and any of the Guarantors in any joint venture or other Person, other than joint ventures or similar pooling of efforts in respect of a specific project or series of related specific projects for a limited or fixed duration to conduct a business of the type in which such Borrower or such Guarantor is presently engaged consistent with past practice. Except as disclosed in Schedule 3.17 hereto, as of the date hereof, the MES Borrower owns, directly or through an MES Subsidiary, free and clear of Liens other than the Lien granted to the Agent, all outstanding shares of each MES Subsidiary (including without limitation each Guarantor) and all such shares are validly issued, fully paid and non-assessable other than in the case of New York corporations under Section 630 of the New York Business Corporation Law, and the MES Borrower (or the respective MES Subsidiary) also owns, free and clear of Liens, all such Investments. Schedule 3.17 also sets forth as to each MES Subsidiary the number of shares of each class of such capital stock issued and outstanding and held in treasury and the record and beneficial owners of all such issued and outstanding shares. Except as set forth on Schedule 3.17, all of the issued and outstanding shares of capital stock of each MES Subsidiary have been duly authorized and validly issued and are fully paid and nonassessable other than, in the case of New York corporations, under Section 630 of the New York Business Corporation Law and held free and clear of all Liens whatsoever, and there are no outstanding subscriptions, options, warrants, calls, conversion or exchange rights, commitments or agreements of any character obligating any MES Subsidiary to issue, deliver or sell additional shares of its capital stock of any class or any securities convertible into or exchangeable for any such capital stock. Except as described on Schedule 3.17, the pledge by the MES Borrower or any Guarantor of the capital stock of any MES Subsidiary pursuant to the Loan Documents, and the granting by any Guarantor of a guaranty of the Obligations pursuant to the Loan Documents, which guaranty would be secured by a Lien upon its assets, does not and under present law will not require any consent or approval of the MES Borrower's or any MES Subsidiary's shareholders or any Person, does not and under present law will not violate any law, rule, regulation order, writ, judgment, injunction, decree, determination or award, does not violate any provision of the charter or by-laws of the MES Borrower or any MES Subsidiary and does not and will not result in any breach of any material agreement, lease or instrument to which either of the Borrowers or any MES Subsidiary is a party, by which it is bound or to which any of its assets are or may be subject.
3.18 Patents, Trademarks, Etc. Except as set forth on Schedule 3.18, each Borrower, Material Guarantor and Core Subsidiary owns or possesses all patents, patent rights or licenses, patent applications, trademarks, trademark rights, trade names, trade name rights, copyrights and rights with respect to the foregoing which are required to conduct its business as now and presently planned to be conducted without known conflict with the rights of others, and Schedule 3.18 lists all patents and trademarks owned by either of the Borrowers, any Material Guarantor and any Core Subsidiary, indicating the owner thereof.
3.19 Accounts. The Accounts of each Borrower, Material Guarantor and Core Subsidiary are bona fide Accounts created in the ordinary course of business. The reserves for non-payment of the Accounts reflected on the Financial Statements are in accordance with Generally Accepted Account Principles.
3.20 Inventory.
(i) Condition. All Inventory of each Borrower and Guarantor is in substantially good condition, meets all material standards imposed by any governmental agency, or department or division thereof, having regulatory authority over such goods, their use or sale, and is currently either usable or salable in the normal course of either of the Borrower's or the applicable Guarantor's business, except to the extent reserved against in the Financial Statements or as otherwise disclosed in writing to the Lenders.
(ii) Location. To the best of either Borrower's knowledge, substantially all Inventory of each Borrower and each Guarantor is located on the premises set forth on Schedule 3.17, is Inventory in transit to one of such locations or is at the site of work currently being performed by such Borrower or Guarantor, except as otherwise disclosed in writing to the Lenders.
3.21 Equipment. Substantially all of the Equipment of each Borrower and Guarantor is in good order and repair in all material respects and is located on the premises set forth on Schedule 3.17 or is at the site of work currently being performed by such Borrower or Guarantor.
3.22 Real Property. All real property owned by each Borrower and Guarantor is described on Schedule 3.22.
3.23 Corporate and Fictitious Names. Except as otherwise disclosed on Schedule 3.17, during the five-year period preceding the date hereof, none of the Borrowers, the Material Guarantors, nor any predecessor thereof has been known as or used any corporate or fictitious name other than the respective corporate names of such Persons on the date hereof.
IV. SECURITY.
4.1 Security Documents. As security for the punctual payment of all Obligations and without any further action being required other than filings under the Uniform Commercial Code of various states and delivery to the Agent on behalf of the Lenders of shares of stock, notes and other securities constituting Collateral to be pledged pursuant to the terms of the Pledge and Security Agreement and the Guarantor Security Agreement, the Loan Documents will create and grant to the Agent on behalf of the Lenders a valid, perfected and enforceable security interest in and Lien upon the Collateral, which security interest and Lien will be perfected except as otherwise contemplated by Section 2.9, securing the Obligations, and no Person, including without limitation any Person that currently provides or shall hereafter provide to the Borrower or any MES Subsidiary payment or performance bonds, will have any right, title or interest in or to the Collateral that is, or that shall hereafter be, prior, paramount, superior or equal to the right, title or interest of the Agent on behalf of the Lenders therein or thereto, other than Liens expressly permitted by Section 7.3.
4.2 Release of Collateral.
(a) Upon the payment in full of the entire principal balance and all interest in respect of the Notes, the payment in full of all other Obligations and the termination of the Loan Commitments, as well as payment in full obligations under the Dyn Facility and termination of the commitment thereunder, the Majority Lenders shall direct the Agent to release its Lien and security interest in the Collateral and shall do such things as are reasonably requested by the Borrowers and the Guarantors to effect such release.
(b) Upon the disposition of any Collateral in
compliance with Section 7.8, such Collateral is hereby released
by the Agent on behalf of the Lenders from its security interest,
and the Majority Lenders shall direct the Agent to do such things
as are reasonably requested by either of the Borrowers or the
Guarantors to evidence such release. In addition, upon receipt
by the Lenders of evidence that any liability directly relating
to Collateral disposed in compliance with
Section 7.8, other than a Permitted Disposition, is then
currently due and payable but was not deducted from the proceeds
of such disposition to determine Net Cash Proceeds, the Majority
Lenders shall direct the Agent to release funds equal to the
amount of such liability, not in excess of the Net Cash Proceeds
of such disposition, from the Cash Collateral Account.
(c) All costs (including attorneys' fees) of the preparation, execution and filing of any documents or the taking of any steps to release or terminate such security interests shall be for the account of the Borrowers and shall be included in the Obligations.
V. CONDITIONS PRECEDENT.
5.1 Conditions to First Loan. The obligation of the Lenders to make the first Loan hereunder is conditioned upon the following:
(a) Articles, Bylaws. The Lenders shall have received copies of the Articles or Certificates of Incorporation and Bylaws of each Borrower and Guarantor, certified by the secretary or assistant secretary of either of the Borrowers.
(b) Evidence of Authorization. The Lenders shall have received certified copies of all corporate or other action taken by each Person other than the Agent and the Lenders who are party to any Loan Document to authorize its execution and delivery and performance of the Loan Documents and to authorize the Loans hereunder, together with such other related papers as the Lenders shall reasonably require.
(c) Legal Opinions. The Agent and the Lenders shall have received a favorable written opinion of Stroock & Stroock & Lavan, counsel for the Parent, and the General Counsel of the Parent who shall have acted as counsel for the MES Borrower and the Guarantors, which shall be addressed to the Agent and the Lenders and be dated the date of the first Loan, in substantially the form attached as Exhibits F and G hereto, respectively, and such other legal opinion or opinions as the Lenders may reasonably request.
(d) Incumbency. The Agent and the Lenders shall have received a certificate signed by the secretary, assistant secretary or authorized representative of each corporate signatory to the Loan Documents other than the Agent and the Lenders, together with the true signature of the officer or officers or other person authorized to execute and deliver the Loan Documents and certificates thereunder, upon which the Lenders shall be entitled to rely conclusively until the Lenders shall have received a further certificate of the appropriate secretary or assistant secretary amending the prior certificate and submitting the signature of the officer or officers or such other person named in the new certificate as being authorized to execute and deliver Loan Documents and certificates thereunder.
(e) Note. Each Lender shall have received an executed Note payable to the order of such Lender and otherwise in the form of Exhibit D hereto. In addition, the Agent and the Lenders shall have received all certificates, instruments and other documents then required to be delivered pursuant to any Loan Documents, in each instance in form and substance reasonably satisfactory to the Agent and the Lenders.
(f) Confirmation and Effectiveness of the Reorganization Plan. Each Lender shall have received a certified copy of the order of the Bankruptcy Court confirming the Reorganization Plan, and each condition precedent to the effectiveness of the Reorganization Plan shall have been satisfied.
(g) Consents. The Borrowers shall have provided to the Agent and the Lenders evidence satisfactory to the Agent and the Lenders that all governmental, shareholder and third party consents and approvals necessary in connection with the transactions contemplated hereby, if any, have been obtained and remain in effect.
(h) Change. Except as disclosed on Schedule 5.1 hereto, no material adverse change shall have occurred in the financial condition, cash flows or operations, including backlog, of the Borrowers or of the MES Subsidiaries taken as a whole since September 30, 1994.
(i) Continued Bonding. Seaboard or any comparable successor bonding companies, are making available to the MES Subsidiaries performance and payment bonds required for the conduct in the ordinary course of business of the MES Subsidiaries, and the Parent shall have provided to the Lenders an officer's certificate of the Chief Executive Officer, any Executive Vice President, the Senior Vice President and Treasurer or the Vice President and Controller of the Parent that such bonds are available and, to the best knowledge of such officer, shall continue to be made available to the MES Subsidiaries.
(j) Other Agreements. The Borrowers and the Guarantors shall have executed and delivered all Loan Documents required hereunder, including the Pledge and Security Agreement (and the stock certificates pledged thereunder) and the Guarantor Security Agreements. Each of the Borrowers and the Concentration Bank shall have executed and delivered the Depositary Agreement.
(k) Absence of Defaults. No default by either of the Borrowers, any Material Guarantors or any Core Subsidiaries under any existing material agreements shall exist or occur as a result of consummation of the transactions contemplated hereby.
(l) Documents. The Borrowers shall have delivered and each Lender shall have received a request for a Loan, as provided in Sections 2.1 and 2.3.
(m) Inspection and Management Rights. The Borrowers shall have executed and delivered a letter agreement granting to the Lenders certain inspection and management rights in substantially the form of Exhibit H hereto.
(n) Concentration Accounts. The Borrowers shall have
provided to the Agent and the Lenders evidence satisfactory to
the Agent and the Lenders that the Concentration Accounts are
established in the name of the Borrower in compliance with
Section 2.8(c) hereof.
(o) Dyn Facility. All documentation relating to the Dyn Facility shall have been completed to the satisfaction of the Lenders and the Lenders' counsel and all conditions precedent to lending under the Dyn Facility shall have been satisfied or waived.
5.2 All Loans Subsequent to the First Loan. The obligation of the Lenders to make any Loan after the first Loan is conditioned upon the following:
(a) Documents. The Borrowers shall have delivered and each Lender shall have received a request for a Loan, as provided in Sections 2.1 and 2.3.
(b) Covenants; Representations. Each Person that is a party thereto other than the Agent or any Lender shall be in compliance in all material respects with all covenants, agreements and conditions in each Loan Document and each representation and warranty contained in each Loan Document shall be true with the same effect as if such representation or warranty had been made on the date such Loan is made, except that any such representation or warranty that relates to a specific date shall be correct as of such date. Also, each Lender shall have received a certificate dated the date of the Loan signed by the chief executive officer, Senior Vice President and Treasurer, any Executive Vice President or the Vice President and Controller of the Parent to the foregoing effect.
(c) Defaults. After giving effect to such transaction, no Event of Default or Potential Default shall exist.
(d) Legal Proceedings. Each Lender shall be satisfied that, in its reasonable judgment, there is no (i) injunction, stay, decree or order issued by any court or arbitrator or any governmental body, agency or official or (ii) action, suit or proceeding pending against or affecting, either of the Borrowers, any Material Guarantor or any Core Subsidiary before any court or arbitrator or any governmental body, agency or official in which there is a reasonable likelihood of an adverse decision, and, in either case, which in any manner draws into question the validity of any of the Loan Documents, the transactions contemplated hereby and thereby or which could materially adversely affect the ability of either of the Borrowers or any Material Guarantor to perform any of their obligations hereunder and thereunder.
(e) Continued Bonding. Seaboard or any comparable successor bonding companies, are making available to the MES Subsidiaries performance and payment bonds required for the conduct in the ordinary course of business of the MES Subsidiaries, and the Parent shall have provided to the Lenders an officer's certificate of the Chief Executive Officer, any Executive Vice President, Senior Vice President and Treasurer or the Vice President and Controller of the Parent that such bonds are available and, to the best knowledge of such officer, shall continue to be made available to the MES Subsidiaries.
(f) Absence of Defaults. No default by any Borrower, Material Guarantor, or Core Subsidiary under any existing material agreements shall exist or occur as a result of consummation of the transactions contemplated hereby.
VI. AFFIRMATIVE COVENANTS
The Borrowers covenant and agree that, without the prior written consent of the Majority Lenders, from and after the date hereof and so long as the Loan Commitments are in effect or any Obligations remain unpaid or outstanding, the Borrowers, and, where applicable, each MES Subsidiary (including each Guarantor) will:
Financial Statements and Reports. Prepare, maintain and furnish to the Lenders (and, as to subsections (a) and (b) hereof, simultaneously file with the Securities and Exchange Commission) the following financial information, except that the information required by subsections (d), (f) and (g) hereof shall be furnished to a Lender only upon request of such Lender (which request may be a request for all information required by any such subsection or for any specific portion thereof):
(a) Quarterly Statements. As soon as available but no later than forty-five (45) calendar days after the end of each fiscal quarter of each fiscal year, other than the fourth quarter of each fiscal year, a consolidated balance sheet of the Parent and its subsidiaries and related consolidated statements of operations, shareholders' equity and cash flows for such quarterly period and for the period from the beginning of such fiscal year to the end of such fiscal quarter and a corresponding financial statement for the same periods in the preceding fiscal year certified by the Chief Executive Officer, any Executive Vice President, Senior Vice President and Treasurer or Vice President and Controller of the Parent as having been prepared in accordance with Generally Accepted Accounting Principles (subject to changes resulting from audits and year-end adjustments).
(b) Annual Statements. As soon as available but no later than ninety (90) days after the end of each fiscal year, a balance sheet of the Parent and its subsidiaries as of the end of such year and the prior year in comparative form, and related statements of operations, shareholders' equity, and cash flows for the Parent and its subsidiaries for such fiscal year and the prior fiscal year in comparative form. The financial statements shall be on a consolidated basis. The financial statements shall be in reasonable detail with appropriate notes and be prepared in accordance with Generally Accepted Accounting Principles. The annual financial statements shall be audited and reported on by independent certified public accountants of the Parent and shall be accompanied by a report of such independent certified public accountants stating that, in the opinion of such accountants, such financial statements present fairly, in all material respects, the financial position, and the results of operations and the cash flows of the Parent and its subsidiaries for the period then ended in conformity with Generally Accepted Accounting Principles, and that the audit by such accountants, of such financial statements has been conducted in accordance with generally accepted auditing standards and accordingly included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and assessing the accounting principles used and significant estimates made, as well as evaluating the overall financial statement presentation. Each financial statement prepared under this subsection (b) shall be accompanied by a report signed by such accountants, either stating, to the extent allowed under the AICPA guidelines, that nothing has come to their attention which would cause them to believe that any event has occurred and is continuing which constitutes an Event of Default or Potential Default, or describing each such event. In addition to the annual financial statements, the Borrowers shall, upon request, furnish to the Lenders a copy of each other report submitted to the board of directors of the Parent by its independent certified public accountants, if any, in connection with any annual, interim or special audit made by them of the financial records of any of the Parent and its subsidiaries.
(c) No Default. Within forty-five (45) calendar days after the end of each fiscal quarter (other than the fourth quarter, which shall be within ninety (90) calendar days), a certificate signed by the Chief Executive Officer, any Executive Vice President, Senior Vice President and Treasurer or the Vice President and Controller of the Parent certifying that, to the best of such officer's knowledge, after due inquiry, (i) the Borrowers and the Guarantors have complied with all covenants, agreements and conditions in each Loan Document and (ii) no event has occurred and is continuing which constitutes an Event of Default or Potential Default, or describing each such event and the remedial steps being taken by the Borrowers.
(d) ERISA. All reports and forms filed with respect to all Plans, except as filed in the normal course of business and that would not result in an adverse action to be taken under ERISA, and details of related information of a Reportable Event.
(e) Net Cash Proceeds. Promptly upon receipt of Net Cash Proceeds (other than the Net Cash Proceeds of Inventory sold in the ordinary course of business, machinery and equipment that is obsolete, damaged or no longer used or useful disposed in the ordinary course of business or machinery and equipment replaced with comparable goods within three months of such disposition), a certificate of the Chief Executive Officer, Executive Vice President and Chief Financial Officer, Senior Vice President and Treasurer or Vice President and Controller of the Parent setting forth the details of the transaction giving rise to such Net Cash Proceeds, the details of the calculation of the Net Cash Proceeds and the source thereof.
(f) Material Changes. Promptly upon its occurrence, notification of any litigation, administrative proceeding, investigation, business development (relating particularly to the Borrowers or any of the MES Subsidiaries and not generally to economic conditions or the industry in which they are engaged), or change in financial condition as to which either of the Borrowers has knowledge which could reasonably be expected to have a material adverse effect on the business, operations, including backlog, cash flows, assets or condition (financial or otherwise) of either of the Borrowers or the MES Companies taken as a whole.
(g) Other Information. Such other information and reports regarding the operations, business affairs, prospects and financial condition of either of the Borrowers, any Guarantor or any MES Subsidiary as the Lenders may reasonably request, including shareholder and Securities and Exchange Commission notices, reports and filings and any material press release. In addition, the Lenders shall be entitled to examine and make abstracts from the books and records, operating reports, budgets and other financial reports of the Borrowers and the MES Subsidiaries and to visit and inspect the facilities of the Borrowers and, upon reasonable notice to the Borrowers, the facilities of the MES Subsidiaries. Upon request, the Lenders shall be entitled to receive, when available, copies of financial statements, forecasts and projections provided to or approved by the Borrowers' or MES Subsidiaries' boards of directors.
6.2 Taxes and Other Charges. Pay or cause to be paid after notice that the same are due all taxes, assessments and governmental charges imposed upon the Borrowers and the MES Subsidiaries or any assets that are subject to the Lien of the Agent or which the Borrowers and the MES Subsidiaries are required to withhold and pay over to the relevant taxing authorities, except (a) as may be contested in good faith by the Borrowers or the MES Subsidiaries by appropriate proceedings and (b) estimated taxes of the type disclosed on Schedule 3.9, in each case for which reserves in accordance with Generally Accepted Accounting Principles have been established by such Borrower or MES Subsidiary as reflected in such Borrower's or Subsidiary's financial statements.
6.3 Corporate Existence. Except as otherwise permitted by
Section 7.1, preserve its corporate existence and material
franchises, licenses, patents, copyrights, trademarks and trade
names consistent with good business practice, to the extent
required to continue to comply with the representations and
warranties of Section 3.1.
6.4 Compliance with ERISA. Maintain each Covered Plan in compliance in all material respects with all applicable requirements of ERISA and the Code, including all applicable rulings and regulations under ERISA and the Code. As soon as practicable and, in any event, within 10 days after either of the Borrowers, any Guarantor or any ERISA Affiliate knows, or has reason to know, that:
(a) any Termination Event with respect to a Pension Plan (other than a Multiemployer Plan) has occurred or will occur; or
(b) either Borrower, any Guarantor or any ERISA Affiliate has applied for a waiver of the minimum funding standard under Section 412 of the Code with respect to a Pension Plan; or
(c) the aggregate amount of the Unfunded Pension Liabilities under all Pension Plans (other than Multiemployer Plans) has increased to an amount in excess of $1,000,000; or
(d) the aggregate amount of Unrecognized Retiree Welfare Liability under all applicable Plans has increased to an amount in excess of $1,000,000; or
(e) either Borrower, any Guarantor or any ERISA Affiliate has engaged in a Prohibited Transaction with respect to a Plan; or
(f) there is a partial or complete withdrawal (as described in ERISA Section 4203 or 4205) by either Borrower, any Guarantor or any ERISA Affiliate from a Multiemployer Plan; or
(g) either Borrower, any Guarantor or any ERISA Affiliate is in "default" (as defined in ERISA Section 4219(c)(5)) with respect to payments to a Multiemployer Plan by reason of its complete or partial withdrawal from such Multiemployer Plan; or
(h) a Multiemployer Plan terminates or is in "reorganization" (as described in Code Section 418 or Title IV or ERISA); or
(i) the actual withdrawal liability that has been assessed (as determined in accordance with Title IV or ERISA) against either Borrower, any Guarantor or any ERISA Affiliate with respect to all Multiemployer Plans has, in any year, increased to an amount in excess of $1,000,000; or
(j) there is an action brought against either
Borrower, any Guarantor or any ERISA Affiliate under ERISA
Section 502 with respect to its failure to comply with ERISA
Section 515;
the Borrowers shall prepare and, upon request of any Lender, furnish or cause to be furnished to any Lender, a notice of such event.
Any notice required hereunder shall include a certificate addressed to the applicable Lender and signed by the Chief Executive Officer, Executive Vice President and Chief Financial Officer, Senior Vice President and Treasurer or Vice President and Controller of the Parent, setting forth all pertinent details relating to the events described in such notice is based and the action which is proposed to be taken with respect thereto.
6.5 Compliance with Regulations. Comply in all material respects with all Regulations applicable to its business, the noncompliance with which is reasonably likely to have a material adverse effect on the business, operations, assets or condition (financial or otherwise) of either Borrower or the MES Companies taken as a whole.
6.6 Notice of Events. Promptly upon discovery by either of the Borrowers of any of the events described in subsections (a) through (e) hereof, such Borrower shall deliver to each Lender telephone notice, and within three (3) calendar days of such telephone notice deliver to each Lender a written notice, which describes the event and all action the Borrowers propose to take with respect thereto:
(a) an Event of Default or Potential Default under this Agreement;
(b) any default or event of default under a contract or series of related contracts which default or event of default (i) involves payments by the Borrowers or any MES Subsidiary in an aggregate amount equal to or in excess of $5,000,000 or (ii) is reasonably likely to result in the loss by the Borrowers or any MES Subsidiary of the right to receive payments otherwise owing to the Borrowers or such Subsidiary under any such contract or series of related contracts in an amount equal to or in excess of $5,000,000;
(c) failure by a Material Guarantor to comply with its
obligation to remit funds received to a Depositary Account
for transfer to a Concentration Account in accordance with
Section 2.8(c);
(d) the entry of any default judgment, order, stipulated judgment or order or settlement in any suit, action, arbitration, administrative proceeding, criminal prosecution or governmental investigation involving either of the Borrowers, any Material Guarantor or any Core Subsidiary in which the amount to be paid by the Borrowers or such Material Guarantor or Core Subsidiary (but not by its insurer) is at least $500,000; or
(e) any change in any Regulation, including, without limitation, changes in tax laws and regulations, which could reasonably have a material adverse impact on the ability of either of the Borrowers or any of the Guarantors to perform their obligations under the Loan Documents or a material adverse effect on the business, operations, assets or condition (financial or otherwise) of either of the Borrowers, or the MES Companies taken as a whole.
6.7 Maintenance of Records; Audits. Create and maintain,
(a) on each Business Day, a report as to cash received by the
Borrowers from each Domestic MES Subsidiary on the immediately
preceding Business Day, the cash provided by the Borrowers to
each such Domestic MES Subsidiary on such preceding Business Day,
and a comparison of each such Domestic MES Subsidiary's net cash
against such Domestic MES Subsidiary's monthly forecast provided
to the Borrowers and (b) within two Business
Days after the end of each week, a summary of the Daily Reports
for each day of such preceding week, and, upon request by a
Lender, provide any or all such reports pursuant to (a) or (b)
above to such Lender. The Lenders shall have the right to have
conducted annually by the Lenders or designees (as selected by
the Majority Lenders) an audit of the Borrowers and the MES
Subsidiaries and all the Borrowers' and the
MES Subsidiaries' books and records, including without limitation
an audit of all books and records relating to the Collateral,
provided that such audits may be conducted more frequently within
the reasonable discretion of the Majority Lenders. The Borrowers
shall bear the expense of such annual audit, and the Lenders
shall bear the expense of such audits conducted more frequently
than annually. In addition, the Lenders may at any time consult
with any director, authorized officer,
employee, agent or representative of either of the Borrowers or,
upon reasonable notice to the Borrowers, of any MES Subsidiary
regarding any matter deemed by a Lender to be material to the
transactions contemplated hereby or the operations of the
Borrowers or such MES Subsidiary.
6.8 Generally Accepted Accounting Principles. Maintain its books and records at all times in accordance with Generally Accepted Accounting Principles.
6.9 Sale of Assets by Core Subsidiaries and Non-Guarantor MES Subsidiaries. Cause each Core Subsidiary and each MES Subsidiary that is not a Guarantor to distribute to the Parent, promptly upon receipt by such Core Subsidiary or non-Guarantor MES Subsidiary, the full amount of Net Cash Proceeds from the sale, lease, transfer or disposition of any of its assets, tangible or intangible, from and after the date hereof, to the extent such distribution would not violate the terms of any agreement or instrument of such Core Subsidiary or non-Guarantor MES Subsidiary, which agreement or instrument is with a party that is not an Affiliate and is negotiated on an arm's length basis, or any rule or regulation of any governmental authority binding upon such Core Subsidiary or non-Guarantor MES Subsidiary; provided, however, that to the extent such Net Cash Proceeds relate to an asset sale by Jamaica Water Supply Co. or Sea Cliff Water Company, such Net Cash Proceeds need be distributed only to the extent they are included in dividends remitted in accordance with past practice.
VII. NEGATIVE COVENANTS.
The Borrowers covenant and agree that, without the prior written consent of the Majority Lenders, from and after the date hereof and so long as the Loan Commitments are in effect or any Obligations remain unpaid or outstanding, neither the Parent, the MES Borrower nor any MES Subsidiary (including any Guarantor) will:
7.1 Merger, Consolidation. Merge or consolidate with or into any corporation except, if no Potential Default or Event of Default shall have occurred and be continuing either immediately prior to or upon the consummation of such transaction, (a) an MES Subsidiary (that is not a Guarantor) may be merged into another MES Subsidiary (that is not a Guarantor) and (b) a Guarantor may be merged into another Guarantor.
7.2 Indebtedness for Borrowed Money. Incur, create, or permit to exist any Indebtedness for Borrowed Money, except:
(a) the Obligations;
(b) the obligations of the Parent under the Dyn Facility;
(c) existing Indebtedness for Borrowed Money, including existing lines of credit (drawn and undrawn) described on Schedule 3.14 ("Lines of Credit"), together with renewals, extensions or replacements of such Indebtedness for Borrowed Money (including such Lines of Credit) so long as such renewal, extension or replacement of any items of such Indebtedness for Borrowed Money (including such Lines of Credit) does not increase the amount of such item of Indebtedness for Borrowed Money (including such Lines of Credit);
(d) Indebtedness for Borrowed Money of either Borrower or any MES Subsidiary under any lease of property, real or personal, as to which the present value of the minimum rental commitment would be capitalized in accordance with Generally Accepted Accounting Principles ("Capital Leases");
(e) Indebtedness for Borrowed Money of either Borrower or any MES Subsidiary incurred to finance the purchase of inventory, machinery or equipment (including vehicles) in the ordinary course of business;
(f) Additional Indebtedness for Borrowed Money of Comstock Canada Ltd. such that, when added to the existing Indebtedness for Borrowed Money, the aggregate Indebtedness for Borrowed Money of Comstock Canada, Ltd., other than Intercompany Debt, Capital Leases, Indebtedness for Borrowed Money to an MES Subsidiary that is not a Guarantor, shall not exceed $10,000,000 (Canadian);
(g) Additional Indebtedness for Borrowed Money of JWP U.K. Ltd. and its Subsidiaries such that the aggregate Indebtedness for Borrowed Money of JWP U.K. Ltd. and its subsidiaries, after incurring such additional Indebtedness for Borrowed Money, other than Intercompany Debt, Capital Leases and Indebtedness owed to a Foreign MES Subsidiary, shall not exceed $20,000,000;
(h) Additional Indebtedness for Borrowed Money of Lunar Drake & Scull (UAE), Drake & Scull Assarain, Drake & Scull (Cayman Islands) Ltd., JWP (Cayman Islands) Ltd., Drake & Scull Oman and a Malaysian Subsidiary formed or to be formed that will be the direct or indirect wholly owned subsidiary of the Parent, such that the aggregate Indebtedness for Borrowed Money of such Subsidiaries, after incurring such additional Indebtedness for Borrowed Money, other than Intercompany Debt, Capital Leases and Indebtedness owed to a Foreign MES Subsidiary, shall not exceed $7,000,000;
(i) Indebtedness for Borrowed Money consisting of the deferred or financed payment obligation of either Borrower or any MES Subsidiary of insurance premiums in the ordinary course of business;
(j) Indebtedness for Borrowed Money of MES Subsidiaries consisting of reimbursement obligations with respect to documentary letters of credit issued for its own account to support the purchase of goods in the ordinary course of business;
(k) Intercompany Debt among the Borrowers and MES
Subsidiaries evidenced by Intercompany Notes, provided that
(i) at no time shall Intercompany Debt owing to a Borrower
by an MES Subsidiary that is not a Guarantor exceed the
amount of such Intercompany Debt set forth in Schedule 3.12,
(ii) at no time shall Intercompany Debt incurred from and
after the date hereof owing to all Guarantors by all MES
Subsidiaries that are not Guarantors (including any
Investments permitted by Section 7.7(j)) exceed $3,000,000
and (iv) at no time shall the amount of such Intercompany
Debt owed to the Borrower or any Guarantor by any MES
Subsidiary cause such MES Subsidiary to cease to be Solvent;
(l) Additional Indebtedness for Borrowed Money of the Parent evidenced by the Series A Notes, the Series B Notes, the Series C Notes and the obligations existing under the indentures pursuant to which such notes are issued and the documents executed in connection therewith;
(m) Additional Indebtedness for Borrowed Money of the Parent in an aggregate amount at any time outstanding not in excess of $200,000 to the State of Connecticut or any agency or instrumentality thereof, incurred in connection with the relocation of the Company's executive offices to Connecticut;
(n) Indebtedness for Borrowed Money of a Foreign MES Subsidiary to another Foreign MES Subsidiary.
7.3 Liens. Create, assume or permit to exist any Lien on either Borrower's or any Guarantor's property or assets, whether now owned or hereafter acquired, or upon any income or profits therefrom, except:
(a) Permitted Liens;
(b) Liens upon assets subject to, and securing, Capital Leases;
(c) purchase money mortgages securing Indebtedness for Borrowed Money permitted by Section 7.2(e), which Liens shall not secure Debt in excess of $10,000,000 in the aggregate;
(d) Liens upon assets of the obligors of Indebtedness for Borrowed Money permitted by Sections 7.2(f), (g) and (h) securing such Indebtedness for Borrowed Money;
(e) Liens upon insurance policies securing the financed premiums thereof permitted by Section 7.2(i);
(f) Liens upon restricted depositary accounts of the MES Borrower or the MES Subsidiaries required to be maintained in connection with specific jobs or contracts into which all or a portion of payments with respect to the respective job or contract are required to be deposited and from which disbursements relating to such job or contract are required to be made (an "Imprest Account");
(g) Liens upon cash collateral deposits made by the Parent and the MES Companies in the ordinary course of business in connection with the Parent's and the MES Companies' insurance program consistent with the Parent's past practice;
(h) Liens on the tangible personal property to be located at the Parent's executive offices to be located in Norwalk, Connecticut to secure Indebtedness for Borrowed Money to the State of Connecticut or any agency or instrumentality thereof in an amount not to exceed $200,000; and
(i) Liens on assets of the MES Companies evidencing obligations (other than for borrowed money) in the ordinary course of business in an aggregate amount not exceeding $100,000.
7.4 Guarantees. Guarantee or otherwise in any way become or be responsible for indebtedness or obligations (including working capital maintenance, take-or-pay contracts, etc.) of any other person, contingently or otherwise, except:
(a) the endorsement of negotiable instruments of deposit in the normal course of business;
(b) existing guarantees, as of the date hereof, such guarantees not to apply to the renewal of the underlying obligation, except for such renewals in the ordinary course of business which do not cause the amount of the guarantee to increase;
(c) guarantees by a Borrower or an MES Subsidiary of
Indebtedness for Borrowed Money permitted by Section 7.2(c)
or 7.2(d), guarantees by the Parent, JWP International, Inc.
or one or more Foreign MES Subsidiaries of Indebtedness for
Borrowed Money permitted by Section 7.2(f), guarantees by
JWP International, Inc. or one or more Foreign MES
Subsidiaries of Indebtedness for Borrowed Money permitted by
Sections 7.2(g) and 7.2(h) and guarantees by the MES
Borrower of Indebtedness for Borrowed Money permitted by
Section 7.2(l);
(d) guarantees by a Borrower or MES Subsidiary of the obligations of any other MES Subsidiary under performance and payment bonds, guarantees by JWP West of the obligations of University Mechanical Contractors, Inc. (a Washington corporation) under performance and payment bonds, guarantees by Comstock Limited or 923452 Ontario Limited, the partners of Comstock Canada, or JWP International, of the obligations of Comstock Canada, a limited partnership, and U.K. Companies under performance and payments bonds and guarantees by a Borrower or MES Subsidiary of the performance or payment obligations of a Subsidiary in the ordinary course of business for the benefit of other Persons to induce such Persons to forego the issuance of a performance or payment bond;
(e) guarantees by the Parent and the MES Borrower of obligations of the Sellco Companies and the Software House Companies (other than of obligations for borrowed money), which obligations so guaranteed shall not exceed $50,000,000;
(f) guarantees by the Parent of the obligations of the Dyn Companies;
(g) guarantees by a Subsidiary that is not a Guarantor of the obligations of another Subsidiary;
(h) guarantees by Borrowers or Guarantors of the obligations of the Borrowers and/or other Guarantors permitted by Section 7.2;
(i) guarantees by the Borrowers and the Guarantors of the Dyn Facility to the extend contemplated by the Pledge and Security Agreement and the Guarantor Security Agreement; and
(j) guarantees of the Obligations pursuant to Article IX hereof.
7.5 Sale of Stock. Except pursuant to the terms of Section 7.8,
(a) sell, assign, pledge or otherwise dispose of any shares of stock or other equity interests in (or warrants, rights or options to acquire stock of or equity interests) the MES Borrower or any MES Subsidiary other than (i) the transfer of the shares of an MES Subsidiary that is not a Guarantor to another MES Subsidiary that is also not a Guarantor (ii) the transfer of the shares of a Guarantor to another Guarantor or (iii) the pledge of any such stock that is a Permitted Lien.
(b) issue or sell any shares of its stock or other equity interests in itself (or warrants, rights or options to acquire, or securities convertible into, such stock or other equity interests) to any Person other than in the case of an MES Subsidiary, to either of the Borrowers or a Guarantor and in the case of the MES Borrower, to the Parent.
7.6 Judgment, Attachment. Permit any of its assets to be subject to any judgments, attachments or levies the aggregate amount of which exceeds $500,000 and which judgments, attachments or levies have not been stayed by appeal, satisfied, bonded or discharged within thirty (30) calendar days after service of notice thereof to a Borrower or such MES Subsidiary.
7.7 Loans, Advances and Investments. Purchase or otherwise acquire or hold any Investments, except that:
(a) a Borrower or any MES Subsidiary may make and own those Investments in a Person that is an Affiliate which Investments are existing as of the date hereof;
(b) a Borrower or any MES Subsidiary may make and own Investments in a Person that is not an Affiliate which Investments are existing as of the date hereof;
(c) a Borrower or any MES Subsidiary may make and own
Investments consisting of Intercompany Debt permitted under
Section 7.2(k) above;
(d) a Borrower or any MES Subsidiary may make and own stock, obligations or securities received in settlement of debts (created in the ordinary course of business) owing to such Borrower or Subsidiary;
(e) a Borrower or any MES Subsidiary may make loans or advances to employees of either Borrower or any MES Subsidiary, which loans and advances, in the aggregate, will not exceed $500,000 at any time outstanding;
(f) a Borrower or any MES Subsidiary may make Investments consisting of notes, bonds, debentures or other securities or instruments (other than general partnership and similar instruments) acquired by such Borrower or Subsidiary in connection with the sale of assets permitted by Section 7.8; provided, however, that such Investments received in connection with any such a disposition of assets shall not exceed 25% of the total consideration received upon such disposition;
(g) a Borrower or any MES Subsidiary (except for a subsidiary of any MES Company incorporated and organized in a jurisdiction other than the United States of America, and each of their respective subsidiaries) may make loans, advances or capital contributions to any SellCo Company or Software House Company; provided, however, that the aggregate amount of such loans, advances or capital contributions from and after the date hereof in the aggregate shall not exceed at any time outstanding $2,500,000;
(h) a Borrower or any MES Subsidiary (except for a subsidiary of any MES Company incorporated and organized in a jurisdiction other than the United States of America, and each of their respective subsidiaries) may make loans, advances or capital contributions to any Dyn Company; provided, however, that such loans, advances or capital contributions from and after the date hereof in the aggregate shall not exceed at any time outstanding $8,000,000;
(i) investments made by a Foreign MES Subsidiary in any other Foreign MES Subsidiary;
(j) a Borrower or any Domestic MES Subsidiary may, after the date hereof, make and own Investments in Foreign MES Subsidiaries in an aggregate amount (including the amount of any loans permitted by Section 7.2(k)(ii)) not in excess of $3,000,000 at any time;
(k) a Borrower or any MES Subsidiary may make and own Investments in the ordinary course of business in connection with its capacity as a co-venturer in a joint venture, corporation, or other similar pooling of efforts in respect of a specific project or series of related specific projects for a limited or fixed duration to conduct a business of the type in which the MES Borrower or an MES Subsidiary is presently engaged consistent with past practices;
(l) a Borrower or any MES Subsidiary may make and own:
(i) Investments in certificates of deposit or time deposits having maturities in each case not exceeding one year from the date of issuance thereof and issued by any FDIC-insured commercial bank incorporated in the United States or any state thereof having a combined capital and surplus of not less than $500,000,000;
(ii) Investments in marketable direct obligations issued or unconditionally guaranteed by the United States of America or issued by any agency thereof and backed by the full faith and credit of the United States of America, in each case maturing within no more than one year from the date of issuance or acquisition thereof;
(iii) Investments in commercial paper or demand notes issued by a corporation incorporated in the United States or any State thereof maturing no more than one year from the date of issuance thereof and, at the time of acquisition, having a rating of A-1 (or better) by Standard & Poor's Corporation or P-1 (or better) by Moody's Investors Service, Inc.; and
(iv) Investments in money market mutual funds all of the assets of which are invested in cash or investments described in clauses (i), (ii) and (iii) of this paragraph (l).
7.8 Transfer of Assets. Except as otherwise provided in this Agreement, sell, lease, transfer, pledge, assign or otherwise dispose of any assets of either Borrower or any Guarantor, unless (i) such sale or disposition is a Permitted Disposition or (ii) the Net Cash Proceeds of such transaction are deposited into the Cash Collateral Account (as defined below) and, in any such case, no Event of Default or Potential Default shall have occurred or will thereby occur. The "Cash Collateral Account" shall be a depositary account maintained by the MES Borrower, but under the sole dominion and control and subject to the Lien and security interest of the Agent provided in Section 4.1 hereof pursuant to an agreement among the depositary institution holding such account, the MES Borrower and the Agent, which agreement shall be in form and substance acceptable to the Agent.
7.9 Modification of Loan Agreements or Policies; Payment of Debt. Except for such changes as are approved by the Majority Lenders in writing, (i) consent to or permit any amendment, modification or waiver of any material provision or term contained in any agreement or indenture governing any Indebtedness for Borrowed Money unless such change is not adverse to the Lenders and would not result in an Event of Default or Potential Default or (ii) prepay, redeem, purchase or otherwise acquire, or make any payment on account of, any Indebtedness for Borrowed Money other than repayments by a Borrower or a Domestic MES Subsidiary in the ordinary course of business, repayments hereunder, or scheduled amortization of debt or outstanding amounts under a revolving credit, other than (A) Intercompany Debt, (B) the mandatory redemption of Series A Notes, Series B Notes or Series C Notes from the Net Cash Proceeds of the sale, lease, transfer or disposition of the stock or assets of a Subsidiary other than an MES Company, a Dyn Company, or, to the extent such Net Cash Proceeds do not exceed $15,000,000, a Water Company, (C) the mandatory redemption of Series A Notes to be made in December 1996 pursuant to the indenture applicable to such Series A Notes in the amount of $10,000,000 less the amount of optional or mandatory redemptions occurring prior to such date or (D) the mandatory prepayments of the contingent note of the Parent and JWP Systems/Kirkwood Electric Co. Inc. in the maximum principal amount of $988,000.
7.10 Claims. Incur, create, assume or suffer or permit to exist any claim against either of the Borrowers, any claim against any Guarantor, or any Lien on any of the assets of the Borrower or the Guarantors that is subject to the Lien of the Agent, that would be pari passu with or senior to the Lien of the Agent under the Loan Documents, other than (a) claims, not relating to Indebtedness for Borrowed Money, arising in the ordinary course of business, (b) claims against a Guarantor expressly permitted by Section 7.2, (c) Liens expressly permitted by Section 7.3 and claims secured by such Liens and (d) claims of certain holders of securities to proceeds of the sale of the stock of JWSC to the extent such proceeds exceed $60,000,000.
7.11 Accounting Change. Make or permit any change in financial accounting policies or financial reporting practices, except as required by Generally Accepted Accounting Principles or as may be approved in writing by the Majority Lenders.
7.12 Backlog. Permit the aggregate amount of backlog and work-in-progress at any time of all then-existing contracts of the MES Borrower and the MES Subsidiaries to diminish by an amount in excess of (a) 20% of the total amount of backlog and work-in-progress as of the end of the immediately preceding month or (b) 40% of the total amount of backlog and work-in-progress as of the end of the month immediately preceding the date of this Agreement.
7.13 Losses from Operations. Permit the aggregate of losses from operations of the MES Borrower and the Domestic MES Subsidiaries incurred (i) as of January 31, 1995 for the one-month period then ended, (ii) as of February 28, 1995 for the two-month period then ended and (iii) as of March 31, 1995 and as of the last Business Day of each month ending thereafter for the three-month period then ended, to equal or exceed $2,500,000, which losses shall be determined prior to any adjustment arising out of FAS 112 - Employer's Accounting for Post-Retirement Benefits.
7.14 Maintenance of Coverage Ratios.
(a) The Operating Companies shall maintain an Unrestricted Cash Coverage Ratio for each of the periods listed below of not less than the following ratio, calculated as of the last date of the periods indicated below:
Unrestricted
Cash
Coverage
Measurement Period Ratio
January 1, 1995 - September 30, 1995 1.00:1
January 1, 1995 - December 31, 1995 1.00:1
Each Rolling Four Fiscal Quarter
Period ending thereafter 1.00:1
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(b) The Operating Companies shall maintain a Consolidated Fixed Charge Coverage Ratio for each of the periods listed below of not less than the following ratio, calculated as of the last date of the periods indicated below:
Consolidated
Fixed Charge
Coverage
Measurement Period Ratio
January 1, 1995 - September 30, 1995 1.00:1
January 1, 1995 - December 31, 1995 1.00:1
Each Rolling Four Fiscal Quarter
Period ending thereafter 1.00:1
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7.15 Capital Expenditures.
The Borrowers shall not permit the aggregate Capital Expenditures of the Operating Companies made during each of the fiscal years set forth below to be in excess of the maximum amount set forth below for such fiscal year:
Maximum Amount of
Fiscal Year Beginning in Capital
Expenditures
1994 10,000,000
1995 10,500,000
1996 11,000,000
1997 and thereafter 11,500,000
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7.16 Employee Benefit Plans; ERISA.
The Borrowers and the MES Subsidiaries shall not, directly or indirectly, and shall not permit any ERISA Affiliate to, directly or indirectly by reason of an amendment or amendments (other than any amendment required by applicable law or by any federal or state agency or commission) to, or the adoption of, one or more Plans, permit the present value of all accrued benefit liabilities, under all Plans subject to Title IV of ERISA (using the actuarial assumptions utilized for purposes of funding such Plans) to increase by more than $2,000,000; provided that this limitation shall not be applicable to the extent that the fair market value of assets allocable to such benefits, all determined as of the most recent valuation date for each such Plan is in excess of the benefit liabilities, or to increase to the extent security must be provided to any Plan under Section 401(a)(29) of the Code. Neither of the Borrowers nor any MES Subsidiary shall establish or become obligated to any new Plan which is a "welfare benefit plan," as defined in Section 3(1) of ERISA for the purpose of providing retiree medical and/or retiree life insurance benefits, or modify any existing welfare benefit plan for the benefit of retirees, which would result in the present value of future liabilities under any such plans to increase by more than $1,000,000 (except as may be required by applicable law or by a state or federal agency or commission). Except as permitted in the first sentence hereof, neither of the Borrowers nor any MES Subsidiary shall establish or become obligated to any new Pension Plan, or modify (except as may be required by applicable law or by a federal or state agency or commission) any existing Pension Plan, which would result in the present value of future liabilities under any such plans to increase by more than $1,000,000.
7.17 Lease Obligations.
(a) The Borrowers and the MES Subsidiaries shall not create or suffer to exist, any obligations as lessee for the rental or hire of real or personal property of any kind under leases or agreements to lease having an original term of more than one year (other than Capital Leases) which would cause the liabilities of the Borrowers and the MES Subsidiaries, on a consolidated basis, in respect of all such obligations (net of rentals received in connection with any sublease arrangements) to exceed in the Borrowers' 1994 fiscal year the sum of (A) $24,000,000, plus (B) an amount equal to 110% of the obligations as lessee of any MES Subsidiary acquired by the Borrowers on the date such MES Subsidiary was acquired in such fiscal year, in the Borrowers' 1995 fiscal year, the sum of (A) $25,000,000, plus (B) an amount equal to 110% of the obligations as lessee of any MES Subsidiary acquired by the Borrowers on the date such MES Subsidiary was acquired in such fiscal year, in the Borrowers' 1996 fiscal year, the sum of (A) $26,000,000, plus (B) an amount equal to 110% of the obligations as lessee of any MES Subsidiary acquired by the Borrower on the date such MES Subsidiary was acquired in such fiscal year, and in the Borrowers' 1997 fiscal year, the sum of (A) $27,000,000, plus (B) an amount equal to 110% of the obligations as lessee of any MES Subsidiary acquired by the Borrowers on the date such MES Subsidiary was acquired in such fiscal year.
(b) The Borrowers and the MES Subsidiaries shall not become or remain liable as lessee or guarantor or other surety with respect to any lease, whether an operating lease or a Capital Lease, of any property (whether real or personal or mixed), whether now owned or hereafter acquired, which (i) the Borrowers or any of the MES Subsidiaries has sold or transferred or is to sell or transfer to any other Person (other than customary contingent liabilities as a sublessor or assignor of a lease), or (ii) the Borrowers and the MES Subsidiaries intend to use for substantially the same purposes as any other property which has been or is to be sold or transferred by that entity to any other Person in connection with such lease unless, in either case, the Borrowers comply with Section 7.8 hereof.
VIII. DEFAULT.
8.1 Events of Default. The Borrowers shall be in default if any one or more of the following events ("Event of Default") occurs:
(a) Principal, Interest or Other Amounts. The Borrowers fail to pay any principal of or interest on any Note when due and payable (whether at maturity, by notice of intention to prepay, or otherwise) or fails to pay when it is due and payable any other amount payable under any Loan Document;
(b) Covenants.
(i) The Borrowers fail to observe or perform as and when required any of the terms, conditions or covenants contained in any Loan Document (other than those referred to in clause (ii) below unless waived by the Majority Lenders); or
(ii) The Borrowers fail to observe or perform as
and when required any of the terms, conditions or
covenants contained in Sections 6.3 (other than as to
the corporate existence of the Borrower or any
Guarantor), 6.4, 6.5, 6.6(c), 6.6(d) or 6.6(e) of this
Agreement, and such failure shall continue for thirty
(30) days after written notice to the Borrower by any
Lender.
(c) Representations, Warranties, Etc. Any representation or warranty made by either Borrower or any Material Guarantor herein or in any Loan Document or in any exhibit, schedule, report or certificate delivered pursuant hereto or thereto shall prove to have been false, misleading or incorrect in any material respect when made or deemed to have been made;
(d) Bankruptcy, Etc. of Borrowers, any Material Guarantor or Core Subsidiary. Either Borrower, any Material Guarantor or Core Subsidiary is dissolved or liquidated, makes an assignment for the benefit of creditors, files a petition in bankruptcy, is adjudicated insolvent or bankrupt, petitions or applies to any tribunal for any receiver or trustee, commences any proceeding relating to itself under any bankruptcy, reorganization, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, has commenced against it any such proceeding which remains undismissed for a period of forty-five (45) days, consents to, approves of or acquiesces in any such proceeding, or any receiver of or trustee for such Borrower, Material Guarantor or Core Subsidiary or any substantial part of the property of such Borrower, Material Guarantor or Core Subsidiary is appointed, or any Borrower, Material Guarantor or Core Subsidiary suffers any such receivership or trusteeship to continue undischarged for a period of forty-five (45) days;
(e) Failure to Maintain Bonding in the Ordinary Course. Seaboard, or any comparable successor bonding company, shall not continue to make available performance and payment bonds required for the conduct in the ordinary course of the business of the MES Subsidiaries;
(f) Material Adverse Change. Except as disclosed on Schedule 5.1, any material adverse change shall have occurred in the financial condition, cash flows or operations, including backlog, of either of the Borrowers, or of the MES Companies taken as a whole since September 30, 1994;
(g) Default under the Dyn Facility. Parent or the Dyn Companies fail to pay any principal of or interest on the Dyn Facility when due and payable (whether at maturity, by notice of intention to prepay, or otherwise), fail to pay when it is due and payable any other amount payable under any Dyn Facility loan document or any other event shall have occurred and be continuing that allows the lenders under the Dyn Facility to accelerate the required repayment of the obligations thereunder, unless waived by such lenders pursuant to such Dyn Facility;
(h) Certain Other Defaults. The MES Borrower, any Material Guarantor or Core Subsidiary shall fail to pay when due any Indebtedness for Borrowed Money which singularly or in the aggregate exceeds $500,000, and such failure shall continue and not be waived, beyond any applicable cure period or either Borrower, any Material Guarantor or Core Subsidiary shall suffer to exist any default or event of default in the performance or observance, subject to any applicable notice or grace period, of any agreement, term, condition or covenant with respect to any agreement or document, if the effect of such default, if not waived, is to permit, with the giving of notice or passage of time or both, the holders thereof, or any trustee or agent for said holders, to terminate or suspend any commitment (which is equal to or in excess of $500,000) to lend money or to cause or declare any portion of any borrowings thereunder to become due and payable prior to the date on which it would otherwise be due and payable, provided that during any applicable cure period the Lenders' obligations hereunder to make further Loans shall be suspended;
THEN and in every such event other than that specified in clause
(d) and, as to each such event other than that specified in
clause (a), only so long as such event shall be continuing, the
Majority Lenders may terminate the Aggregate Loan Commitment and
may declare the Loans and all other Obligations, including
without limitation accrued interest and the then unpaid
Commitment Fee, to be, and the Loans and all other Obligations
shall thereupon become, due and payable without
presentment, demand, protest or other notice of any kind, all of
which are hereby waived by each Borrower and Guarantor. Upon the
occurrence of any event specified in clause (d) above, the
Aggregate Loan Commitment shall automatically terminate and the
Loans and all other Obligations, including without limitation
accrued interest and the then unpaid Commitment Fee, shall
immediately be due and payable without presentment, demand,
protest or other notice of any kind, all of which
are hereby waived by each Borrower and Guarantor. Any date on
which the Loans and such other Obligations are declared due and
payable pursuant to this Section 8.1, shall be a Maturity Date
for purposes of this Agreement.
IX. GUARANTY.
9.1 Guaranty.
(a) Each Guarantor unconditionally and irrevocably guarantees the due and punctual payment by, and performance of, the Obligations of the Borrowers. Each Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice or further assent from it (except as may be otherwise required herein), and it will remain bound upon this guaranty notwithstanding any extension or renewal of any Obligation.
(b) Each Guarantor waives presentation to, demand for payment from and protest to, as the case may be, either of the Borrowers, any Guarantor or any other guarantor of the Obligations, and also waives notice of protest for nonpayment. The obligations of each Guarantor hereunder shall not be affected by (i) the failure of any Lender to assert any claim or demand or to enforce any right or remedy against either of the Borrowers, any Guarantor or any other guarantor of the Obligations under the provisions of this Agreement, any other Loan Document, any other agreement or otherwise; (ii) any extension or renewal of any provision hereof or thereof; (iii) the failure of the Lender to notify or obtain the consent of any Guarantor with respect to any rescission, waiver, compromise, acceleration, amendment or modification of any of the terms or provisions of this Agreement, the Notes, any other Loan Document, or of any other agreement; (iv) the release, exchange, waiver or foreclosure of any security held by the Agent or any Lender for the Obligations or any of them; (v) the failure of a Lender to exercise any right or remedy against any Guarantor or any other guarantor of the Obligations; or (vi) the release or substitution of any Guarantor.
(c) Each Guarantor further agrees that this guaranty constitutes a guaranty of performance and of payment when due and not just of collection, and expressly waives any right to require that any resort be had by the Agent or any Lender to any security held for payment of the Obligations either of or to any balance of any deposit, account or credit on the books of the Agent or any Lender in favor of the Borrowers, any Guarantor or any other guarantor of the Obligations or to any other Person.
(d) Each Guarantor hereby expressly assumes all responsibilities to remain informed of the financial condition of the Borrower and any circumstances affecting the ability of either of the Borrowers to perform under this Agreement or any other Loan Document.
(e) Each Guarantor's guaranty shall not be affected by the genuineness, validity, regularity or enforceability of the Obligations, the Notes or any other Loan Documents, or by the existence, validity, enforceability, perfection, or extent of an collateral therefor or by any other circumstances relating to the Obligations which might otherwise constitute a defense to this Guaranty. The Lender makes no representation or warranty in respect to any such circumstances and has no duty or responsibility whatsoever to each Guarantor in respect to the management and maintenance of the Obligations or any collateral security for the Obligations.
9.2 No Impairment of Guaranty. The obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including, without limitation, any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise affected by the failure of the Agent or any Lender to assert any claim or demand or to enforce any remedy under this Agreement or any other agreement, by any waiver or modification of any provision thereof, by any default, failure or modification of any provision thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of such Guarantor or would otherwise operate as a discharge of such Guarantor as a matter of law, unless and until the Obligations are finally and indefeasibly paid in full.
9.3 Continuation and Reinstatement, Etc.
(a) Each Guarantor further agrees that its guaranty hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or is otherwise restored by any Lender. In furtherance of the provisions of this Section 9, and not in limitation of any other right which a Lender may have at law or in equity against either of the Borrowers or a Guarantor by virtue hereof, upon failure of the Borrowers to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice or otherwise, each Guarantor hereby promises to and will, upon receipt of written demand by any Lender, forthwith pay or cause to be paid to such Lender in cash an amount equal to the unpaid amount of all the Obligations with interest at a rate of interest equal to the rate specified in Section 2.4(b) hereof.
(b) All rights of the Guarantors against either of the Borrowers, arising as a result of the payment by any Guarantor of the sums to a Lender by way of right of subrogation or otherwise shall in all respects be subordinated and junior in right of payment to the prior final and indefeasible payment in full of all the Obligations to the Agent and the Lenders. If any amount shall be paid to such Guarantors for the account of either of the Borrowers, such amount shall be held in trust for the benefit of the Lenders and shall forthwith be paid to the Lenders to be credited and applied to the Obligations, whether matured or unmatured.
(c) Each Guarantor shall have a right of contribution from each other Guarantor with respect to any sums paid by a Guarantor to a Lender hereunder, which right of contribution shall in all respects be subordinated and junior in right of payment to the prior final and indefeasible payment in full of the Obligations to the Agent and the Lenders.
(d) The obligations of the Guarantors hereunder shall terminate upon the final and indefeasible payment in full of the Obligations to the Agent and the Lenders. In addition, the Agent and the Lenders shall release a Guarantor from its obligations hereunder upon the disposition of all of the capital stock of such Guarantor in accordance with Section 7.8.
9.4 Representations and Warranties. Each Guarantor hereby represents and warrants to the Lenders that each representation and warranty by either of the Borrowers set forth in this Agreement and each other Loan Document relating to such Guarantor or any Subsidiary of such Guarantor, including without limitation the representations and warranties contained in Article III hereof, is true, correct and complete in all respects.
X. MISCELLANEOUS.
10.1 Waiver. No failure or delay on the part of any Lender or any holder of any Note in exercising any right, power or remedy under any Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy under any Loan Document. The remedies provided under the Loan Documents are cumulative and not exclusive of any remedies provided by law.
10.2 Amendments. No amendment, modification, termination or waiver of any Loan Document or any provision thereof nor any consent to any departure by either of the Borrowers or any Guarantor therefrom shall be effective unless the same shall have been approved by the Majority Lenders, be in writing and be signed by the Majority Lenders and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Notwithstanding any other provision contained in any Loan Document, no amendment, modification, termination or waiver shall affect payment of principal (including without limitation the date when due), reduce any interest rate or any fee provided herein, increase any Loan Commitment, release any Collateral, modify the definition of "Majority Lenders", modify this Section 10.2 or adversely affect the security interest or any voting rights of the Lenders herein without the written consent of all the Lenders. No notice to or demand on the Borrower shall entitle either of the Borrowers to any other or further notice or demand in similar or other circumstances.
10.3 Governing Law. The Loan Documents and all rights and obligations of the parties thereunder shall be governed by and be construed and enforced in accordance with the laws of the State of New York without regard to principles of conflict of laws.
10.4 Assignments and Participations. Each Loan Document shall bind and inure to the benefit of each Borrower, each Guarantor and each Lender and their respective successors and assigns, except that neither of the Borrowers nor any Guarantor shall have the right to assign any of its rights or interests under any Loan Document without the prior written consent of all of the Lenders. No person not a party to any Loan Document is intended to be benefitted thereby.
10.5 Captions. Captions in the Loan Documents are included for convenience of reference only and shall not constitute a part of any Loan Document for any other purpose.
10.6 Notices. All notices, requests, demands, directions, declarations and other communications between the Lenders, the Borrower and the Guarantors provided for in any Loan Document shall, except as otherwise expressly provided, be mailed by registered or certified mail, return receipt requested, or telegraphed, or telefaxed, or delivered in hand to the applicable party at its address indicated below:
If to a Lender, to the persons set forth on Schedule 10.6 hereto.
with copies to:
Fidelity Management & Research Co.
82 Devonshire Street F7C
Boston, Massachusetts 02109
Attention: Portfolio Manager
Telecopier No.: 617-570-7688
and
TCW Special Credits, as agent
865 South Figueroa Street, 18th Floor
Los Angeles, CA 90017
Attention: Richard Masson, Managing Director
Telecopier No.: 213-244-0494
and
Morgan, Lewis & Bockius
2000 One Logan Square
Philadelphia, Pennsylvania 19103
Attention: Michael A. Bloom, Esquire
Telecopier No.: 215-963-5299
If to the Borrower or any Guarantor, to:
JWP INC.
Six International Drive
Rye Brook, New York 10573
Attention: President
Telecopier No.: 914-935-4178
with a copy to:
Stroock & Stroock & Lavan
Seven Hanover Square
New York, New York 10004
Attention: Lawrence Handelsman, Esquire
Telecopier No.: 212-806-6006
The foregoing shall be effective and deemed received three days after being deposited in the mails, postage prepaid, addressed as aforesaid and shall whenever sent by telegram, telegraph or telefax or delivered in hand be effective when received. Any party may change its address by a communication in accordance herewith.
10.7 Expenses of the Agent and the Lenders; Indemnification of the Agent and the Lenders.
(a) Not less frequently than monthly, the Borrowers
will reimburse the Agent and the Lenders promptly following
demand for all out-of-pocket expenses (including the reasonable
fees and expenses of legal counsel) in connection with (i) the
preparation of the Loan Documents, (ii) the making of any Loans,
(iii) the administration of the Loan Documents and (iv) the
enforcement of the Loan Documents.
(b) In addition to the payment of the foregoing expenses, the Borrowers hereby agree to indemnify, protect and hold the Agent, the Lenders and any holder of the Note and the officers, directors, employees, agents, affiliates and attorneys of the Lenders and such holder (collectively, the "Indemnitees") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature, including reasonable fees and expenses of legal counsel, which may be imposed on, incurred by, or asserted against such Indemnitee by the Borrowers or other third parties and arise out of or relate to this Agreement or the other Loan Documents or any other matter whatsoever related to the transactions contemplated by or referred to in this Agreement or the other Loan Documents; provided, however, that the Borrowers shall have no obligation to an Indemnitee hereunder to the extent that the liability incurred by such Indemnitee has been determined by a court of competent jurisdiction to be the result of gross negligence or willful misconduct of such Indemnitee. For purposes of this Section 10.7, the past or future purchase by the Agent, a Lender or any other Indemnitee of any debt or equity securities of the Borrowers, other than the Notes, any interest thereon, shall not be deemed to be related to the transactions contemplated by or referred to in this Agreement or the other Loan Documents.
10.8 Survival of Warranties and Certain Agreements. All agreements, representations and warranties made or deemed made herein shall survive the execution and delivery of this Agreement, the making of the Loans hereunder and the execution and delivery of the Notes. Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of the Borrowers set forth in Section 10.7 shall survive the payment of the Loans and the termination of this Agreement. This Agreement shall remain in full force and effect until the latest to occur of the termination of the Aggregate Loan Commitment or the repayment in full of all amounts owed by the Borrowers under any Loan Document.
10.9 Severability. The invalidity, illegality or unenforceability in any jurisdiction of any provision in or obligation under this Agreement, the Notes or other Loan Documents shall not affect or impair the validity, legality or enforceability of the remaining provisions or obligations under this Agreement, the Notes or other Loan Documents or of such provision or obligation in any other jurisdiction.
10.10 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. EACH BORROWER AND GUARANTOR HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE BOROUGH OF MANHATTAN, THE CITY OF NEW YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO MAJORITY LENDERS' ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THE NOTES, THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. EACH BORROWER AND GUARANTOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE NOTES, OR SUCH OTHER LOAN DOCUMENT. EACH BORROWER AND GUARANTOR DESIGNATES AND APPOINTS PRENTICE HALL (OR SUCH OTHER PERSON AS SHALL ACT AS REGISTERED AGENT OF ANY BORROWER OR GUARANTOR IN NEW YORK AND AS TO WHOM ANY BORROWER OR GUARANTOR SHALL PROVIDE NOTICE IN WRITING TO THE LENDERS) AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY SUCH PERSON WHICH IRREVOCABLY AGREE IN WRITING TO SO SERVE AS ITS AGENT TO RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY EACH BORROWER AND GUARANTOR TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO EACH BORROWER AND GUARANTOR, AS APPLICABLE, AT ITS ADDRESS AS PROVIDED IN SECTION 10.6, EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY ANY BORROWER OR GUARANTOR REFUSES TO ACCEPT SERVICE, EACH BORROWER AND GUARANTOR HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF ANY LENDER TO BRING PROCEEDINGS AGAINST ANY BORROWER OR GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
10.11 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS, THE GUARANTORS AND THE LENDERS HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE LENDER/BORROWER RELATIONSHIP ESTABLISHED HEREBY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH OF THE BORROWERS, GUARANTORS AND THE LENDERS ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO THE TRANSACTION, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH OF THE BORROWERS, GUARANTORS AND THE LENDERS FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
10.12 Counterparts; Effectiveness. This Agreement and any amendment hereto or waiver hereof may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement and any amendments hereto or waivers hereof shall become effective when the Lenders shall have received signed counterparts or notice by telecopy of the signature page that the counterpart has been signed and is being delivered to the Lenders or facsimile that such counterparts have been signed by all the parties hereto or thereto.
10.13 Use of Defined Terms. All words used herein in the singular or plural shall be deemed to have been used in the plural or singular where the context or construction so requires.
Any defined term used in the singular preceded by "any" shall be taken to indicate any number of the members of the relevant class.
10.14 Lender Obligations. Each Borrower and Guarantor hereby acknowledges that TCW Special Credits is entering into this Agreement, and undertaking the obligations of a Lender hereunder, only as agent or nominee for each Fund and on each Fund's behalf and not individually, and that TCW Special Credits is not personally liable with respect to the obligations of a Lender hereunder. Each Borrower and Guarantor further acknowledges that the liability of the Funds is several and not joint and several, in accordance with and in proportion to their respective percentage interest set forth on Schedule A hereto, and each Fund shall be liable for its breach hereby only to the extent such breach and any loss, cost or damages incurred by Borrower as a result thereof, relates to such Fund. TCW Special Credits represents and warrants that (i) as of the date of this Agreement, each of the Funds has a net worth equal to not less than $25,000,000, and (ii) investors in the Funds cannot unilaterally withdraw all or any portion of their investment in the Funds at any time on or before the Maturity Date.
IN WITNESS WHEREOF, the Borrowers, the Guarantors and the Lenders have caused this Agreement to be executed by their proper corporate officers thereunto duly authorized as of the day and year first above written.
JWP INC.
By:___________________________
Title:
MES HOLDINGS CORPORATION
By:___________________________
Title:
HANSEN MECHANICAL CONTRACTORS, INC.
GIBSON ELECTRIC CO., INC.
By:___________________________
Title:
JWP FOREST ELECTRIC CORP.
By:___________________________
Title:
HERITAGE AIR SYSTEMS INC.
By:___________________________
Title:
JWP/HYRE ELECTRIC CO. OF
INDIANA, INC.
By:___________________________
Title:
JWP GOWAN, INC.
By:___________________________
Title:
JWP MECHANICAL SERVICES, INC.
By:___________________________
Title:
JWP INTERNATIONAL INC.
By:___________________________
Title:
JWP/J.C. HIGGINS CORP.
By:___________________________
Title:
JWP MAINTENANCE AND SERVICES, INC.
By:___________________________
Title:
JWP MECHANICAL/ELECTRICAL SERVICES, INC.
By:___________________________
Title:
JWP MECHANICAL/ELECTRICAL
SERVICES (EAST), INC.
By:___________________________
Title:
JWP MECHANICAL/ELECTRICAL
SERVICES (MIDWEST), INC.
By:___________________________
Title:
JWP MECHANICAL/ELECTRICAL SERVICES (SOUTH), INC.
By:___________________________
Title:
JWP MECHANICAL/ELECTRICAL SERVICES (WEST), INC.
By:___________________________
Title:
JWP MIDWEST, INC.
By:___________________________
Title:
JWP PENGUIN AIR CONDITIONING CORP.
By:___________________________
Title:
JWP RISK HOLDINGS INC.
By:___________________________
Title:
JWP TRAUTMAN & SHREVE, INC.
By:___________________________
Title:
JWP WELSBACH ELECTRIC CORP.
By:___________________________
Title:
JWP WELSBACH ELECTRIC CORP. OF LONG ISLAND
By:___________________________
Title:
JWP WEST
By:___________________________
Title:
JWP ZACK INC.
By:___________________________
Title:
T.L. CHOLETTE, INC.
By:___________________________
Title:
BELMONT CAPITAL PARTNERS II, L.P.
By: Fidelity Capital Partners
II Corp.,
Managing General Partner
By:___________________________
Title:
TCW SPECIAL CREDITS, as agent
and nominee for the entities
listed on Schedule A annexed
hereto, AS LENDER
By: TCW Asset Management Company,
its managing general partner
By:___________________________
Richard Masson
Managing Director
By:___________________________
Kenneth Liang
Senior Vice President
|
ALBERT FRIED & COMPANY
By:___________________________
Title:
UBS MORTGAGE FINANCE INC.
By:___________________________
Title:
EXHIBIT 10(bb)
THE LENDERS NAMED HEREIN,
and
CORESTATES BANK, N.A.
as Agent
December ___, 1994
GUARANTOR SECURITY AGREEMENT
THIS GUARANTOR SECURITY AGREEMENT, dated as of December ____, 1994 (this "Agreement"), is entered into by and among the subsidiaries of MES HOLDINGS CORPORATION ("MES") that are signatories hereto (each, a "Pledgor" and collectively, the "Pledgors"), BELMONT CAPITAL PARTNERS II, L.P. ("BELMONT"), TCW SPECIAL CREDITS, a California general partnership, as agent and nominee for the entities (each a "Fund") set forth in the Schedule attached hereto, ALBERT FRIED & COMPANY, UBS MORTGAGE FINANCE INC. and KEVIN C. TONER (each a "Lender" and collectively, the "Lenders") and CORESTATES BANK, N.A., a national association (the "Agent"), solely in its capacity as agent for the Lenders.
WITNESSETH:
WHEREAS, JWP INC. (the "Parent", and together with MES, the "Borrowers"), MES, the Pledgors, as guarantors, and the Lenders are parties to that certain Credit Agreement, dated as of the date hereof, whereby the Lenders are providing to the Borrowers credit facilities in the maximum aggregate amount of $35,000,000;
WHEREAS, the Parent, Dyn Specialty Contracting, Inc. ("Dyn"), the subsidiaries of Dyn that are signatories thereto, and the Lenders are parties to that certain Credit Agreement, dated as of the date hereof (the "Dyn Credit Agreement"), whereby the Lenders are providing to the Parent and Dyn credit facilities in the maximum aggregate amount of $10,000,000;
WHEREAS, each Pledgor has agreed to secure its obligations under the Credit Agreement pursuant to the terms and conditions set forth herein; and
WHEREAS, it is a condition to the issuance of the initial loans under the Credit Agreement and the Dyn Credit Agreement that this Agreement be executed and delivered.
NOW, THEREFORE, in consideration of the premises and intending to be legally bound hereby, the parties hereto agree as follows:
1. Definitions.
a. As used herein the following terms shall have the meanings indicated:
"Accounts" shall have the meaning assigned to such term under the Uniform Commercial Code, now or hereafter acquired, wherever located, excluding any accounts that are prohibited from assignment by an enforceable provision of any contract giving rise thereto.
"Affiliate" shall mean any Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, a Pledgor. A Person shall be deemed to control another Person if such Person possesses, directly or indirectly, the power (i) to vote 10% or more of the outstanding stock or other ownership interests having ordinary voting power for the election of directors of such other Person or (ii) to direct or cause the direction of the management and policies of such corporation, whether by contract or otherwise.
"Agent" has the meaning set forth in the preliminary paragraph hereof.
"Borrowers" has the meaning set forth in the recitals hereto.
"Case" shall mean the case of the Parent before the United States Bankruptcy Court for the Southern District of New York.
"Chattel Paper" shall have the meaning assigned to such term under the Uniform Commercial Code, now or hereafter acquired, wherever located.
"Collateral" shall mean, as to each Pledgor, all of
such Pledgor's now-existing or hereafter acquired or arising (i)
Accounts, (ii) General Intangibles, including but not limited to
Intercompany Notes, Chattel Paper, Contracts and Instruments
derived from or related to any Accounts, (iii) guarantees of any
Accounts of which any of the Pledgors are the beneficiaries and
all other security held for the payment or satisfaction thereof,
(iv) goods or services the sale or lease of which gave rise to
any Account, including returned goods, (v) balance of any
deposit, agency or other account with any financial
institution, (vi) Inventory, (vii) Equipment, (viii) Pledged
Securities and the certificates representing the Pledged
Securities, (ix) Patents and Trademarks and (x) books, records
and other property at any time evidencing or related to the
foregoing, together with all products and
Proceeds (including insurance Proceeds) of any of the foregoing,
including all such Proceeds held in the Cash Collateral Account;
provided, however, that the Collateral shall not include the
stock of the Excluded Subsidiaries and Defender Indemnity Ltd.
"Concentration Account" shall mean a concentration depositary account maintained by MES or the Parent at a Concentration Bank and subject to a Depositary Agreement.
"Concentration Banks" shall mean NationsBank, N.A. or such other financial institution designated by a Borrower and approved by the Majority Lenders to maintain Concentration Accounts.
"Contract" shall have the meaning assigned to such term under the Uniform Commercial Code, now or hereafter acquired, wherever located, excluding any contract or rights thereunder that are prohibited from assignment by an enforceable provision of such contract.
"Credit Agreement" shall mean the Credit Agreement, dated the date hereof, among the Parent, MES, the Pledgors, as guarantors, and the Lenders, as hereafter amended from time to time, until such time as all the MES Obligations shall have been paid in full and satisfied, at which time the "Credit Agreement" shall mean the Dyn Credit Agreement.
"Depositary Agreement" shall mean an agreement among the Parent, MES, the Agent and a Concentration Bank, providing, among other things, that the Agent shall have a security interest in funds held in each Concentration Account and that, upon the terms and conditions provided therein, the Agent may require the Concentration Banks to transfer funds deposited into the Concentration Accounts solely in accordance with the instructions of the Agent, and authorizing the Agent to cause the Concentration Banks to remit to the Agent amounts necessary to pay the Lenders any amount payable under the Credit Agreement, Notes or any other Loan Document, as defined in the Credit Agreement, which is not paid in a timely manner; such agreement shall be in substantially the form of Exhibit A of the Credit Agreement.
"Dyn" shall have the meaning set forth in the recitals hereto.
"Dyn Credit Agreement" shall have the meaning set forth in the recitals hereto.
"Dyn Obligations" shall mean all now existing or hereafter arising debts, obligations, covenants, and duties of payment or performance of every kind, matured or unmatured, direct or contingent, owing, arising, due, or payable to the lenders under the Dyn Credit Agreement by or from any of the Parent or any other borrower or any guarantor arising out of the Dyn Credit Agreement or any other "Loan Document" (as such term is defined in the Dyn Credit Agreement), including, without limitation, all obligations to repay principal of and interest on all "Loans" (as such term is defined in the Dyn Credit Agreement) and to pay interest, fees, costs, charges, expenses, professional fees, and all sums chargeable to the Parent, any other borrower or the guarantors under the "Loan Documents" (as such term is defined under the Dyn Credit Agreement), whether or not evidenced by any note or other instrument.
"Equipment" shall have the meaning assigned to such term under the Uniform Commercial Code, now or hereafter acquired, wherever located.
"General Intangibles" shall have the meaning assigned to such term under the Uniform Commercial Code, now or hereafter acquired, wherever located.
"Generally Accepted Accounting Principles" shall mean generally accepted accounting principles as in effect in the United States from time to time, consistently applied.
"Instruments" shall have the meaning assigned to such term under the Uniform Commercial Code, now or hereafter acquired, wherever located.
"Intercompany Debt" shall mean any debt, loan or advance to, investment in, or guarantee of the obligations of, an Affiliate, other than indebtedness (i) arising in the ordinary course of business, (ii) under normal trade practices, (iii) on terms no less favorable than could be obtained between independent parties on an arm's length basis and (iv) not for borrowed money.
"Intercompany Note" shall mean a promissory note evidencing Intercompany Debt (which Intercompany Debt may be in the nature of a revolving loan).
"Inventory" shall have the meaning assigned to such term under the Uniform Commercial Code, now or hereafter acquired, wherever located, and in any event, including all inventory, merchandise, goods and other personal property that are held by or on behalf of a Person for sale or lease or to be furnished under a contract of service, in each case in the ordinary course of business.
"Lenders" shall have the meaning assigned to such term in the Credit Agreement.
"Lien" shall mean any lien, mortgage, security
interest, chattel mortgage, pledge or other encumbrance
(statutory or otherwise) of any kind securing satisfaction or
performance of an obligation, including any agreement to give any
of the foregoing, any conditional sales or other title retention
agreement, any lease in the nature thereof, and the filing of or
the agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction or
similar evidence of any encumbrance, whether within or outside
the United States.
"Majority Lenders" shall mean Lenders holding Commitment Percentages aggregating 51%, until such time as the Agent shall have received notice from such Majority Lenders that the MES Obligations have been paid in full and satisfied, at which time the Majority Lenders shall mean "Lenders" under the Dyn Credit Agreement holding "Commitment Percentages" (as such term is defined under the Dyn Credit Agreement) aggregating 51%.
"MES Obligations" shall mean all now existing or hereafter arising debts, obligations, covenants, and duties of payment or performance of every kind, matured or unmatured, direct or contingent, owing, arising, due, or payable to the Lenders by or from any of the Borrowers or any of the Pledgors arising out of the Credit Agreement or any other Loan Document, including, without limitation, all obligations to repay principal of and interest on all Loans and to pay interest, fees, costs, charges, expenses, professional fees, and all sums chargeable to the Borrowers and the Pledgors under the Loan Documents, whether or not evidenced by any note or other instrument.
"Obligations" shall mean the MES Obligations and the Dyn Obligations.
"Patents and Trademarks" shall mean, as to each Pledgor, patents and trademarks owned, directly or indirectly, by such Pledgor.
"Permitted Investments" shall mean:
(i) Investments in certificates of deposit or time deposits having maturities in each case not exceeding one year from the date of issuance thereof and issued by any FDIC-insured commercial bank incorporated in the United States or any state thereof having a combined capital and surplus of not less than $500,000,000;
(ii) Investments in marketable direct obligations issued or unconditionally guaranteed by the United States of America or issued by any agency thereof and backed by the full faith and credit of the United States of America, in each case maturing within one year from the date of issuance or acquisition thereof;
(iii) Investments in commercial paper or demand notes issued by a corporation incorporated in the United States or any State thereof maturing no more than one year from the date of issuance thereof and, at the time of acquisition, having a rating of A-1 (or better) by Standard & Poor's Corporation or P-1 (or better) by Moody's Investors Service, Inc.; and
(iv) Investments in money market mutual funds, including one which may be created managed, underwritten, or to which investment advice is rendered or the shares of which are shold by the Agent, all of the assets of which are invested in cash or investments described in clauses (i), (ii) and (iii) above.
"Person" shall mean any individual, corporation, partnership, joint venture, association, company or entity.
"Pledged Securities" shall mean, as to each Pledgor, all of the capital stock of those Subsidiaries held directly by such Pledgor, except for the capital stock of Excluded Subsidiaries. Set forth on Schedule A attached hereto is a listing of each of the Pledged Securities existing on the date hereof.
"Prevailing Interest Rate" as at any date shall mean the highest rate of interest then payable by the Borrowers under the Credit Agreement.
"Proceeds" shall have the meaning assigned to such term under the Uniform Commercial Code, now or hereafter acquired, wherever located.
"Subsidiaries" shall mean, as to any Pledgor, any Person at least 50% of the voting stock of which is held, directly or indirectly, by such Pledgor.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in effect from time to time in the State of New York.
b. Capitalized terms used herein and not otherwise defined herein shall have their respective meanings assigned in the Credit Agreement.
2. Grant of Security.
To secure the payment, promptly when due, and the punctual performance of all of the Obligations, each Pledgor hereby pledges and assigns to the Agent, for the benefit of the Lenders, and grants to the Agent, for the benefit of the Lenders, and agrees that the Agent, for the benefit of the Lenders, shall have a security interest in and valid Lien upon the Collateral.
3. Deposit of Pledged Securities and Intercompany Notes; Reregistration of Shares.
a. To perfect the security interest of the Agent in and to the Pledged Securities, as provided in Section 6(a) hereof, each Pledgor hereby deposits with the Agent the Pledged Securities owned by such Pledgor, in each case endorsed in blank, except as set forth on Schedule A hereto. At any time and from time to time the Agent may cause all or any of the Pledged Securities to be transferred into its name or into the name of its nominee or nominees.
b. Except as set forth on Schedule A hereto, if any of the Collateral of a Pledgor is or becomes evidenced by a promissory note, draft, trade acceptance, Chattel Paper or Instrument, including, without limitation, any Intercompany Notes, such Pledgor will promptly deliver the same to the Agent appropriately endorsed to the Agent's order. Regardless of the form of such endorsement, each Pledgor hereby waives presentment, demand, notice of dishonor, protest and notice of protest and all other notices with respect thereto. All such promissory notes, drafts, trade acceptances, Chattel Paper or Instruments existing on the date hereof are set forth on Schedule A hereto.
4. Reservation of Voting Rights.
At any time after the occurrence and during the continuation of an Event of Default, the Agent shall be entitled to exercise any and all voting power with respect to the Pledged Securities and shall exercise such power as directed by the Majority Lenders. At all other times the Pledgor of such Pledged Securities shall be entitled to exercise as it thinks fit, but in a manner not inconsistent with the provisions of the Loan Documents, all voting power with respect to the Pledged Securities.
5. Additional Collateral Security.
If, upon the dissolution or liquidation (in whole or in part) of any Pledgor or any of the Subsidiaries of any of the Pledgors, any sum shall be paid upon or with respect to any of the Pledged Securities, such sum shall be paid over to the Agent as additional Collateral for the Obligations to be held by the Agent in the Cash Collateral Account. In case any stock dividend shall be declared on any of the Pledged Securities, or any shares of stock or fractions thereof shall be issued pursuant to any stock split involving any of the Pledged Securities, or any distribution of capital shall be made on any of the Pledged Securities, or any property shall be distributed upon or with respect to the Pledged Securities pursuant to any recapitalization or reclassification of the capital of any of the Pledgors or pursuant to a reorganization thereof, the shares or other property so distributed shall be delivered to the Agent and any funds included in such distribution shall be deposited in the Cash Collateral Account. Funds in the Cash Collateral Account shall be invested by the Agent as directed by the Majority Lenders or, in the absence of such direction, shall be invested by the Agent in Permitted Investments.
6. Representations and Warranties.
Each Pledgor represents and warrants to and agrees with the Agent and Lenders as follows:
a. The security interest and Lien granted hereby is a perfected and enforceable security interest in and Lien upon the Collateral of such Pledgor to the extent such security interest and Lien can be perfected by the filing of Uniform Commercial Code financing statements or delivery of the Pledged Securities and such other securities and instruments as are contemplated to be delivered pursuant to Section 3(b) hereof, and no Person, including without limitation any Person that currently provides or shall hereafter provide to any Pledgor or any Subsidiary of any Pledgor payment or performance bonds, will have any right, title or interest in or to the Collateral that is, or that shall hereafter be, prior, paramount, superior or equal to the right, title or interest of the Lenders therein or thereto, other than Liens expressly permitted by Section 7.3 of the Credit Agreement.
b. The Pledged Securities owned by such Pledgor are
duly and validly issued, fully paid and non-assessable, subject,
if the issuer thereof is a New York corporation, to Section 630
of the New York Business Corporation Law, and have been duly and
validly pledged hereunder in accordance with law, and each of the
Pledgors warrants and covenants to defend the Agent's right and
security interest in and to the Pledged Securities against the
claims and demands of all persons whomsoever. The Pledgors are
the exclusive legal and equitable owners
of, and have good title to, all of the Pledged Securities, free
and clear of all claims, Liens, security interests and other
encumbrances (except for the security interest created hereby in
favor of the Agent and Liens expressly permitted by Section 7.3
of the Credit Agreement), and the Pledgors have the unqualified
legal right to pledge the same hereunder. Each certificate
evidencing any of the Pledged Securities
pledged hereunder by the Pledgors and delivered pursuant to
Section 3 hereof is issued in the name of one of the Pledgors and
has attached a stock power duly signed in blank by such Pledgor
and bears no restrictive or cautionary legend. The Pledgors
acknowledge that no filings or recordings (including without
limitation filings under the Uniform Commercial Code) are
necessary to be made under present law in order to perfect,
protect and preserve the security interest of the
Agent in the Pledged Securities created by this Agreement or
intended so to be; and
c. The Pledgors, for themselves and their respective successors and assigns, do hereby irrevocably waive and release all preemptive, first-refusal and other similar rights of the Pledgors to purchase any or all of the Pledged Securities upon any sale thereof by the Agent hereunder, whether such right to purchase arises under the Certificate or Articles of Incorporation or any By-Law of the issuer of the Pledged Securities, by operation of law or otherwise.
7. Books and Records.
Each Pledgor shall faithfully keep complete and accurate books and records and make all necessary entries therein to reflect the amounts, identity of account debtors and all events and transactions giving rise to the Collateral of such Pledgor and all payments, credits and adjustments applicable thereto and shall permit the Agent to have such access to them and to any other records pertaining to such Pledgor's business as the Agent may request from time to time.
8. Collection of Accounts.
Until otherwise notified by the Agent after the occurrence of a Potential Default or an Event of Default, each Pledgor may collect all amounts due on the Collateral of such Pledgor from the respective account debtors or obligors liable thereon, but the Proceeds so collected by such Pledgor shall be deposited into a Concentration Account. After the occurrence of a Potential Default or an Event of Default, the Agent may, upon notice to a Pledgor, terminate the authority hereby given to such Pledgor to make such collections and, acting if it so chooses in the name of such Pledgor, collect any amounts due on the Collateral directly or through an agent, sell, assign, compromise, discharge or extend the time for payment of any Account or other Collateral, institute legal action for the collection of any Account or other Collateral and do all acts and things necessary or incidental thereto, and each Pledgor hereby ratifies that the Agent shall lawfully do under the authority hereby granted to it. After the occurrence of a Potential Default or an Event of Default, the Agent may at any time, upon notice to a Pledgor, notify any account debtor on any Account pledged by such Pledgor or obligor with respect to any other Collateral pledged by such Pledgor that the Collateral has been assigned to the Agent and is to be paid directly to the Agent. Alternatively, at its election, the Agent may, after the occurrence of a Potential Default or an Event of Default, require a Pledgor to, and in such event such Pledgor at its sole expense will, notify account debtors and obligors that payments are thenceforth to be made directly to the Agent. After the occurrence of a Potential Default or an Event of Default, no Pledgor shall, without the written consent of the Majority Lenders in each case, compromise, discharge, extend the time for payment of or otherwise grant any indulgence or allowance with respect to any Account or other Collateral.
9. Title to Collateral.
Each Pledgor has acquired or shall acquire absolute and exclusive title to each and every item or unit of the Collateral owned by such Pledgor free and clear of all Liens, except Liens expressly permitted by Section 7.3 of the Credit Agreement, and each Pledgor shall warrant and defend its title to the Collateral, subject to the rights of the Agent, against the claims and demands of all persons whomsoever.
10. Maintenance of Collateral.
Without the written consent of the Majority Lenders, no
Pledgor shall amend or terminate any contract or other document
or instrument constituting part of the Collateral pledged by such
Pledgor, except for transactions in the ordinary course of
business. Without the prior written consent of the Majority
Lenders, (i) no Pledgor will, other than in the ordinary course
of business, sell, exchange, lease or otherwise dispose of,
voluntarily or involuntarily, any of the Collateral pledged by
such Pledgor or any of such Pledgor's rights therein, except only
to the extent specifically permitted by Sections
7.1 or 7.8 of the Credit Agreement. Each Pledgor will maintain
the Collateral pledged by such Pledgor in good condition and
repair, will give it suitable preventative maintenance in the
case of machinery and equipment, and will pay the cost of all
repairs to or maintenance of the same which may be required from
time to time. No Pledgor will do or permit to be done anything
which might impair the value of any item
of the Collateral owned by it or the security intended to be
afforded hereby. Each Pledgor will immediately notify the Agent
and the Lenders of any event causing any material loss or
depreciation in value of the Collateral pledged by such Pledgor
and of the extent of such loss or depreciation. Each Pledgor,
upon the Agent's request and upon prior
notice to the Borrowers, will permit the Agent at any time and
from time to time, through its officers or other agents, to have
access to the Collateral pledged by such Pledgor for the purpose
of inspecting or, after a Potential Default or an Event of
Default, assembling and removing the same.
11. Taxes and Liens.
Except for Permitted Liens and Liens expressly permitted by
Section 7.3 of the Credit Agreement, each Pledgor shall
immediately notify the Agent and the Lenders in the event there
ever arises against any of the Collateral of such Pledgor any
Lien, assessment, tax or other liability, whether or not entitled
to priority over, or pari passu with, the Agent's security
interest hereunder. In any such event, whether or not such
notice is given, the Agent shall have the
right (but shall be under no obligation) to pay (with funds
advanced by the Lenders) any tax or other liability of such
Pledgor deemed by the Agent in good faith to affect the Agent's
interests hereunder. Such Pledgor shall repay to the Agent (and
the Agent shall remit to the Lenders) on demand all sums which
the Agent shall have paid under this section in respect of taxes
or other liabilities of such Pledgor, with
interest thereon at the Prevailing Interest Rate, and such
Pledgor's liability to the Agent for such repayment with interest
shall be included in the Obligations. The Agent shall be
subrogated to the extent of any such payment by it to all the
rights and Liens of the payee against the applicable Pledgor's
assets. Each Pledgor shall furnish to the Agent from time to
time upon the Agent's request proof satisfactory to the Agent of
the making of all payments or deposits required by applicable law
to be made with respect to amounts withheld by such Pledgor from
wages and salaries of employees and amounts contributed by such
Pledgor on account of federal, state or other
income or wage taxes and amounts due under the Federal Insurance
Contributions Act or the Federal Unemployment Tax Act or any
similar legislation.
12. Significant Locations; Name.
Each Pledgor represents and warrants to the Agent and the
Lenders that none of the books and records relating to the
Collateral of such Pledgor is or will be located or used at any
location other than their respective locations identified on
Schedule 3.17 to the Credit Agreement. The applicable Pledgor
shall notify the Agent in writing prior to any change in location
of any such books and records. If any of the Collateral of a
Pledgor or any of such Pledgor's records concerning any of the
Collateral of such Pledgor are at any time to be
located on premises leased by such Pledgor, the Pledgor shall, at
the request of the Agent or the Majority Lenders, obtain and
deliver to the Agent, prior to the delivery of any such
Collateral or books or records
to such premises, an agreement in form satisfactory to the
Majority Lenders waiving the landlord's right to enforce against
the Collateral or such Pledgor's records concerning the same and
assuring the Agent's access to such Collateral and books and
records to facilitate the Agent's exercise of its rights to take
possession thereof. The location of each Pledgor's chief
executive office and, if different, the location of such
Pledgor's principal place of business are set
forth on Schedule 3.17 to the Credit Agreement, and each Pledgor
agrees to provide the Agent prior written notice of any change of
any such chief executive office or principal place of business of
such Pledgor. No Pledgor shall change its name, identity or
corporate structure in any manner which might make any financing
or continuation statement filed in connection herewith seriously
misleading under any applicable provision of the Uniform
Commercial Code, unless such Pledgor shall
have given the Agent at least 30 days prior written notice
thereof and shall have taken all action necessary or reasonably
requested by the Agent or any Lender to amend such financing
statement or continuation statement so that it is not seriously
misleading.
13. Further Assurances.
Each Pledgor shall execute and deliver to the Agent from time to time all such other agreements, instruments and other documents (including, without limitation, all requested financing and continuation statements and all requested documents relating to the creation, perfection or protection of Liens and security interests) and do all such other and further acts and things as the Agent or the Majority Lenders may reasonably request in order to further evidence or carry out the intent of this Agreement or to perfect and protect the Liens and security interests created hereby or intended so to be.
14. Release of Collateral.
Upon the payment in full of the entire principal balance and all interest in respect of the Notes and the payment in full of all other Obligations, and the termination of each Loan Commitment, the Majority Lenders shall direct the Agent to, and the Agent shall, release its Lien and security interest in the Collateral and shall do such things as are reasonably requested by the Pledgors to effect such release. In addition, upon the disposition of any Collateral in compliance with Section 7.8 of the Credit Agreement, such Collateral is hereby released by the Agent from its security interest, and the Agent shall do such things as are reasonably requested by the applicable Pledgor to evidence such release. All costs (including attorneys' fees) of the preparation, execution and filing of any documents or the taking of any steps to release or terminate such security interests shall be for the account of the applicable Pledgor and shall be included in the Obligations.
15. Default and Remedies.
a. Each Pledgor shall be in default hereunder upon the occurrence of an Event of Default (as defined in the Credit Agreement).
b. Upon the occurrence of any Event of Default and so long as the same shall be continuing, the Agent may at its option exercise from time to time any and all rights and remedies available to it under the Uniform Commercial Code or otherwise, including the right to foreclose or otherwise realize upon any of the Collateral and to dispose of any of the Collateral at one or more public or private sales or other proceedings, and each Pledgor agrees that the Agent or any Lender, or the nominee of the Agent or any Lender, may become the purchaser at any such sale or sales. Each Pledgor agrees that ten (10) days shall be reasonable prior notice of the date of any public sale or other disposition of all or any part of the Collateral, or of the date on or after which any private sale or other disposition of the same may be made. All rights and remedies granted to the Agent hereunder or under any other agreement between the Agent, the Borrowers, and any of the Pledgors shall be deemed concurrent and cumulative and not alternative, and the Agent may proceed with any number of remedies at the same time or at different times until all the Obligations are fully satisfied. The exercise of any one right or remedy shall not be deemed a waiver or release of or any election against any other right or remedy, and the Agent may proceed against any of the Borrowers and/or any of the Pledgors and the Collateral and any other collateral granted by the Borrowers or the Pledgors to the Agent under any other agreement, all in any order and through any available remedies. All property of any kind held at any time by the Agent as Collateral shall stand as one general continuing collateral security for all the Obligations and may be retained by the Agent as security until all the Obligations are fully satisfied. Notwithstanding the foregoing, unless and until the Agent shall have received written directions from the Majority Lenders, the Agent shall not be obligated to take any action with respect to such Event of Default as the Agent may deem advisable.
Any rights and remedies of the Agent hereunder may, at the option of the Majority Lenders and upon written notice to the Agent, be exercised by the Majority Lenders or their designee.
c. The Pledgors shall pay to the Agent on demand any and all expenses (including reasonable attorneys' fees and legal expenses) which may have been incurred by the Agent, with interest at the Prevailing Interest Rate, in connection with the custody, preservation, use, operation, preparation for sale or sale of any of the Collateral, the incurring of which are hereby authorized to the extent the Agent deems the same advisable. The Pledgors' liability to the Agent for any such payment with interest at the Prevailing Interest Rate shall be included in the Obligations.
d. The Proceeds of any Collateral received by the Agent upon the occurrence and during the continuance of an Event of Default, whether from a sale or other disposition of Collateral or otherwise, or the Collateral itself, shall be applied (i) first, to the Agent (in its capacity as such) in an amount equal to the reasonable fees, indemnitees, costs and expenses incurred by the Agent through the date of such enforcement or sale, including reasonable compensation for and expenses of the Agent's representatives and counsel, and all changes, expenses, liabilities and advances incurred or made by the Agent in connection with such enforcement or sale, whether provided for under this Agreement or otherwise, (ii) second, to payment in full or in part of such of the remaining MES Obligations and in such order and manner as the Agent shall be directed in writing by the Majority Lenders, and (iii) third, to the payment in full or in part of such of the remaining Dyn Obligations and in such order and manner as the Agent shall be directed in writing by the Majority Lenders and each Pledgor shall remain liable for any deficiency. Each Pledgor to the extent of its rights in the Collateral waives and releases any right to require the Agent to collect any of the Obligations from any particular Collateral or any other collateral then held by the Agent under any theory of marshalling of assets or otherwise.
e. In the event the Agent is permitted to sell any of the Pledged Securities pursuant to this Section 15, upon the written request of the Agent to cause any registration, qualification or compliance under any federal or state securities law or laws to be effected with respect to any of the Pledged Securities, each Pledgor of such Pledged Securities, as soon as practicable and at its sole expense will use its best efforts to cause such registration, qualification or compliance to be effected (and be kept effective) as may be so requested and as would permit or facilitate the sale and distribution of such Pledged Securities. Such Pledgor will use its best efforts to cause the Agent and the Lenders to be kept reasonably advised in writing as to the progress of each such registration, qualification or compliance and as to the completion thereof and will furnish or use its best efforts to cause to be furnished to the Agent and the Lenders, without expense to the Agent or the Lenders, such number of prospectuses or offering circulars and other documents incident thereto as the Agent or the Lenders may from time to time reasonably request. Each Pledgor will indemnify and hold harmless the Agent and the Lenders from and against any claims or liabilities caused by any untrue statement of a material fact or omission of a material fact required to be stated in any registration statement, offering circular or prospectus used in connection with such registration or compliance, or necessary to make the statements therein not misleading, except insofar as such claims or liabilities are caused by any untrue statement or omission based on or in conformity with any written statement supplied by the Agent or such Lender. If at any time when the Agent shall determine to exercise its rights to sell all or any part of the Pledged Securities pursuant to this Section 15, such Pledged Securities or the part thereof to be sold shall not, for any reason, be effectively registered under the Securities Act of 1933 (the "Securities Act"), the Agent is hereby expressly authorized to sell such Pledged Securities or such part thereof by private sale in such manner and under such circumstances as the Agent may deem necessary or advisable in order that such sale may legally be effected without such registration.
Without limiting the generality of the foregoing, in any such
event the Agent: (i) may proceed to make such private sale
whether or not a registration statement for the purpose of
registering the Pledged Securities or such part thereof shall
have been filed under the Securities Act; (ii) may approach and
negotiate with a restricted number of potential purchasers to
effect such sale; and (iii) may restrict such sale to purchasers
as to their number, nature of business, level of sophistication
and investment intention (including
without limitation, to purchasers each of whom will represent and
agree to the satisfaction of the Agent that such purchaser is
purchasing for its own account, for investment, and not with a
view to the distribution or sale of such Pledged Securities or
part thereof), it being understood that the Agent may require the
Pledgor of such Pledged Securities, and such Pledgor hereby
agrees upon the written request of the Agent, to cause: (i) a
legend or legends to be placed on the certificates to be
delivered to such purchasers to the effect that the
offering and sale of the Pledged Securities represented thereby
have not been registered under the Securities Act and setting
forth or referring to any required restrictions on the
transferability of such Securities; (ii) the issuance of stop
transfer instructions to such Pledgor's transfer agent, if any,
with respect to the Pledged Securities (or if such Pledgor
transfers its own securities, a notation
in the appropriate records of such Pledgor); and (iii) to be
delivered to the purchasers a signed written agreement of such
Pledgor that such purchasers will be entitled to the rights of
the Agent under this Section 15. In addition, it is understood
that any such purchasers may be required as a condition of any
such sale to furnish a signed written agreement that the Pledged
Securities will not be sold without registration or other
compliance with the requirements of the Securities Act. In the
event of any such sale, each Pledgor hereby consents and agrees
that neither the Agent nor any Lender will incur
any responsibility or liability for selling all or any part of
the Pledged Securities at a price which the Agent or the Majority
Lenders may deem reasonable under the circumstances,
notwithstanding the possibility that a substantially higher price
might be realized if the sale were public and deferred until
after registration as aforesaid.
f. In any suit, proceeding or action brought by the Agent or any Lender relating to any Collateral, for any sum owing thereunder or to enforce any provision thereof, each Pledgor agrees to indemnify and keep harmless the Agent or such Lender from and against all expenses, loss or damage suffered by reason of any defense, setoff, counterclaim, recoupment or reduction of liability whatsoever of the obligor thereunder for any reason, including without limitation, arising out of a breach by any Pledgor of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to, or in favor of, such obligor or its successors from such Pledgor and, in any such case, all such obligations of such Pledgor shall be and remain enforceable against and only against such Pledgor and shall not be enforceable against the Agent or any Lender.
16. Power of Attorney.
Each Pledgor hereby irrevocably appoints any officer, employee or agent of the Agent as such Pledgor's true and lawful attorney-in-fact with power to, upon the occurrence of an Event of Default: (i) endorse such Pledgor's name upon any notes, checks, drafts, money orders, or other instruments or payments or other Collateral that may come into the Agent's possession; (ii) sign and endorse such Pledgor's name upon any invoices, assignments, verifications and notices in connection with any of the Collateral, and any instruments or documents relating thereto or to such Pledgor's rights therein; and (iii) at any time whether or not an Event of Default has occurred, to execute in such Pledgor's name and file one or more financing, amendment or continuation statements covering the Collateral. Any such attorney of a Pledgor shall have full power to do any and all things necessary to be done with respect to the above transactions as fully and effectually as such Pledgor might do, and each Pledgor hereby ratifies all that said attorney shall lawfully do or cause to be done by virtue hereof.
17. Financing Statements.
Each Pledgor shall execute all financing statements and amendments thereto and continuations thereof as the Agent may request from time to time to evidence the security interest granted, or intended to be granted, to the Agent hereunder and will pay all filing fees and taxes, if any, necessary to effect the filing thereof. Wherever permitted by law, each Pledgor authorizes the Agent to file financing statements with respect to the Collateral without the signature of such Pledgor. A copy of this Agreement or a copy of any financing statement prepared in connection with this Agreement may itself be filed as a financing statement.
18. Agent
a. Each Lender hereby irrevocably appoints and authorizes
the Agent to take such action on its behalf and to exercise such
powers under this Agreement and the Loan Documents as are
specifically delegated to the Agent by the terms hereof or
thereof, together with such other powers as are reasonably
incidental thereto. Nothing in this Agreement or any Loan
Document shall be construed to impose on the
Agent any duties or responsibilities other than those for which
express provision is made herein or therein. In performing its
duties and functions hereunder, the Agent does not assume and
shall not be deemed to have assumed, and hereby expressly
disclaims, any obligation with or for the Pledgors. As to
matters not expressly provided for in this Agreement or any Loan
Document, the Agent shall not be required to
exercise any discretion or to take any action or communicate any
notice, but shall be fully protected in so acting or refraining
from acting upon the instructions of the Majority Lenders and
their respective successors and assigns; provided, however, that
in no event shall the Agent be required to take any action which
(i) exposes it to personal liability, (ii) requires it to qualify
to do business or subjects it to liabilities for taxes in any
jurisdiction other than jurisdictions in which the Agent is
otherwise so liable or (iii) which is contrary to this Agreement,
any Loan Document or applicable law, and the Agent shall be fully
justified in failing or refusing to take any action hereunder
unless it shall first be specifically 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
omitting to take any such action. If an indemnity furnished to
the Agent for any purpose shall, in the reasonable opinion of the
Agent, be insufficient or become impaired, the Agent may call for
additional indemnity from the Lenders and not commence or cease
to do the acts for which such indemnity is requested until such
additional indemnity is furnished.
b. In performing its functions and duties hereunder on behalf of the Lenders, the Agent shall exercise the same care and skill as it would exercise in dealing with collateral for its own account. Neither the Agent nor any of its directors, officers, employees or other agents shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement or any Loan Document except for its or their own gross negligence or willful misconduct. Without limiting the generality of the foregoing, the Agent (a) may consult with legal counsel and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith and in accordance with the advice of such experts; (b) makes no representation or warranty to any Lender as to, and shall not be responsible to any Lender for, any recital, statement, representation or warranty made in or in connection with this Agreement, any Loan Document or in any written or oral statement (including a financial or other such statement), instrument or other document delivered in connection herewith or therewith or furnished to any Lender by or on behalf of the Pledgors; (c) except as expressly required hereunder, shall have no duty to ascertain or inquire into the Pledgors' performance or observance of any of the covenants or conditions contained herein or to inspect any of the property (including the books and records) of the Pledgors or inquire into the use of the proceeds of the Loans or (unless the officers of the Agent active in their capacity as officers of the Agent for performance of the Agent's duties hereunder have actual knowledge thereof or have been notified in writing thereof) to inquire into the existence or possible existence of any Event of Default or Potential Default; (d) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, effectiveness, genuineness, sufficiency, collectability or value of this Agreement or any other Loan Document or any instrument or document executed or issued pursuant hereto or in connection herewith, except to the extent that such may be dependent on the due authorization and execution by the Agent itself; (e) except as expressly provided herein in respect of information and data furnished to the Agent for distribution to the Lenders, shall have no duty or responsibility, either initially or on a continuing basis, to provide to any Lender any credit or other information with respect to the Pledgors, whether coming into its possession before the making of the Loans or at any time or times thereafter; and (f) shall incur no liability under or in respect of this Agreement or any other Loan Document for, and shall be entitled to rely and act upon, any notice, consent, certificate or other instrument or writing (which may be by facsimile (telecopier), telegram, cable, or other electronic means) believed by it to be genuine and correct and to have been signed or sent by the proper party or parties. Furthermore, the Agent shall not be deemed to have knowledge of any Event of Default or Potential Default unless and until the Agent shall have received written notice thereof from a Borrower, a Lender or a Pledgor, and notwithstanding any provision hereof to the contrary, the Agent shall have no obligation to take any action permitted or required to be taken upon such occurrence unless and until the Agent shall have received such written notice.
c. The Agent and its affiliates may (without having to account therefor to any of the Lenders) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with the Pledgors or their affiliates as if it were not acting for the benefit of the Lenders as the Agent.
d. The Lenders agree to indemnify the Agent (to the extent not reimbursed by the Pledgors), ratably in proportion to each Lender's Commitment Percentage, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Agent in such capacity in any way relating to or arising out of this Agreement or any Loan Document or any action taken or omitted to be taken by the Agent in such capacity hereunder or under any Loan Document; provided that none of the Lenders shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's gross negligence or willful misconduct. Without limiting the generality of the foregoing, each Lender agrees to reimburse the Agent, promptly on demand, for such Lender's ratable share (based upon the aforesaid apportionment) of any out-of-pocket expenses (including counsel fees and disbursements) incurred by the Agent in connection with the preparation, execution, administration or enforcement of, or the preservation of any rights under, this Agreement and the Loan Documents to the extent that the Agent is not reimbursed for such expenses by the Pledgors.
e. The Agent may resign at any time by giving written
notice of such resignation to the Lenders and the Pledgors, such
resignation to be effective only upon the appointment of a
successor Agent as hereinafter provided. Upon any such notice of
resignation, the Majority Lenders shall appoint a successor Agent
upon written notice to the Pledgors and the retiring Agent. If
no successor Agent shall have been appointed by the Majority
Lenders or shall have not accepted such appointment within thirty
(30) days after the retiring Agent shall have
given notice of resignation, the retiring Agent may, upon notice
to the Pledgors and the Lenders, appoint a successor Agent. In
addition, subject to the appointment of a successor Agent
hereunder, the Agent may be removed as Agent at any time with or
without cause by the Majority Lenders. Upon its acceptance of
any appointment as Agent hereunder, the successor Agent shall
succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent and
the retiring Agent shall take all actions as shall reasonably be
determined by the Majority Lenders or the successor Agent as
necessary or desirable to assign to such successor Agent the
security interest granted to the Agent hereunder (including
without limitation the transfer to the successor Agent of Pledged
Securities and all other Collateral then held by the retiring or
removed Agent). All actions taken by the retiring or removed
Agent shall be considered part of its duties hereunder, and the
retiring or removed Agent otherwise shall be
discharged from its duties and obligations as Agent under this
Agreement and the Loan Documents. After any retiring or removed
Agent's resignation or removal hereunder, the provisions hereof
shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was the Agent under this Agreement and
the Loan Documents.
19. Miscellaneous.
a. This Agreement shall remain in full force and effect until the latest to occur of the termination of each Loan Commitment or the repayment in full of all Obligations.
b. No amendment, modification, termination or waiver of this Agreement or any provision thereof nor any consent to any departure by any Pledgor therefrom shall be effective unless the same shall have been approved by the Agent and the Majority Lenders, be in writing and be signed by the Agent and the Majority Lenders and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No notice to or demand on any Pledgor shall entitle any Pledgor to any other or further notice or demand in similar or other circumstances.
c. The Pledgors, jointly and severally, agree to:
i. pay or reimburse the Agent for all of its reasonable out-of-pocket costs and expenses incurred in connection with the preparation, execution and delivery of, and any amendment, consent or waiver, supplement or modification to, this Agreement and the Loan Documents, including the fees and disbursements of counsel to the Agent (but not in-house counsel), such payments or reimbursements to be made, to the extent due and payable on the date hereof and, thereafter, from time to time upon demand;
ii. pay or reimburse the Agent on demand for all of its reasonable costs and expenses incurred in connection with the enforcement or preservation of, or any waiver of or consent with respect to, any rights under this Agreement including the fees and disbursements of counsel of the Agent (but not in-house counsel) and the fees and disbursements of all agents and attorneys-in-fact employed by the Agent;
iii. pay, indemnify, and hold the Agent harmless on demand from any and all recording and filing fees and any and all liabilities with respect to, or resulting from, any delay in paying 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, or consummation of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement; and
iv. the obligations of the Pledgors under this Section 19(c) shall survive the termination of this Agreement.
d. The remedies provided under this Agreement are cumulative and not exclusive of any remedies provided by law.
e. This Agreement shall bind and inure to the benefit of each Pledgor, the Lenders and the Agent and their respective successors and assigns, and upon any trustee or successor subsequently appointed in any Chapter 7 proceeding, except that no Pledgor shall have the right to assign any of its rights or interests under this Agreement. No person not a party to this Agreement is intended to be benefitted thereby.
f. The invalidity, illegality or unenforceability in any jurisdiction of any provision in or obligation under this Agreement shall not affect or impair the validity, legality or enforceability of the remaining provisions or obligations under this Agreement, or of such provision or obligation in any other jurisdiction.
g. Each Pledgor acknowledges that this Agreement and the obligations of the Pledgors hereunder and the security created or intended to be created hereby have constituted, and were intended by each Pledgor to constitute, a material inducement to the Lenders to enter into the Credit Agreement, knowing that the Lenders will rely upon this Agreement.
h. This Agreement and all rights and obligations of the parties hereunder shall be governed by and be construed and enforced in accordance with the laws of the State of New York without regard to principles of conflict of laws.
i. This Agreement and any amendment hereto or waiver hereof may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement and any amendments hereto or waivers hereof shall become effective when the Agent shall have received signed counterparts or notice by telecopy of the signature page that the counterpart has been signed and is being delivered to the Agent or facsimile that such counterparts have been signed by all the parties hereto or thereto.
j. All notices, requests, demands, directions, declarations and other communications between the Lenders and any of the Pledgors shall be given in conformity with Section 10.6 of the Credit Agreement, and any such notices, requests, demands, directions, declarations and other communications to the Agent shall be given to the following address:
CoreStates Bank, N.A.
510 Walnut Street, 6th Floor
Philadelphia, PA 19106
Attention: Corporate Trust
Telecopier: 215-973-2955
k. All words used herein in the singular or plural shall be deemed to have been used in the plural or singular where the context or construction so requires. Any defined term used in the singular preceded by "any" shall be taken to indicate any number of the members of the relevant class.
l. Each Pledgor and the Agent hereby acknowledges that TCW Special Credits is entering into this Agreement, and undertaking the obligations of a Lender hereunder, only as agent or nominee for each Fund and on each Fund's behalf and not individually, and that TCW Special Credits is not personally liable with respect to the obligations of a Lender hereunder. Each Pledgor and the Agent further acknowledges that the liability of the Funds is several and not joint and several, in accordance with and in proportion to their respective percentage interest set forth on Schedule A hereto, and each Fund shall be liable for its breach hereby only to the extent such breach and any loss, cost or damages incurred by a Pledgor or the Agent as a result thereof, relates to such Fund.
IN WITNESS WHEREOF, this Agreement has been duly
executed under due authorization as of the day and year first
above
written.
CORESTATES BANK, N.A.
By:___________________________
Title:
HANSEN MECHANICAL CONTRACTORS, INC.
By:___________________________
Title:
GIBSON ELECTRIC CO., INC.
By:___________________________
Title:
JWP FOREST ELECTRIC CORP.
By:___________________________
Title:
HERITAGE AIR SYSTEMS INC.
By:___________________________
Title:
JWP/HYRE ELECTRIC CO. OF INDIANA, INC.
By:___________________________
Title:
JWP GOWAN, INC.
By:___________________________
Title:
JWP/J.C. HIGGINS CORP.
By:___________________________
Title:
JWP INTERNATIONAL INC.
By:___________________________
Title:
JWP MECHANICAL SERVICES, INC.
By:___________________________
Title:
JWP MAINTENANCE AND SERVICE, INC.
By:___________________________
Title:
JWP MECHANICAL/ELECTRICAL SERVICES, INC.
By:___________________________
Title:
JWP MECHANICAL/ELECTRICAL SERVICES (EAST), INC.
By:___________________________
Title:
JWP MECHANICAL/ELECTRICAL SERVICES (MIDWEST), INC.
By:___________________________
Title:
JWP MECHANICAL/ELECTRICAL SERVICES (SOUTH), INC.
By:___________________________
Title:
JWP MECHANICAL/ELECTRICAL SERVICES (WEST), INC.
By:___________________________
Title:
JWP MIDWEST, INC.
By:___________________________
Title:
JWP PENGUIN AIR CONDITIONING CORP.
By:___________________________
Title:
JWP RISK HOLDINGS INC.
By:___________________________
Title:
JWP TRAUTMAN & SHREVE, INC.
By:___________________________
Title:
JWP WELSBACH ELECTRIC CORP.
By:___________________________
Title:
JWP WELSBACH ELECTRIC CORP. OF LONG ISLAND
By:___________________________
Title:
JWP WEST
By:___________________________
Title:
JWP ZACK INC.
By:___________________________
Title:
T.L. CHOLETTE, INC.
By:___________________________
Title:
TCW SPECIAL CREDITS,
as agent and nominee for the entities listed
on the Schedule of TCW Funds annexed
hereto, AS LENDER
By TCW ASSET MANAGEMENT COMPANY,
its managing general partner
By: ___________________________
Richard Masson
Managing Director
By: ___________________________
Kenneth Liang
Senior Vice President
ALBERT FRIED & COMPANY
By:___________________________
Title:
UBS MORTGAGE FINANCE INC.
By: _________________________
Title:
BELMONT CAPITAL PARTNERS II, L.P.
By: Fidelity Capital Partners II Corp.,
Managing General Partner
By: _________________________
Title:
SCHEDULE OF TCW FUNDS
Fund Percentage Interest
Weyerhaeuser Company Master
Retirement Trust 26%
The Common Fund for Bond
Investments 5%
TCW Special Credits Trust 7%
TCW Special Credits Fund lllb 32%
TCW Special Credits Trust lllb 25%
Delaware State Employees
Retirement Fund
5%
TOTAL 100%
|
SCHEDULE A
PLEDGED SECURITIES
The following is a listing of each of the Pledged Securities and other pledged instruments existing on the date hereof:
PLEDGE AND SECURITY AGREEMENT
by and among
JWP INC.,
MES HOLDINGS CORPORATION,
THE LENDERS NAMED HEREIN
and
CORESTATES BANK, N.A.
as Agent
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY PLEDGE AGREEMENT, dated as of December ____, 1994 (this "Agreement"), is entered into by and among JWP INC. (the "Parent"), a Delaware corporation, MES HOLDINGS CORPORATION ("MES"), a Delaware corporation, BELMONT CAPITAL PARTNERS II, L.P. ("BELMONT"), TCW SPECIAL CREDITS, a California general partnership, as agent and nominee for the entities (each a "Fund") set forth in the Schedule attached hereto, ALBERT FRIED & COMPANY, UBS MORTGAGE FINANCE INC. and KEVIN C. TONER (each, a "Lender" and collectively, the "Lenders") and CORESTATES BANK, N.A., a national banking association (the "Agent"), solely in its capacity as agent for the Lenders. JWP and MES are sometime referred to herein collectively as the "Borrowers" and individually as a "Borrower".
WITNESSETH:
WHEREAS, the Borrowers, certain of the Borrowers'
subsidiaries, as guarantors, and the Lenders are parties to that
certain Credit Agreement, dated as of the date hereof, whereby
the
Lenders are providing to the Borrowers credit facilities in the
maximum aggregate amount of $35,000,000;
WHEREAS, the Parent, Dyn Specialty Contracting, Inc.
("Dyn"),
the subsidiaries of Dyn that are signatories thereto and the
Lenders are parties to that certain Credit Agreement, dated as of
the date hereof (the "Dyn Credit Agreement"), whereby the Lenders
are providing to the Parent and Dyn credit facilities in the
maximum aggregate amount of $10,000,000;
WHEREAS, the Borrowers have agreed to secure their obligations under the Credit Agreement and to secure the obligations of the borrowers under the Dyn Credit Agreement, pursuant to the terms and conditions set forth herein;
WHEREAS, it is a condition to the issuance of the initial
loans under the Credit Agreement and the Dyn Credit Agreement
that
this Agreement be executed and delivered.
NOW, THEREFORE, in consideration of the premises and intending to be legally bound hereby, the parties hereto agree as follows:
1. Definitions.
a. As used herein the following terms shall have the meanings indicated:
"Accounts" shall have the meaning assigned to such term
under the Uniform Commercial Code, now or hereafter acquired,
wherever located, excluding any accounts that are prohibited from
assignment by an enforceable provision of any contract giving
rise
thereto.
"Affiliate" shall mean any Person directly or
indirectly
controlling, controlled by, or under direct or indirect common
control with, any of the Borrowers. A Person shall be deemed to
control another Person if such Person possesses, directly or
indirectly, the power (i) to vote 10% or more of the outstanding
stock or other ownership interests having ordinary voting power
for the election of directors of such other Person or (ii) to
direct or cause the direction of the management and policies of
such corporation, whether by contract or otherwise.
"Agent" has the meaning set forth in the preliminary paragraph hereof.
"Borrowers" has the meaning set forth in the
preliminary
paragraph hereof.
"Case" shall mean the case of the Parent before the United States Bankruptcy Court for the Southern District of New York.
"Cash Collateral Account" shall mean a depositary account maintained in the name of a Borrower with the Agent, but under the sole control and subject to the lien and security interest of the Agent pursuant to this Agreement.
"Chattel Paper" shall have the meaning assigned to such
term under the Uniform Commercial Code, now or hereafter
acquired,
wherever located.
"Collateral" shall mean all of the Borrowers'
now-existing or hereafter acquired or arising (i) Accounts, (ii)
General Intangibles, including but not limited to Intercompany
Notes, Chattel Paper, Contracts and Instruments derived from or
related to any Accounts, (iii) guarantees of any Accounts of
which
MES is the beneficiary and all other security held for the
payment
or satisfaction thereof, (iv) goods or services the sale or lease
of which gave rise to any Account, including returned goods, (v)
balance of any deposit, agency or other account with any
financial
institution, including but not limited to funds in the Cash
Collateral Account or any Concentration Account, (vi) Inventory,
(vii) Equipment, (viii) Pledged Securities and the certificates
representing the Pledged Securities, (ix) Patents and Trademarks
and (x) books, records and other property at any time evidencing
or related to the foregoing, together with all products and
Proceeds (including insurance Proceeds) of any of the foregoing,
including all such Proceeds held in the Cash Collateral Account;
provided, however, that the Collateral shall not include the
stock
of MES, the Software House Companies or SellCo or the Series A
Substitute Collateral or the Series B Substitute Collateral and
upon receipt by the Parent, shall include the Proceeds of the
stock or assets of JWSC, but only to the extent of the first
$15,000,000 of such Proceeds.
"Concentration Account" shall mean a concentration depositary account maintained by MES or the Parent at a Concentration Bank and subject to a Depositary Agreement.
"Concentration Banks" shall mean NationsBank, N.A. or such other financial institution designated by a Borrower and approved by the Majority Lenders to maintain Concentration Accounts.
"Contract" shall have the meaning assigned to such term
under the Uniform Commercial Code, now or hereafter acquired,
wherever located, excluding any contract or rights thereunder
that
are prohibited from assignment by an enforceable provision of
such
contract.
"Credit Agreement" shall mean the Credit Agreement, dated the date hereof, among the Parent, MES, certain of the Subsidiaries of MES as guarantors and the Lenders, as hereafter amended from time to time, until such time as all the MES Obligations shall have been paid in full and satisfied, at which time the "Credit Agreement" shall mean the Dyn Credit Agreement.
"Depositary Agreement" shall mean an agreement among
the
Parent, MES, the Agent and a Concentration Bank, providing, among
other things, that the Agent shall have a security interest in
funds held in each Concentration Account and that, upon the terms
and conditions provided therein, the Agent may require the
Concentration Banks to transfer funds deposited into the
Concentration Accounts solely in accordance with the instructions
of the Agent, and authorizing the Agent to cause the
Concentration
Banks to remit to the Agent amounts necessary to pay the Lenders
any amount payable under the Credit Agreement, Notes or any other
Loan Document, as defined in the Credit Agreement, which is not
paid in a timely manner; such agreement shall be in substantially
the form of Exhibit A of the Credit Agreement.
"Dyn Credit Agreement" shall have the meaning set forth in the recitals hereto.
"Dyn Obligations" shall mean all now existing or
hereafter arising debts, obligations, covenants, and duties of
payment or performance of every kind, matured or unmatured,
direct
or contingent, owing, arising, due, or payable to the lenders
under the Dyn Credit Agreement by or from any of the Parent or
any
other borrower or any guarantor arising out of the Dyn Credit
Agreement or any other "Loan Document" (as such term is defined
in
the Dyn Credit Agreement), including, without limitation, all
obligations to repay principal of and interest on all "Loans" (as
such term is defined in the Dyn Credit Agreement) and to pay
interest, fees, costs, charges, expenses, professional fees, and
all sums chargeable to the Parent, any other borrower or the
guarantors under the "Loan Documents" (as such term is defined
under the Dyn Credit Agreement), whether or not evidenced by any
note or other instrument.
"Equipment" shall have the meaning assigned to such
term
under the Uniform Commercial Code, now or hereafter acquired,
wherever located.
"General Intangibles" shall have the meaning assigned to such term under the Uniform Commercial Code, now or hereafter acquired, wherever located.
"Generally Accepted Accounting Principles" shall mean generally accepted accounting principles as in effect in the United States from time to time, consistently applied.
"Guarantor" shall mean those Subsidiaries of MES that are parties to the Credit Agreement.
"Instruments" shall have the meaning assigned to such
term under the Uniform Commercial Code, now or hereafter
acquired,
wherever located.
"Intercompany Debt" shall mean any debt, loan or
advance
to, investment in, or guarantee of the obligations of, an
Affiliate, other than indebtedness (i) arising in the ordinary
course of business, (ii) under normal trade practices, (iii) on
terms no less favorable than could be obtained between
independent
parties on an arm's length basis and (iv)not for borrowed money.
"Intercompany Note" shall mean a promissory note evidencing Intercompany Debt (which Intercompany Debt may be in the nature of a revolving loan).
"Inventory" shall have the meaning assigned to such
term
under the Uniform Commercial Code, now or hereafter acquired,
wherever located, and in any event, including all inventory,
merchandise, goods and other personal property that are held by
or
on behalf of a Person for sale or lease or to be furnished under
a
contract of service, in each case in the ordinary course of
business.
"Lenders" shall have the meaning assigned to such term in the Credit Agreement.
"Lien" shall mean any lien, mortgage, security
interest,
chattel mortgage, pledge or other encumbrance (statutory or
otherwise) of any kind securing satisfaction or performance of an
obligation, including any agreement to give any of the foregoing,
any conditional sales or other title retention agreement, any
lease in the nature thereof, and the filing of or the agreement
to
give any financing statement under the Uniform Commercial Code of
any jurisdiction or similar evidence of any encumbrance, whether
within or outside the United States.
"Majority Lenders" shall mean Lenders holding
Commitment
Percentages aggregating 51%, until such time as the Agent shall
have received notice from such Majority Lenders that the MES
Obligations have been paid in full and satisfied, at which time
the Majority Lenders shall mean "Lenders" under the Dyn Credit
Agreement holding "Commitment Percentages" (as such term is
defined under the Dyn Credit Agreement) aggregating 51%.
"MES Obligations" shall mean all now existing or
hereafter arising debts, obligations, covenants, and duties of
payment or performance of every kind, matured or unmatured,
direct
or contingent, owing, arising, due, or payable to the Lenders by
or from any of the Borrowers or any of the Guarantors arising out
of the Credit Agreement or any other Loan Document, including,
without limitation, all obligations to repay principal of and
interest on all Loans and to pay interest, fees, costs, charges,
expenses, professional fees, and all sums chargeable to the
Borrowers and the Guarantors under the Loan Documents, whether or
not evidenced by any note or other instrument.
"Obligations" shall mean the MES Obligations and the
Dyn
Obligations.
"Patents and Trademarks" shall mean patents and trademarks owned, directly or indirectly, by the Parent or MES.
"Permitted Investments" shall mean:
(i) Investments in certificates of deposit or time deposits having maturities in each case not exceeding one year from the date of issuance thereof and issued by any FDIC-insured commercial bank incorporated in the United States or any state thereof having a combined capital and surplus of not less than $500,000,000;
(ii) Investments in marketable direct obligations issued or unconditionally guaranteed by the United States of America or issued by any agency thereof and backed by the full faith and credit of the United States of America, in each case maturing within one year from the date of issuance or acquisition thereof;
(iii) Investments in commercial paper or demand notes issued by a corporation incorporated in the United States or any State thereof maturing no more than one year from the date of issuance thereof and, at the time of acquisition, having a rating of A-1 (or better) by Standard & Poor's Corporation or P-1 (or better) by Moody's Investors Service, Inc.; and
(iv) Investments in money market mutual funds, including one which may be created managed, underwritten, or to which investment advice is rendered or the shares of which are sold by the Agent, all of the assets of which are invested in cash or investments described in clauses (i), (ii) and (iii) above.
"Person" shall mean any individual, corporation, partnership, joint venture, association, company or entity.
"Pledged Securities" shall mean all of the capital stock of those Subsidiaries held directly by the Borrowers, except for the capital stock of Excluded Subsidiaries, Dyn Specialty Contracting, Inc., MES, Defender Indemnity Ltd., JWSC, the Software House Companies and SellCo and any capital stock that is included in the Series A Substitute Collateral and the Series B Substitute Collateral. Set forth on Schedule A attached hereto is a listing of each of the Pledged Securities existing on the date hereof.
"Prevailing Interest Rate" as at any date shall mean the highest rate of interest then payable by the Borrowers under the Credit Agreement.
"Proceeds" shall have the meaning assigned to such term under the Uniform Commercial Code, now or hereafter acquired, wherever located.
"Subsidiaries" shall mean any Person at least 50% of the voting stock of which is held, directly or indirectly, by MES.
"Uniform Commercial Code" shall mean the Uniform
Commercial Code as in effect from time to time in the State of
New
York.
b. Capitalized terms used herein and not otherwise defined herein shall have their respective meanings assigned in the Credit Agreement.
2. Grant of Security.
To secure the payment, promptly when due, and the punctual performance of all of the Obligations, each Borrower hereby pledges and assigns to the Agent, for the benefit of the Lenders, and grants to the Agent, for the benefit of the Lenders, and agrees that the Agent, for the benefit of the Lenders, shall have a security interest in and valid Lien upon the Collateral.
3. Deposit of Pledged Securities and Intercompany Notes; Reregistration of Shares.
a. To perfect the security interest of the Agent in and to the Pledged Securities, as provided in Section 6(a) hereof, the Borrowers hereby deposit with the Agent the Pledged Securities, in each case endorsed in blank except as set forth on Schedule A hereto. At any time and from time to time the Agent may cause all or any of the Pledged Securities to be transferred into its name or into the name of its nominee or nominees.
b. Except as set forth on Schedule A hereto, if any of the Collateral is or becomes evidenced by a promissory note, draft, trade acceptance, Chattel Paper or Instrument, including, without limitation, any Intercompany Notes, the Borrowers will promptly deliver the same to the Agent appropriately endorsed to the Agent's order. Regardless of the form of such endorsement, each Borrower hereby waives presentment, demand, notice of dishonor, protest and notice of protest and all other notices with respect thereto. All such promissory notes, drafts, trade acceptances, Chattel Paper or Instruments existing on the date hereof are set forth on Schedule A hereto.
4. Reservation of Voting Rights.
At any time after the occurrence and during the continuation of an Event of Default, the Agent shall be entitled to exercise any and all voting power with respect to the Pledged Securities and shall exercise such power as directed by the Majority Lenders. At all other times each Borrower shall be entitled to exercise as it thinks fit, but in a manner not inconsistent with the provisions of the Loan Documents, all voting power with respect to the Pledged Securities.
5. Additional Collateral Security.
If, upon the dissolution or liquidation (in whole or in part) of MES or any of the Subsidiaries, any sum shall be paid upon or with respect to any of the Pledged Securities, such sum shall be paid over to the Agent as additional Collateral for the Obligations to be held by the Agent in the Cash Collateral Account. In case any stock dividend shall be declared on any of the Pledged Securities, or any shares of stock or fractions thereof shall be issued pursuant to any stock split involving any of the Pledged Securities, or any distribution of capital shall be made on any of the Pledged Securities, or any property shall be distributed upon or with respect to the Pledged Securities pursuant to any recapitalization or reclassification of the capital of any of the Borrowers or pursuant to a reorganization thereof, the shares or other property so distributed shall be delivered to the Agent and any funds included in such distribution shall be deposited in the Cash Collateral Account. Funds in the Cash Collateral Account shall be invested by the Agent as directed by the Majority Lenders or, in the absence of such direction, shall be invested by the Agent in Permitted Investments.
6. Representations and Warranties.
Each of the Borrowers represents and warrants to and agrees with the Agent and the Lenders as follows:
a. The security interest and Lien granted hereby is a
perfected and enforceable security interest in and Lien upon the
Collateral to the extent such security interest and Lien can be
perfected by the filing of Uniform Commercial Code financing
statements or delivery of the Pledged Securities and such other
securities and instruments as are contemplated to be delivered
pursuant to Section 3(b) hereof, and no Person, including without
limitation any Person that currently provides or shall hereafter
provide to the Borrower or any Subsidiary payment or performance
bonds, will have any right, title or interest in or to the
Collateral that is, or that shall hereafter be, prior, paramount,
superior or equal to the right, title or interest of the Lenders
therein or thereto, other than Liens expressly permitted by
Section 7.3 of the Credit Agreement.
b. The Pledged Securities are duly and validly issued, fully paid and non-assessable, subject, if the issuer thereof is a New York corporation, to Section 630 of the New York Business Corporation Law, and have been duly and validly pledged hereunder in accordance with law, and each of the Borrowers warrants and covenants to defend the Agent's right and security interest in and to the Pledged Securities against the claims and demands of all persons whomsoever. The Borrowers are the exclusive legal and equitable owners of, and have good title to, all of the Pledged Securities, free and clear of all claims, Liens, security interests and other encumbrances (except for the security interest created hereby in favor of the Agent and Liens expressly permitted by Section 7.3 of the Credit Agreement), and the Borrowers have the unqualified legal right to pledge the same hereunder. Each certificate evidencing any of the Pledged Securities pledged hereunder by the Borrowers and delivered pursuant to Section 3 hereof is issued in the name of one of the Borrowers and has attached a stock power duly signed in blank by such Borrower and bears no restrictive or cautionary legend. The parties acknowledge that no filings or recordings (including without limitation filings under the Uniform Commercial Code) are necessary to be made under present law in order to perfect, protect and preserve the security interest of the Agent in the Pledged Securities created by this Agreement or intended so to be; and
c. The Borrowers, for the Borrowers and their respective successors and assigns, do hereby irrevocably waive and release all preemptive, first-refusal and other similar rights of the Borrowers to purchase any or all of the Pledged Securities upon any sale thereof by the Agent hereunder, whether such right to purchase arises under the Certificate or Articles of Incorporation or any By-Law of the issuer of the Pledged Securities, by operation of law or otherwise.
7. Books and Records.
Each Borrower shall faithfully keep complete and accurate books and records and make all necessary entries therein to reflect the amounts, identity of account debtors and all events and transactions giving rise to the Collateral and all payments, credits and adjustments applicable thereto and shall permit the Agent to have such access to them and to any other records pertaining to each Borrower's business as the Agent may request from time to time.
8. Collection of Accounts.
Until otherwise notified by the Agent after the occurrence of a Potential Default or an Event of Default, the Borrowers may collect all amounts due on the Collateral from the respective account debtors or obligors liable thereon, but the Proceeds so collected by a Borrower shall be deposited into a Concentration Account. After the occurrence of a Potential Default or an Event of Default, the Agent may, upon notice to the Borrowers, terminate the authority hereby given to a Borrower to make such collections and, acting if it so chooses in the name of such Borrower, collect any amounts due on the Collateral directly or through an agent, sell, assign, compromise, discharge or extend the time for payment of any Account or other Collateral, institute legal action for the collection of any Account or other Collateral and do all acts and things necessary or incidental thereto, and the Borrowers hereby ratify that the Agent shall lawfully do under the authority hereby granted to it. After the occurrence of a Potential Default or an Event of Default, the Agent may at any time, upon notice to the Borrowers, notify any account debtor on any Account or obligor with respect to any other Collateral that the Collateral has been assigned to the Agent and is to be paid directly to the Agent. Alternatively, at its election, the Agent may, after the occurrence of a Potential Default or an Event of Default, require the Borrowers to, and in such event the Borrowers at their sole expense will, notify account debtors and obligors that payments are thenceforth to be made directly to the Agent. After the occurrence of a Potential Default or an Event of Default, no Borrower shall, without the written consent of the Majority Lenders in each case, compromise, discharge, extend the time for payment of or otherwise grant any indulgence or allowance with respect to any Account or other Collateral.
9. Title to Collateral.
The Borrowers have acquired or shall acquire absolute and exclusive title to each and every item or unit of the Collateral owned by the Borrowers free and clear of all Liens, except Liens expressly permitted by Section 7.3 of the Credit Agreement, and the Borrowers shall warrant and defend their title to the Collateral, subject to the rights of the Agent, against the claims and demands of all persons whomsoever.
10. Maintenance of Collateral.
Without the written consent of the Majority Lenders, none of the Borrowers shall amend or terminate any contract or other document or instrument constituting part of the Collateral, except for transactions in the ordinary course of business. Without the prior written consent of the Majority Lenders, (i) the Borrowers will not, other than in the ordinary course of business, sell, exchange, lease or otherwise dispose of, voluntarily or involuntarily, any of the Collateral or any of the Borrowers' rights therein, except only to the extent specifically permitted by Section 7.8 of the Credit Agreement. The Borrowers will maintain the Collateral in good condition and repair, will give it suitable preventative maintenance in the case of machinery and equipment, and will pay the cost of all repairs to or maintenance of the same which may be required from time to time. The Borrowers will not do or permit to be done anything which might impair the value of any item of the Collateral owned by any Borrower or the security intended to be afforded hereby. The Borrowers will immediately notify the Agent and the Lenders of any event causing any material loss or depreciation in value of the Collateral and of the extent of such loss or depreciation.
The Borrowers, upon the Agent's request, will permit the Agent at any time and from time to time, through its officers or other agents, to have access to the Collateral for the purpose of inspecting or, after a Potential Default or an Event of Default, assembling and removing the same.
11. Taxes and Liens.
Except for Permitted Liens and Liens expressly permitted by
Section 7.3 of the Credit Agreement, the Borrowers shall
immediately notify the Agent and the Lenders in the event there
ever arises against any of the Collateral any Lien, assessment,
tax or other liability, whether or not entitled to priority over,
or pari passu with, the Agent's security interest hereunder. In
any such event, whether or not such notice is given, the Agent
shall have the right (but shall be under no obligation) to pay
(with funds advanced by the Lenders) any tax or other liability
of the Borrowers deemed by the Agent in good faith to affect the
Agent's interests hereunder. The Borrowers shall repay to the
Agent (and the Agent shall remit to the Lenders) on demand all
sums which the Agent shall have paid under this section in
respect of taxes or other liabilities of any Borrower, with
interest thereon at the Prevailing Interest Rate, and the
Borrowers' liability to the Agent for such repayment with
interest shall be included in the Obligations. The Agent shall
be subrogated to the extent of any such payment by it to all the
rights and Liens of the payee against the Borrowers' assets. The
Borrowers shall furnish to the Agent from time to time upon the
Agent's request proof satisfactory to the Agent of the making of
all payments or deposits required by applicable law to be made
with respect to amounts withheld by each Borrower from wages and
salaries of employees and amounts contributed by each Borrower on
account of federal, state or other income or wage taxes and
amounts due under the Federal Insurance Contributions Act or the
Federal Unemployment Tax Act or any similar legislation.
12. Significant Locations; Name.
Each Borrower represents and warrants to the Agent and the Lenders that none of the books and records relating to the Collateral is or will be located or used at any location other than their respective locations identified on Schedule 3.17 to the Credit Agreement. The Borrowers shall notify the Agent in writing prior to any change in location of any such books and records. If any of the Collateral or any Borrower's records concerning any of the Collateral are at any time to be located on premises leased by such Borrower, the Borrowers shall, at the request of the Agent or the Majority Lenders, obtain and deliver to the Agent, prior to the delivery of any such Collateral or books or records to such premises, an agreement in form satisfactory to the Majority Lenders waiving the landlord's right to enforce against the Collateral or such Borrower's records concerning the same and assuring the Agent's access to such Collateral and books and records to facilitate the Agent's exercise of its rights to take possession thereof. The location of the each Borrower's chief executive office and, if different, the location of each Borrower's principal place of business are set forth on Schedule 3.17 to the Credit Agreement, and the Borrowers agree to provide the Agent prior written notice of any change of any such chief executive office or principal place of business of any Borrower. Neither Borrower shall change its name, identity or corporate structure in any manner which might make any financing or continuation statement filed in connection herewith seriously misleading under any applicable provision of the Uniform Commercial Code, unless such Borrower shall have given the Agent at least 30 days prior written notice thereof and shall have taken all action necessary or reasonably requested by the Agent or any Lender to amend such financing statement or continuation statement so that it is not seriously misleading.
13. Further Assurances.
Each Borrower shall execute and deliver to the Agent from time to time all such other agreements, instruments and other documents (including, without limitation, all requested financing and continuation statements and all requested documents relating to the creation, perfection or protection of Liens and security interests) and do all such other and further acts and things as the Agent or the Majority Lenders may reasonably request in order to further evidence or carry out the intent of this Agreement or to perfect and protect the Liens and security interests created hereby or intended so to be.
14. Release of Collateral.
Upon the payment in full of the entire principal balance and all interest in respect of the Notes and the payment in full of all other Obligations, and the termination of each Loan Commitment, the Majority Lenders shall direct the Agent to, and the Agent shall, release its Lien and security interest in the Collateral and shall do such things as are reasonably requested by the Borrowers to effect such release. In addition, upon the disposition of any Collateral in compliance with Section 7.8 of the Credit Agreement, such Collateral is hereby released by the Agent from its security interest, and the Agent shall do such things as are reasonably requested by the Borrowers to evidence such release. In addition, upon receipt by the Majority Lenders of evidence that any liability directly relating to Collateral disposed in compliance with Section 7.8 of the Credit Agreement, other than a Permitted Disposition, is currently due and payable but was not deducted from the proceeds of such disposition to determine Net Cash Proceeds, the Majority Lenders shall direct the Agent to, and the Agent shall, release funds equal to the amount of such liability, not in excess of the Net Cash Proceeds of such disposition, from the Cash Collateral Account. All costs (including attorneys' fees) of the preparation, execution and filing of any documents or the taking of any steps to release or terminate such security interests shall be for the account of the Borrowers and shall be included in the Obligations.
15. Default and Remedies.
a. The Borrowers shall be in default hereunder upon the occurrence of an Event of Default (as defined in the Credit Agreement).
b. Upon the occurrence of any Event of Default and so long as the same shall be continuing, the Agent may at its option exercise from time to time any and all rights and remedies available to it under the Uniform Commercial Code or otherwise, including the right to foreclose or otherwise realize upon any of the Collateral and to dispose of any of the Collateral at one or more public or private sales or other proceedings, and each Borrower agrees that the Agent or any Lender, or the nominee of the Agent or any Lender, may become the purchaser at any such sale or sales. The Borrowers agree that ten (10) days shall be reasonable prior notice of the date of any public sale or other disposition of all or any part of the Collateral, or of the date on or after which any private sale or other disposition of the same may be made. All rights and remedies granted to the Agent hereunder or under any other agreement between the Agent and any of the Borrowers shall be deemed concurrent and cumulative and not alternative, and the Agent may proceed with any number of remedies at the same time or at different times until all the Obligations are fully satisfied. The exercise of any one right or remedy shall not be deemed a waiver or release of or any election against any other right or remedy, and the Agent may proceed against any of the Borrowers and the Collateral and any other collateral granted by the Borrowers to the Agent under any other agreement, all in any order and through any available remedies. All property of any kind held at any time by the Agent as Collateral shall stand as one general continuing collateral security for all the Obligations and may be retained by the Agent as security until all the Obligations are fully satisfied. Notwithstanding the foregoing, unless and until the Agent shall have received written directions from the Majority Lenders, the Agent shall not be obligated to take any action with respect to such Event of Default as the Agent may deem advisable. Any rights and remedies of the Agent hereunder may, at the option of the Majority Lenders and upon written notice to the Agent, be exercised by the Majority Lenders or their designee.
c. The Borrowers shall pay to the Agent on demand any and all expenses (including reasonable attorneys' fees and legal expenses) which may have been incurred by the Agent, with interest at the Prevailing Interest Rate, in connection with the custody, preservation, use, operation, preparation for sale or sale of any of the Collateral, the incurring of which are hereby authorized to the extent the Agent deems the same advisable. The Borrowers' liability to the Agent for any such payment with interest at the Prevailing Interest Rate shall be included in the Obligations.
d. The Proceeds of any Collateral received by the Agent upon the occurrence and during the continuance of an Event of Default, whether from a sale or other disposition of Collateral or otherwise, or the Collateral itself, shall be applied (i) first, to the Agent (in its capacity as such) in an amount equal to the reasonable fees, indemnitees, costs and expenses incurred by the Agent through the date of such enforcement or sale, including reasonable compensation for and expenses of the Agent's representatives and counsel, and all changes, expenses, liabilities and advances incurred or made by the Agent in connection with such enforcement or sale, whether provided for under this Agreement or otherwise, (ii) second, to payment in full or in part of such of the remaining MES Obligations and in such order and manner as the Agent shall be directed in writing by the Majority Lenders, and (iii) third, to the payment in full or in part of such of the remaining Dyn Obligations and in such order and manner as the Agent shall be directed in writing by the Majority Lenders and each Borrower shall remain liable for any deficiency. Each Borrower to the extent of its rights in the Collateral waives and releases any right to require the Agent to collect any of the Obligations from any particular Collateral or any other collateral then held by the Agent under any theory of marshalling of assets or otherwise.
e. In the event the Agent is permitted to sell any of the
Pledged Securities pursuant to this Section 15, upon the written
request of the Agent to cause any registration, qualification or
compliance under any federal or state securities law or laws to
be effected with respect to any of the Pledged Securities, each
Borrower as soon as practicable and at its sole expense will use
its best efforts to cause such registration, qualification or
compliance to be effected (and be kept effective) as may be so
requested and as would permit or facilitate the sale and
distribution of such Pledged Securities. Each Borrower will use
its best efforts to cause the Agent and the Lenders to be kept
reasonably advised in writing as to the progress of each such
registration, qualification or compliance and as to the
completion thereof and will furnish or use its best efforts to
cause to be furnished to the Agent and the Lenders, without
expense to the Agent or the Lenders, such number of prospectuses
or offering circulars and other documents incident thereto as the
Agent or the Lenders may from time to time reasonably request.
The Borrowers will indemnify and hold harmless the Agent and the
Lenders from and against any claims or liabilities caused by any
untrue statement of a material fact or omission of a material
fact required to be stated in any registration statement,
offering circular or prospectus used in connection with such
registration or compliance, or necessary to make the statements
therein not misleading, except insofar as such claims or
liabilities are caused by any untrue statement or omission based
on or in conformity with any written statement supplied by the
Agent or such Lender. If at any time when the Agent shall
determine to exercise its rights to sell all or any part of the
Pledged Securities pursuant to this Section 15, such Pledged
Securities or the part thereof to be sold shall not, for any
reason, be effectively registered under the Securities Act of
1933 (the "Securities Act"), the Agent is hereby expressly
authorized to sell such Pledged Securities or such part thereof
by private sale in such manner and under such circumstances as
the Agent may deem necessary or advisable in order that such sale
may legally be effected without such registration. Without
limiting the generality of the foregoing, in any such event the
Agent: (i) may proceed to make such private sale whether or not
a registration statement for the purpose of registering the
Pledged Securities or such part thereof shall have been filed
under the Securities Act; (ii) may approach and negotiate with a
restricted number of potential purchasers to effect such sale;
and (iii) may restrict such sale to purchasers as to their
number, nature of business, level of sophistication and
investment intention (including without limitation, to purchasers
each of whom will represent and agree to the satisfaction of the
Agent that such purchaser is purchasing for its own account, for
investment, and not with a view to the distribution or sale of
such Pledged Securities or part thereof), it being understood
that the Agent may require each Borrower, and each Borrower
hereby agrees upon the written request of the Agent, to cause:
(i) a legend or legends to be placed on the certificates to be
delivered to such purchasers to the effect that the offering and
sale of the Pledged Securities represented thereby have not been
registered under the Securities Act and setting forth or
referring to any required restrictions on the
transferability of such Securities; (ii) the issuance of stop
transfer instructions to such Borrower's transfer agent, if any,
with respect to the Pledged Securities (or if such Borrower
transfers its own securities, a notation in the appropriate
records of such Borrower); and (iii) to be delivered to the
purchasers a signed written agreement of such Borrower that such
purchasers will be entitled to the rights of the Agent under this
Section 15. In addition, it is understood that any such
purchasers may be required as a condition of any such sale to
furnish a signed written agreement that the Pledged Securities
will not be sold without registration or other compliance with
the requirements of the Securities Act. In the event of any such
sale, each Borrower hereby consents and agrees that neither the
Agent nor any Lender will incur any responsibility or liability
for selling all or any part of the Pledged Securities at a price
which the Agent or the Majority Lenders may deem reasonable under
the circumstances, notwithstanding the possibility that a
substantially higher price might be realized if the sale were
public and deferred until after registration as aforesaid.
f. In any suit, proceeding or action brought by the Agent or any Lender relating to any Collateral, for any sum owing thereunder or to enforce any provision thereof, each Borrower agrees to indemnify and keep harmless the Agent or such Lender from and against all expenses, loss or damage suffered by reason of any defense, setoff, counterclaim, recoupment or reduction of liability whatsoever of the obligor thereunder for any reason, including without limitation, arising out of a breach by any Borrower of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to, or in favor of, such obligor or its successors from such Borrower and, in any such case, all such obligations of such Borrower shall be and remain enforceable against and only against such Borrower and shall not be enforceable against the Agent or any Lender.
16. Power of Attorney.
Each Borrower hereby irrevocably appoints any officer, employee or agent of the Agent as each Borrower's true and lawful attorney-in-fact with power to, upon the occurrence of an Event of Default: (i) endorse any Borrower's name upon any notes, checks, drafts, money orders, or other instruments or payments or other Collateral that may come into the Agent's possession; (ii) sign and endorse any Borrower's name upon any invoices, assignments, verifications and notices in connection with any of the Collateral, and any instruments or documents relating thereto or to any Borrower's rights therein; and (iii) at any time whether or not an Event of Default has occurred, to execute in any Borrower's name and file one or more financing, amendment or continuation statements covering the Collateral. Any such attorney of any Borrower shall have full power to do any and all things necessary to be done with respect to the above transactions as fully and effectually as any Borrower might do, and the Borrowers hereby ratify all that said attorney shall lawfully do or cause to be done by virtue hereof.
17. Financing Statements.
Each Borrower shall execute all financing statements and amendments thereto and continuations thereof as the Agent may request from time to time to evidence the security interest granted, or intended to be granted, to the Agent hereunder and will pay all filing fees and taxes, if any, necessary to effect the filing thereof. Wherever permitted by law, each Borrower authorizes the Agent to file financing statements with respect to the Collateral without the signature of any Borrower. A copy of this Agreement or a copy of any financing statement prepared in connection with this Agreement may itself be filed as a financing statement.
18. Agent
a. Each Lender hereby irrevocably appoints and authorizes the Agent to take such action on its behalf and to exercise such powers under this Agreement and the Loan Documents as are specifically delegated to the Agent by the terms hereof or thereof, together with such other powers as are reasonably incidental thereto. Nothing in this Agreement or any Loan Document shall be construed to impose on the Agent any duties or responsibilities other than those for which express provision is made herein or therein. In performing its duties and functions hereunder, the Agent does not assume and shall not be deemed to have assumed, and hereby expressly disclaims, any obligation with or for the Borrowers. As to matters not expressly provided for in this Agreement or any Loan Document, the Agent shall not be required to exercise any discretion or to take any action or communicate any notice, but shall be fully protected in so acting or refraining from acting upon the instructions of the Majority Lenders and their respective successors and assigns; provided, however, that in no event shall the Agent be required to take any action which (i) exposes it to personal liability, (ii) requires it to qualify to do business or subjects it to liabilities for taxes in any jurisdiction other than jurisdictions in which the Agent is otherwise so liable or (iii) which is contrary to this Agreement, any Loan Document or applicable law, and the Agent shall be fully justified in failing or refusing to take any action hereunder unless it shall first be specifically 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 omitting to take any such action. If an indemnity furnished to the Agent for any purpose shall, in the reasonable opinion of the Agent, be insufficient or become impaired, the Agent may call for additional indemnity from the Lenders and not commence or cease to do the acts for which such indemnity is requested until such additional indemnity is furnished.
b. In performing its functions and duties hereunder on
behalf of the Lenders, the Agent shall exercise the same care and
skill as it would exercise in dealing with collateral for its own
account. Neither the Agent nor any of its directors, officers,
employees or other agents shall be liable for any action taken or
omitted to be taken by it or them under or in connection with
this Agreement or any Loan Document except for its or their own
gross negligence or willful misconduct. Without limiting the
generality of the foregoing, the Agent (a) may consult with legal
counsel and other experts selected by it and shall not be liable
for any action taken or omitted to be taken by it in good faith
and in accordance with the advice of such experts; (b) makes no
representation or warranty to any Lender as to, and shall not be
responsible to any Lender for, any recital, statement,
representation or warranty made in or in connection with this
Agreement, any Loan Document or in any written or oral statement
(including a financial or other such statement), instrument or
other document delivered in connection herewith or therewith or
furnished to any Lender by or on behalf of the Borrowers; (c)
except as expressly required hereunder, shall have no duty to
ascertain or inquire into the Borrowers' performance or
observance of any of the covenants or conditions contained herein
or to inspect any of the property (including the books and
records) of the Borrowers or inquire into the use of the proceeds
of the Loans or (unless the officers of the Agent active in their
capacity as officers of the Agent for performance of the Agent's
duties hereunder have actual knowledge thereof or have been
notified in writing thereof) to inquire into the existence or
possible existence of any Event of Default or Potential Default;
(d) shall not be responsible to any Lender for the due execution,
legality, validity, enforceability, effectiveness, genuineness,
sufficiency, collectability or value of this Agreement or any
other Loan Document or any instrument or document executed or
issued pursuant hereto or in connection herewith, except to the
extent that such may be dependent on the due authorization and
execution by the Agent itself; (e) except as expressly provided
herein in respect of information and data furnished to the Agent
for distribution to the Lenders, shall have no duty or
responsibility, either initially or on a continuing basis, to
provide to any Lender any credit or other information with
respect to the Borrowers, whether coming into its possession
before the making of the Loans or at any time or times
thereafter; and (f) shall incur no liability
under or in respect of this Agreement or any other Loan Document
for, and shall be entitled to rely and act upon, any notice,
consent, certificate or other instrument or writing (which may be
by facsimile (telecopier), telegram, cable, or other electronic
means) believed by it to be genuine and correct and to have been
signed or sent by the proper party or parties. Furthermore, the
Agent shall not be deemed to have knowledge of any Event of
Default or Potential Default unless and until the Agent shall
have received written notice thereof from a Borrower, a Lender or
a Subsidiary, and notwithstanding any provision hereof to the
contrary, the Agent shall have no obligation to take any action
permitted or required to be taken upon such occurrence unless and
until the Agent shall have received such written notice.
c. The Agent and its affiliates may (without having to account therefor to any of the Lenders) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with the Borrowers or their affiliates as if it were not acting for the benefit of the Lenders as the Agent.
d. The Lenders agree to indemnify the Agent (to the extent not reimbursed by the Borrowers), ratably in proportion to each Lender's Commitment Percentage, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Agent in such capacity in any way relating to or arising out of this Agreement or any Loan Document or any action taken or omitted to be taken by the Agent in such capacity hereunder or under any Loan Document; provided that none of the Lenders shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's gross negligence or willful misconduct. Without limiting the generality of the foregoing, each Lender agrees to reimburse the Agent, promptly on demand, for such Lender's ratable share (based upon the aforesaid apportionment) of any out-of-pocket expenses (including counsel fees and disbursements) incurred by the Agent in connection with the preparation, execution, administration or enforcement of, or the preservation of any rights under, this Agreement and the Loan Documents to the extent that the Agent is not reimbursed for such expenses by the Borrowers.
e. The Agent may resign at any time by giving written
notice of such resignation to the Lenders and the Borrowers, such
resignation to be effective only upon the appointment of a
successor Agent as hereinafter provided. Upon any such notice of
resignation, the Majority Lenders shall appoint a successor Agent
upon written notice to the Borrowers and the retiring Agent. If
no successor Agent shall have been appointed by the Majority
Lenders or shall have not accepted such appointment within thirty
(30) days after the retiring Agent shall have given notice of
resignation, the retiring Agent may, upon notice to the Borrowers
and the Lenders, appoint a successor Agent. In addition, subject
to the appointment of a successor Agent hereunder, the Agent may
be removed as Agent at any time with or without cause by the
Majority Lenders. Upon its acceptance of any appointment as
Agent hereunder, the successor Agent shall succeed to and become
vested with all the rights, powers, privileges and duties of the
retiring Agent and the retiring Agent shall take all actions as
shall reasonably be determined by the Majority Lenders or the
successor Agent as necessary or desirable to assign to such
successor Agent the security interest granted to the Agent
hereunder (including without limitation the transfer to the
successor Agent of Pledged Securities and all other Collateral
then held by the retiring or removed Agent). All actions taken
by the retiring or removed Agent shall be considered part of its
duties hereunder, and the retiring or removed Agent otherwise
shall be discharged from its duties and obligations as Agent
under this Agreement and the Loan Documents. After any retiring
or removed Agent's resignation or removal hereunder, the
provisions hereof shall inure to its benefit as to any actions
taken or omitted to be taken by it while
it was the Agent under this Agreement and the Loan Documents.
19. Miscellaneous.
a. This Agreement shall remain in full force and effect until the latest to occur of the termination of each Loan Commitment or the repayment in full of all Obligations.
b. No amendment, modification, termination or waiver of this Agreement or any provision thereof nor any consent to any departure by any Borrower therefrom shall be effective unless the same shall have been approved by the Agent and the Majority Lenders, be in writing and be signed by the Agent and the Majority Lenders and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No notice to or demand on the Borrowers shall entitle the Borrowers to any other or further notice or demand in similar or other circumstances.
c. The Borrowers, jointly and severally, agree to:
i. pay or reimburse the Agent for all of its reasonable out-of-pocket costs and expenses incurred in connection with the preparation, execution and delivery of, and any amendment, consent or waiver, supplement or modification to, this Agreement and the Loan Documents, including the fees and disbursements of counsel to the Agent (but not in-house counsel), such payments or reimbursements to be made, to the extent due and payable on the date hereof and, thereafter, from time to time upon demand;
ii. pay or reimburse the Agent on demand for all of its reasonable costs and expenses incurred in connection with the enforcement or preservation of, or any waiver of or consent with respect to, any rights under this Agreement including the fees and disbursements of counsel of the Agent (but not in-house counsel) and the fees and disbursements of all agents and attorneys-in-fact employed by the Agent;
iii. pay, indemnify, and hold the Agent harmless on demand from any and all recording and filing fees and any and all liabilities with respect to, or resulting from, any delay in paying 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, or consummation of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement; and
iv. the obligations of the Borrowers under this
Section 19(c) shall survive the termination of this
Agreement.
d. The remedies provided under this Agreement are cumulative and not exclusive of any remedies provided by law.
e. This Agreement shall bind and inure to the benefit of the Borrowers, the Lenders and the Agent and their respective successors and assigns, and upon any trustee or successor subsequently appointed in any Chapter 7 proceeding, except that no Borrower shall have the right to assign any of its rights or interests under this Agreement. No person not a party to this Agreement is intended to be benefitted thereby.
f. The invalidity, illegality or unenforceability in any jurisdiction of any provision in or obligation under this Agreement shall not affect or impair the validity, legality or enforceability of the remaining provisions or obligations under this Agreement, or of such provision or obligation in any other jurisdiction.
g. Each Borrower acknowledges that this Agreement and the obligations of the Borrowers hereunder and the security created or intended to be created hereby have constituted, and were intended by the Borrowers to constitute, a material inducement to the Lenders to enter into the Credit Agreement, knowing that the Lenders will rely upon this Agreement.
h. This Agreement and all rights and obligations of the parties hereunder shall be governed by and be construed and enforced in accordance with the laws of the State of New York without regard to principles of conflict of laws.
i. This Agreement and any amendment hereto or waiver hereof may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement and any amendments hereto or waivers hereof shall become effective when the Agent shall have received signed counterparts or notice by telecopy of the signature page that the counterpart has been signed and is being delivered to the Agent or facsimile that such counterparts have been signed by all the parties hereto or thereto.
j. All notices, requests, demands, directions, declarations and other communications between the Lenders and the Borrowers shall be given in conformity with Section 10.6 of the Credit Agreement, and any such notices, requests, demands, directions, declarations and other communications to the Agent shall be given to the following address:
CoreStates Bank, N.A.
510 Walnut Street, 6th Floor
Philadelphia, PA 19106
Attention: Corporate Trust
Telecopier: 215-973-2955
k. All words used herein in the singular or plural shall be deemed to have been used in the plural or singular where the context or construction so requires. Any defined term used in the singular preceded by "any" shall be taken to indicate any number of the members of the relevant class.
l. Each Borrower and the Agent hereby acknowledges that TCW Special Credits is entering into this Agreement, and undertaking the obligations of a Lender hereunder, only as agent or nominee for each Fund and on each Fund's behalf and not individually, and that TCW Special Credits is not personally liable with respect to the obligations of a Lender hereunder. Each Borrower and the Agent further acknowledges that the liability of the Funds is several and not joint and several, in accordance with and in proportion to their respective percentage interest set forth on Schedule A hereto, and each Fund shall be liable for its breach hereby only to the extent such breach and any loss, cost or damages incurred by a Borrower or the Agent as a result thereof, relates to such Fund.
IN WITNESS WHEREOF, this Agreement has been duly executed under due authorization as of the day and year first above written.
JWP INC.
By:___________________________
Title:
MES HOLDINGS CORPORATION
By:___________________________
Title:
TCW SPECIAL CREDITS,
as agent and nominee for the entities listed
on the Schedule of TCW Funds annexed
hereto, AS LENDER
By TCW ASSET MANAGEMENT COMPANY,
its managing general partner
By: ___________________________
Richard Masson
Managing Director
By: ___________________________
Kenneth Liang
Senior Vice President
ALBERT FRIED & COMPANY
By:________________________
Title
UBS MORTGAGE FINANCE INC.
By:_________________________
Title
BELMONT CAPITAL PARTNERS II, L.P.
By: Fidelity Capital Partners II Corp.,
Managing General Partner
By:_________________________
Title:
SCHEDULE OF TCW FUNDS
Fund Percentage Interest Weyerhaeuser Company Master Retirement Trust 26% The Common Fund for Bond Investments 5% TCW Special Credits Trust 7% TCW Special Credits Fund lllb 32% TCW Special Credits Trust lllb 25% Delaware State Employees Retirement Fund 5% TOTAL 100% |
SCHEDULE A
PLEDGED SECURITIES
The following is a listing of each of the Pledged Securities and other pledged instruments existing on the date hereof:
EXHIBIT 10(dd)
CREDIT AGREEMENT
among
JWP INC.,
DYN SPECIALTY CONTRACTING, INC.,
As Borrowers
CERTAIN SUBSIDIARIES THEREOF,
As Guarantors
and
THE LENDERS NAMED HEREIN
December 14, 1994
TABLE OF CONTENTS
Page
I. CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . 2
1.1 Definitions.. . . . . . . . . . . . . . . . . . . 2
1.2 Accounting Terms. . . . . . . . . . . . . . . . . 10
II. THE CREDIT . . . . . . . . . . . . . . . . . . . . . . 10
2.1 The Loans . . . . . . . . . . . . . . . . . . . . 10
2.2 The Note. . . . . . . . . . . . . . . . . . . . . 11
2.3 Funding Procedures. . . . . . . . . . . . . . . . 11
2.4 Interest. . . . . . . . . . . . . . . . . . . . . 11
(a) Non-Default Rate . . . . . . . . . . . . . . 12
(b) Default Rate.. . . . . . . . . . . . . . . . 12
2.5 Commitment Fee. . . . . . . . . . . . . . . . . . 12
2.6 Reduction or Termination of Loan Commitment . . . 12
(a) Notice . . . . . . . . . . . . . . . . . . . 12
(b) Mandatory Reduction. . . . . . . . . . . . . 12
2.7 Prepayments . . . . . . . . . . . . . . . . . . . 12
(a) Mandatory Prepayments. . . . . . . . . . . . 13
(b) Voluntary Prepayments. . . . . . . . . . . . 13
2.8 Payments. . . . . . . . . . . . . . . . . . . . . 13
(a) Interest and Principal.. . . . . . . . . . . 13
(b) Form of Payments, Application of Payments,
Payment
Administration, Etc. . . . . . . . . . . . .13
(c) Depositary Procedures. . . . . . . . . . . .13
(d) Net Payments.. . . . . . . . . . . . . . . . 14
2.9 Priority and Liens. . . . . . . . . . . . . . . . 15
III. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . 15
3.1 Organization, Standing. . . . . . . . . . . . . . 15
3.2 Corporate Authority, Etc. . . . . . . . . . . . . 16
3.3 Validity of Documents . . . . . . . . . . . . . . 16
3.4 Litigation. . . . . . . . . . . . . . . . . . . . 16
3.5 ERISA.. . . . . . . . . . . . . . . . . . . . . . 17
3.6 Financial Statements. . . . . . . . . . . . . . . 18
3.7 Use of Proceeds . . . . . . . . . . . . . . . . . 18
3.8 Not in Default. . . . . . . . . . . . . . . . . . 18
3.9 Taxes. . . . . . . . . . . . . . . . . . . . . . 18
3.10 Permits, Licenses, Etc. . . . . . . . . . . . . . 18
3.11 Compliance With Laws. . . . . . . . . . . . . . . 19
3.12 Amounts Owed to or from Affiliates; Intercompany
Agreements. . . . . . . . . . . . . . . . . . . . . .20
(a) Affiliates . . . . . . . . . . . . . . . . . 20
(b) Intercompany Agreements. . . . . . . . . . . 20
(c) Dividends. . . . . . . . . . . . . . . . . . 20
3.13 Title to Assets.. . . . . . . . . . . . . . . . . 20
3.14 Insurance and Surety Bonds. . . . . . . . . . . . 20
3.15 Subsidiaries, Etc.. . . . . . . . . . . . . . . . 21
3.16 Patents, Trademarks, etc. . . . . . . . . . . . . 22
3.17 Accounts. . . . . . . . . . . . . . . . . . . . . 22
3.18 Inventory.. . . . . . . . . . . . . . . . . . . . 22
3.19 Equipment.. . . . . . . . . . . . . . . . . . . . 22
3.20 Real Property.. . . . . . . . . . . . . . . . . . 22
3.21 Corporate and Fictitious Names. . . . . . . . . . 22
IV. SECURITY.. . . . . . . . . . . . . . . . . . . . . . . 22
4.1 Security Documents. . . . . . . . . . . . . . . . 23
4.2 Release of Collateral.. . . . . . . . . . . . . . 23
V. CONDITIONS PRECEDENT.. . . . . . . . . . . . . . . . . 23
5.1 Conditions to First Loan. . . . . . . . . . . . . 23
(a) Articles, Bylaws . . . . . . . . . . . . . . 23
(b) Evidence of Authorization. . . . . . . . . . 24
(c) Legal Opinions.. . . . . . . . . . . . . . . 24
(d) Incumbency.. . . . . . . . . . . . . . . . . 24
(e) Note. . . . . . . . . . . . . . . . . . . . 24
(f) Confirmation and Effectiveness of the
Reorganization Plan. . . . . . . . . . . . . 24
(g) Consents . . . . . . . . . . . . . . . . . . 24
(h) Change . . . . . . . . . . . . . . . . . . . 24
(i) Continued Bonding. . . . . . . . . . . . . . 24
(j) Other Agreements.. . . . . . . . . . . . . . 25
(k) Absence of Defaults. . . . . . . . . . . . . 25
(l) Documents. . . . . . . . . . . . . . . . . . 25
5.2 All Loans Subsequent to the First Loan. . . . . . 25
(a) Documents. . . . . . . . . . . . . . . . . . 25
(b) Covenants; Representations . . . . . . . . . 25
(c) Defaults . . . . . . . . . . . . . . . . . . 26
(d) Legal Proceedings. . . . . . . . . . . . . . 26
(e) Continued Bonding. . . . . . . . . . . . . . 26
(f) Absence of Defaults. . . . . . . . . . . . . 26
VI. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . 26
6.1 Financial Statements and Reports. . . . . . . . . 26
(a) Quarterly Statements.. . . . . . . . . . . . 26
(b) Annual Statements. . . . . . . . . . . . . . 27
(c) No Default.. . . . . . . . . . . . . . . . . 27
(d) ERISA. . . . . . . . . . . . . . . . . . . . 28
(e) Net Cash Proceeds. . . . . . . . . . . . . . 28
(f) Material Changes. . . . . . . . . . . . . . 28
(g) Other Information. . . . . . . . . . . . . . 28
6.2 Taxes and Other Charges.. . . . . . . . . . . . . 28
6.3 Corporate Existence.. . . . . . . . . . . . . . . 29
6.4 Compliance with ERISA . . . . . . . . . . . . . . 29
6.5 Compliance with Regulations. . . . . . . . . . . 30
6.6 Notice of Events. . . . . . . . . . . . . . . . . 30
6.7 Maintenance of Records; Audits. . . . . . . . . . 31
6.8 Generally Accepted Accounting Principles. . . . . 31
6.9 Sale of Assets of JWSC. . . . . . . . . . . . . . 31
VII. NEGATIVE COVENANTS.. . . . . . . . . . . . . . . . . . 31
7.1 Merger, Consolidation . . . . . . . . . . . . . . 31
7.2 Indebtedness for Borrowed Money.. . . . . . . . . 32
7.3 Liens. . . . . . . . . . . . . . . . . . . . . . 32
7.4 Guarantees. . . . . . . . . . . . . . . . . . . . 33
7.5 Sale of Stock of Subsidiaries . . . . . . . . . . 33
7.6 Judgment, Attachment. . . . . . . . . . . . . . . 34
7.7 Loans, Advances and Investments . . . . . . . . . 34
7.8 Transfer of Assets. . . . . . . . . . . . . . . . 35
7.9 Modification of Loan Agreements or Policies;
Payment of Debt.. . . . . . . . . . . . . . . . . . 35
7.10 Claims. . . . . . . . . . . . . . . . . . . . . . 36
7.11 Accounting Change. . . . . . . . . . . . . . . . 36
7.12 Backlog.. . . . . . . . . . . . . . . . . . . . . 36
7.13 Losses from Operations. . . . . . . . . . . . . . 36
VIII. DEFAULT. . . . . . . . . . . . . . . . . . . . . . . 36
8.1 Events of Default.. . . . . . . . . . . . . . . . 36
(a) Principal, Interest or Other Amounts.. . . . 36
(b) Covenants. . . . . . . . . . . . . . . . . . 36
(c) Representations, Warranties, Etc.. . . . . . 37
(d) Bankruptcy, Etc. of Borrowers and any
Subsidiary.. . . . . . . . . . . . . . . . . 37
(e) Failure to Maintain Bonding in the Ordinary
Course. . . . . . . . . . . . . . . . . . . 37
(f) Material Adverse Change. . . . . . . . . . . 37
(g) Certain Other Defaults . . . . . . . . . . . 37
IX. GUARANTY.. . . . . . . . . . . . . . . . . . . . . . . 38
9.1 Guaranty. . . . . . . . . . . . . . . . . . . . . 38
9.2 No Impairment of Guaranty.. . . . . . . . . . . . 39
9.3 Continuation and Reinstatement, Etc.. . . . . . . 39
9.4 Representations and Warranties. . . . . . . . . . 40
X. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . 40
10.1 Waiver. . . . . . . . . . . . . . . . . . . . . . 40
10.2 Amendments. . . . . . . . . . . . . . . . . . . . 40
10.3 Governing Law.. . . . . . . . . . . . . . . . . . 41
10.4 Assignments and Participations. . . . . . . . . . 41
10.5 Captions. . . . . . . . . . . . . . . . . . . . . 41
10.6 Notices . . . . . . . . . . . . . . . . . . . . . 41
10.7 Expenses of the Agent and the Lenders;
Indemnification of the Agent
and the Lenders.. . . . . . . . . . . . . . . . . 42
10.8 Survival of Warranties and Certain Agreements.. . 43
10.9 Severability. . . . . . . . . . . . . . . . . . . 43
10.10 CONSENT TO JURISDICTION AND SERVICE OF
PROCESS . . . . . . . . . . . . . . . . . . . . . 43
10.11 WAIVER OF JURY TRIAL.. . . . . . . . . . . . 44
10.12 Counterparts; Effectiveness. . . . . . . . . 44
10.13 Use of Defined Terms . . . . . . . . . . . . 45
10.14 Lender Obligations. . . . . . . . . . . . . 45
EXHIBITS
A Depositary Agreement
B Guarantor Security Agreement
C Pledge and Security Agreement
D Form of Note
E Loan Requests
F Opinion of Counsel for JWP
G Opinion of Counsel of Dyn
H Reliance Intercreditor Agreement
|
SCHEDULES
A TCW Special Credits, as Agent and Nominee for
Certain Entities
1.1(b) Existing Liens
2.1 Loan Commitments
2.8(c) Depositary Accounts and Concentration Accounts
3.1 Organization; Standing
3.2 Consents
3.4 Litigation
3.5 ERISA
3.6 Financial Statements
3.9 Taxes
3.11 Compliance with Laws; Licenses, Permits, Etc.
3.12 Intercompany Debt; Intercompany Agreements;
Dividends
3.14 Sureties
3.15 Subsidiaries; Location of Inventory and Equipment;
Corporate and
Fictitious Names
3.16 Patents, Trademarks
3.20 Real Property
5.1 Change
7.4 Existing Guarantees
7.7 Investments
10.6 Address for Notice
|
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of December 14, 1994 (this "Agreement"), is entered into by and among JWP INC., a Delaware corporation (the "Parent"), DYN SPECIALTY CONTRACTING, INC., a Virginia corporation (the "Dyn Borrower") and a wholly owned subsidiary of the Parent, the Dyn Borrower's subsidiaries (each, a "Subsidiary" and collectively the "Subsidiaries") (the Dyn Borrower and the Subsidiaries are referred to herein collectively as the "Dyn Companies"), BELMONT CAPITAL PARTNERS II, L.P. ("BELMONT"), TCW SPECIAL CREDITS, a California general partnership, as agent and nominee for the entities (each a "Fund") set forth in Schedule A hereto, ALBERT FRIED & COMPANY, UBS MORTGAGE FINANCE INC. and KEVIN C. TONER (each, a "Lender" and collectively, the "Lenders"). The Parent and the Dyn Borrower are sometimes referred to herein collectively as the "Borrowers" and individually as a "Borrower".
WITNESSETH:
WHEREAS, on December 21, 1993 (the "Petition Date"), certain creditors of the Parent initiated an involuntary bankruptcy proceeding against the Parent in the United States District Court for the Southern District of New York (the "Bankruptcy Court");
WHEREAS, on February 14, 1994, the Parent moved the Bankruptcy Court to convert the involuntary bankruptcy proceeding to a voluntary chapter 11 proceeding and an order for relief was entered by the Bankruptcy Court on February 14, 1994;
WHEREAS, the Parent has continued to operate its business
and manage its assets as a debtor-in-possession pursuant to
Section 1107 and 1108 of the Bankruptcy Code;
WHEREAS, on September 30, 1994, the Bankruptcy Court confirmed the Third Amended Joint Plan of Reorganization of the Parent and SellCo Corporation, as modified;
WHEREAS, it is a condition precedent to the effectiveness of the Parent's Reorganization Plan that the Borrowers obtain a written agreement for a working capital facility to become available upon the Effective Date of such Reorganization Plan; and
WHEREAS, the Borrowers have requested, and the Lenders have agreed to provide credit facilities to the Parent and certain of its subsidiaries in the maximum aggregate principal amount of $45,000,000 and, as a portion of such facilities, for the Lenders to provide a secured revolving loan facility in the maximum aggregate principal amount of $10,000,000.
NOW, THEREFORE, in consideration of the premises and intending to be legally bound hereby, the parties hereto agree as follows:
I. CERTAIN DEFINITIONS.
1.1 Definitions. As used in this Agreement, the following terms shall have these meanings:
"Accounts" shall mean any "accounts," as such term is defined in the Uniform Commercial Code as in effect from time to time in the State of New York
"Affiliate" shall mean any Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, the Parent. A Person shall be deemed to control another person if such Person possesses, directly or indirectly, the power (i) to vote 10% or more of the outstanding stock or other ownership interests having ordinary voting power for the election of directors of such other Person or (ii) to direct or cause the direction of the management and policies of such corporation, whether by contract or otherwise.
"Agent" shall mean CoreStates Bank, N.A., in its capacity as agent for the Lenders under each of the Pledge and Security Agreement and the Guarantor Security Agreement.
"Aggregate Loan Commitment" shall have the meaning set forth in Section 2.1(a).
"Bankruptcy Code" shall mean the Bankruptcy Reform Act of 1978 as heretofore and hereafter amended and codified as 11 U.S.C. section 101 et seq.
"Bankruptcy Court" shall mean the United States Bankruptcy Court for the Southern District of New York having jurisdiction over the Case from time to time.
"Business Day" shall mean any day that is not a Saturday, a Sunday, any day on which banks are required or permitted to be closed in the State of New York or any day on which the New York Stock Exchange is required or permitted to be closed.
"Capital Leases" shall have the meaning set forth in Section 7.2(b).
"Case" shall mean Case No. 93 B 46404 before the Bankruptcy Court.
"Cash Collateral Account" shall have the meaning set forth in Section 7.8.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collateral" shall have the meanings set forth in the Pledge and Security Agreement and each Guarantor Security Agreement and any other personal property, tangible or intangible, now existing or hereafter acquired, including accessions, substitutions and proceeds (including insurance proceeds) that may at any time be or become subject to a security interest or Lien in favor of the Agent or the Lenders to secure the Obligations.
"Commitment Fee" shall have the meaning set forth in Section 2.5.
"Commitment Percentage" shall mean, as to each Lender, the percentage such Lender's Loan Commitment represents of the Aggregate Loan Commitment.
"Concentration Account" shall have the meaning set forth in
Section 2.8(c).
"Concentration Bank" shall have the meaning set forth in
Section 2.8(c)
"Confirmation Order" shall mean the order of the Bankruptcy Court, dated September 30, 1994, confirming the Reorganization Plan.
"Covered Plan" shall have the meaning set forth in Section 3.5.
"Debt" shall mean, with respect to any Person, without
duplication, (i) all items (excluding reserves for deferred
income taxes) which in accordance with Generally Accepted
Accounting Principles would be included in determining total
liabilities as shown on the liability side of a balance sheet of
such Person as of the date on which Debt is to be determined,
(ii) all indebtedness secured by any Lien on any property or
asset owned or held by such Person subject thereto, whether or
not the indebtedness secured thereby shall have been assumed,
(iii) all indebtedness of others with respect to which such
Person has become liable by way of a guarantee, and (iv) all
outstanding letters of credit and payment and performance bonds
with respect to which, if drawn upon, such Person would have any
repayment or reimbursement obligations.
"Default Rate" shall mean a 2% per annum increase above the interest rate otherwise applicable on all Loans.
"Depositary Account" shall have the meaning set forth in
Section 2.8(c).
"Depositary Agreement" shall mean an agreement in substantially the form of Exhibit A hereto among the Dyn Borrower, the Agent and the Concentration Bank providing, among other things, that the Agent shall have a security interest in funds held in the Concentration Account and that, upon the terms and conditions provided therein, the Agent may require the Concentration Bank to transfer funds deposited into the Concentration Account solely in accordance with the instructions of the Agent, and authorizing the Agent to cause the Concentration Bank to remit to the Agent amounts necessary to pay the Agent any amount payable under this Agreement, the Notes or any other Loan Document which is not paid in a timely manner.
"Dollars" and "$" shall mean the lawful currency of the United States of America.
"Effective Date" shall mean the effective date of the Reorganization Plan.
"Equipment" shall mean "equipment," as such term is defined in the Uniform Commercial Code as in effect from time to time in the State of New York.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time.
"ERISA Affiliate" shall mean any corporation which is a member of the same controlled group of corporations as either of the Borrowers within the meaning of Section 414(b) of the Code, or any trade or business which is under common control with either of the Borrowers within the meaning of Section 414(c) of the Code.
"Event of Default" shall have the meaning set forth in
Section 8.1.
"Financial Statements" shall have the meaning set forth in
Section 3.6.
"Generally Accepted Accounting Principles" shall mean generally accepted accounting principles as in effect on the date hereof, for purposes of computing compliance with all financial covenants contained herein, and as in effect from time to time, for all other purposes of this Agreement, in each case consistently applied.
"Guarantor Security Agreement" shall mean the Guarantor Security Agreement, dated as of the date hereof, among the Agent, the Lenders and the Subsidiaries in substantially the form of Exhibit B hereto.
"Imprest Account" shall have the meaning set forth in
Section 7.3(f).
"Indebtedness for Borrowed Money" shall mean (i) all indebtedness, liabilities, and obligations, now existing or hereafter arising, for money borrowed by a Person, whether or not evidenced by any note, indenture or agreement (including, without limitation, the Notes and any indebtedness for money borrowed from an Affiliate) and (ii) all indebtedness, liabilities and obligations of others (including an Affiliate) now existing or hereafter arising for money borrowed with respect to which a Person has become liable by way of a guarantee or indemnity.
"Intercompany Agreements" shall have the meaning set forth in Section 3.12(b).
"Intercompany Debt" shall mean any debt, loan or advance to, investment in, or guarantee of the obligations of, an Affiliate, other than indebtedness (i) arising in the ordinary course of business under normal trade practices, (ii) on terms no less favorable than could be obtained between independent parties on an arm's-length basis and (iii) not for borrowed money.
"Intercompany Note" shall mean a promissory note evidencing Intercompany Debt (which Intercompany Debt may be in the nature of a revolving loan).
"Inventory" shall mean any "inventory," as such term is defined in the Uniform Commercial Code as in effect from time to time in the State of New York now or hereafter owned or acquired, whenever located, and, in any event, including all inventory, merchandise, goods and other personal property that are held by or on behalf of a Person for sale or lease or to be furnished under a contract of service, in each case in the ordinary course of business.
"Investment" in any Person shall mean:
(a) the acquisition (whether for cash, property, services or securities or otherwise) of capital stock, bonds, notes, debentures, partnership or other ownership interests or other securities of such Person; and
(b) any deposit with, or advance, loan or other extension of credit to, such Person (other than (i) any such deposit securing obligations under real or personal property leases or securing obligations to utilities, in each case in the ordinary course of business and (ii) any such advance, loan or extension of credit representing the purchase price of inventory or supplies purchased, or services rendered, in the ordinary course of business upon payment terms consistent with past practice in similar transactions) or guarantee or assumption of, or other contingent obligation with respect to, Indebtedness for Borrowed Money or other liability of such Person, except as expressly permitted by Section 7.2, 7.4 or 7.7; and
(c) (without duplication of the amounts included in (a) and (b) above) any amount that may, pursuant to the terms of such investment, be required to be paid, deposited, advanced, lent or extended to or guaranteed or assumed on behalf of such Person.
"JWSC" shall mean Jamaica Water Securities Corp., an indirect subsidiary of the Parent.
"Lien" shall mean any lien, mortgage, security interest, chattel mortgage, pledge or other encumbrance (statutory or otherwise) of any kind securing satisfaction of an obligation, including any agreement to give any of the foregoing, any conditional sales or other title retention agreement, any lease in the nature thereof, and the filing of or the agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction or similar evidence of any encumbrance, whether within or outside the United States.
"Loan" shall have the meaning set forth in Section 2.1(a).
"Loan Commitment" shall have the meaning set forth in
Section 2.1(a).
"Loan Documents" shall mean this Agreement, the Notes, the Pledge and Security Agreement, the Guarantor Security Agreement, the Depositary Agreement and each other agreement, document and instrument necessary or required to implement the terms of this Agreement.
"Majority Lenders" shall mean Lenders holding Commitment Percentages aggregating 51%.
"Maturity Date" shall mean the earliest of (i) the date that is eighteen months after the date of this Agreement; (ii) termination of the Loan Commitments and repayment in full of the Obligations; or (iii) such earlier date as provided in Section 8.1 hereof.
"MES" shall mean MES Holdings Corporation, a direct wholly- owned subsidiary of the Parent.
"MES Companies" shall mean MES and its direct and indirect subsidiaries.
"MES Facility" shall mean the credit facility, dated as of the date hereof, provided by the Lenders to the Parent and the MES Companies.
"Multiemployer Plan" shall mean a multiemployer plan as defined in ERISA Section 4001(a)(3).
"Net Cash Proceeds" shall mean, (i) with respect to the
sale, lease, transfer or disposition by the Dyn Borrower or a
Subsidiary of any asset, tangible or intangible, now existing or
hereafter acquired, from and after the date hereof, and with
respect to the sale, transfer or disposition by the Parent of the
stock of the Dyn Borrower, the aggregate amount of cash received
(including cash payments received by way of deferred payment
pursuant to any note or installment receivable or otherwise in
respect of such transaction) and state and federal income tax
refunds attributable to such sale, lease, transfer or
disposition, but in each case only as and when received by the
Borrower or such Subsidiary in respect of such transaction, and
(ii) with respect to the sale, lease, transfer or disposition of
the stock of JWSC or of any asset of JWSC, tangible or
intangible, from and after the date hereof, the aggregate amount
of cash received and distributed to the Parent pursuant to
Section 6.9 hereof, minus, as to each of clause (i) or (ii)
above, the sum of (A) reasonable fees and commissions incurred in
connection with such transaction and not payable to an Affiliate,
(B) taxes incurred in connection with such transactions, (C)
employee severance costs incurred in connection with the sale,
lease, transfer or disposition of such assets to the extent such
costs are due and payable within ninety (90) days following such
transaction and, (D) fixed liabilities, determined in accordance
with Generally Accepted Accounting Principles, retained by a
Borrower or such Subsidiary in connection with such sale, lease,
transfer or disposition to the extent such liabilities are due
and payable within ninety (90) days following such transaction.
"Note" shall have the meaning set forth in Section 2.2 hereof.
"Obligations" shall mean all now existing or hereafter arising debts, obligations, covenants and duties of payment or performance of every kind, matured or unmatured, direct or contingent, owing, arising, due or payable to any Lender by or from the Borrowers and the Subsidiaries arising out of this Agreement or any other Loan Document, including, without limitation, all obligations to repay principal of and interest on all Loans and to pay interest, fees, costs, charges, expenses, professional fees, and all sums chargeable to the Borrowers and the Subsidiaries under the Loan Documents, whether or not evidenced by any note or other instrument.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Pension Plan" shall mean, at any time, any Plan (including a Multiemployer Plan), subject to the funding requirements of ERISA Section 302 or Code Section 412, which requirements are, or at any time within the six years immediately preceding the time in question were, in whole or in part, the responsibility of either of the Borrowers, any Subsidiary or any ERISA Affiliate.
"Permitted Disposition" shall mean (i) as to the Dyn
Companies, the sale, lease, transfer or disposition by the Dyn
Borrower or a Subsidiary of (a) Inventory in the ordinary course
of business, (b) machinery and equipment (1) that is obsolete,
damaged or no longer used or useful in the conduct of the
business of the Dyn Borrower or a Subsidiary and the disposition
of which is in the ordinary course of business or (2) that is
replaced with comparable machinery or equipment within three
months of such disposition and (c) other assets, provided that
the aggregate fair market value of all assets sold, leased,
transferred or disposed by the Dyn Borrower and all Subsidiaries
as provided in this clause (c) from and after the date of this
Agreement shall not exceed $250,000 and (ii) as to the Parent,
the sale of any asset other than (1) the stock of the Dyn
Borrower and (2) the stock of JWSC to the extent that the Net
Cash Proceeds of such sale (a) are less than or equal to
$15,000,000 and (b) are not used to reduce the outstanding
commitment under the MES Facility as provided in
Section 2.6(b) hereof.
"Permitted Lien" shall mean:
(a) any Liens for current taxes, assessments and other governmental charges not yet due and payable or being contested in good faith by the Borrowers or the Subsidiaries by appropriate proceedings and for which adequate reserves in accordance with Generally Accepted Accounting Principles have been established by the Borrowers or the Subsidiaries;
(b) any mechanic's, materialman's, carrier's, warehousemen's or similar Liens for sums not yet due or being contested in good faith by the Borrowers or the Subsidiaries by appropriate proceedings and for which adequate reserves in accordance with Generally Accepted Accounting Principles have been established by the Borrowers or the Subsidiaries;
(c) Liens in favor of the Agent under the Loan Documents to secure the Obligations;
(d) Liens granted by the Parent pursuant to the Reorganization Plan to secure the Series A Secured Notes, the Series B Secured Notes and the SellCo Subordinated Contingent Payment Notes (as defined in the Reorganization Plan) and related obligations under the indentures therefor and under the documents executed in connection therewith;
(e) Liens granted by the Parent in favor of the Agent to secure the MES Facility and any refinancing thereof;
(f) Liens granted by the Dyn Companies in favor of Reliance and its affiliates which Liens are the subject of the Reliance Intercreditor Agreement;
(g) easements, rights-of-way, restrictions and other similar encumbrances on the real property or fixtures of the Borrowers or the Subsidiaries incurred in the ordinary course of business which individually or in the aggregate are not substantial in amount and which do not in any case materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of either of the Borrowers or any of the Subsidiaries;
(h) Liens (other than Liens imposed on any property of the Borrower or the Subsidiaries or any ERISA Affiliate pursuant to ERISA or section 412 of the Code) incurred or deposits made in the ordinary course of business, including Liens in connection with workers' compensation, unemployment insurance and other types of social security and Liens to secure performance of tenders, statutory obligations, appeal bonds, bids, leases that are not capitalized leases, sales contracts and other similar obligations, in each case, not incurred in connection with the obtaining of credit or the payment of a deferred purchase price, and which do not, in the aggregate, result in a material adverse effect on the business, operations, assets or condition (financial or otherwise) of either of the Borrowers or any of the Subsidiaries;
(i) Liens existing upon the date hereof as set forth on Schedule 1.1(b) hereto and the extension, renewal or replacement of any such Lien without any increase in the Debt secured by such Lien or the assets subject to such Lien;
(j) Liens applicable to assets of the Dyn Companies arising as a matter of law or equity securing the obligations of the Dyn Companies under now existing or hereafter established performance and payment bonds; and
(k) unperfected Liens arising out of indemnity agreements with Cigna Insurance Company set forth on Schedule 1.1(b).
"Person" shall mean any individual, corporation, partnership, joint venture, association, company or entity.
"Petition Date" shall have the meaning set forth in the recitals hereto.
"Plan" shall mean an employee benefit plan as defined in
Section 3(3) of ERISA, other than a Multiemployer Plan.
"Pledge and Security Agreement" shall mean the Pledge and Security Agreement, dated as of the date hereof, between each of the Borrowers, the Lenders and the Agent in the form of Exhibit C hereto.
"Potential Default" shall mean an event that with the giving of notice or lapse of time or both would become an Event of Default.
"Prohibited Transaction" shall mean a transaction that is prohibited under Code Section 4975 or ERISA Section 406 and not exempt under Code Section 4975 or ERISA Section 408.
"Regulation" shall mean any statute, law, ordinance, regulation, order or rule of any foreign, federal, state, local or other government or governmental body, including, without limitation, those covering or related to banking, financial transactions, securities, public utilities, environmental control, energy, safety, health, transportation, bribery, record keeping, zoning, antidiscrimination, antitrust, wages and hours, employee benefits, and price and wage control matters.
"Reliance" shall mean Reliance Surety Company.
"Reliance Intercreditor Agreement" shall mean the intercreditor agreement among the Borrowers, Reliance, the Agent and the Lenders relating to the relative rights of Reliance and the Lenders in and to the assets of the Dyn Companies.
"Reorganization Plan" shall mean the Parent's confirmed plan of reorganization in the Case.
"Reportable Event" shall mean, with respect to a Pension Plan: (a) any of the events set forth in ERISA Sections 4043(b) (other than a reportable event as to which the provision of 30 days' notice to the PBGC is waived under applicable regulations) or 4063(a) or the regulations thereunder, (b) an event requiring either of the Borrowers, any Subsidiary or any ERISA Affiliate to provide security to a Pension Plan under Code Section 401(a)(29) and (c) any failure by either of the Borrowers, any Subsidiary or any ERISA Affiliate to make payments required by Code Section 412(m).
"SellCo" shall mean SellCo Corporation, a wholly owned subsidiary of the Parent.
"Software House Companies" shall mean those corporations described as "Non-debtor Subsidiaries listed on Schedule 4" in the Reorganization Plan, as long as they are Subsidiaries of the Parent.
"Solvent" shall mean that the aggregate present fair saleable value of a Person's assets is in excess of the total amount of its probable liability on its existing debts as they become absolute and matured, such Person has not incurred debts beyond its foreseeable ability to pay such debts as they mature, and such Person has capital adequate to conduct the business in which it is presently or is about to engage in.
"Subsidiaries" shall have the meaning set forth in the recitals hereto.
"Subsidiary" shall have the meaning set forth in the recitals hereto.
"Termination Event" shall mean, with respect to a Pension Plan: (a) a Reportable Event, (b) the termination of a Pension Plan, or the filing of a notice of intent to terminate a Pension Plan, or the treatment of a Pension Plan amendment as a termination under ERISA Section 4041(e), (c) the institution of proceedings to terminate a Pension Plan under ERISA Section 4042 or (d) the appointment of a trustee to administer any Pension Plan under ERISA Section 4042.
"Transaction" shall mean the establishment of the facility contemplated by this Agreement.
"Unfunded Pension Liabilities" shall mean, with respect to any Pension Plan at any time, the amount determined by taking the accumulated benefit obligation, as disclosed in accordance with Statement of Accounting Standards No. 87, over the fair market value of Pension Plan assets.
"Unrecognized Retiree Welfare Liability" shall mean, with respect to any Plan that provides post-retirement benefits other than pension benefits, the amount of the accumulated post- retirement benefit obligation, as determined in accordance with Statement of Financial Accounting Standards No. 106, as of the most recent valuation date, which has not previously been recognized. Prior to the date such statement is applicable to the Borrower or any Subsidiary, such amount of the obligation shall be based on an estimate made in good faith. For purposes of determining the aggregate amount of the Unrecognized Retiree Welfare Liability, Plans maintained by a Subsidiary that is not otherwise a ERISA Affiliate shall be taken into account.
1.2 Accounting Terms. All accounting terms used herein shall be construed in accordance with Generally Accepted Accounting Principles.
II. THE CREDIT
2.1 The Loans.
(a) Subject to the terms and conditions hereof, each
of the Lenders agrees to make revolving credit loans
(collectively called the "Loans" and individually a "Loan") to
the Borrower from time to time during the period commencing on
the date hereof and ending on the Maturity Date in outstanding
principal amounts not to exceed at any time each such Lenders'
commitment set forth on Schedule 2.1 (such Lender's "Loan
Commitment") and the aggregate of all such Loans shall not exceed
at any time $10,000,000 (the "Aggregate Loan Commitment"). The
failure of any one or more of the Lenders to make Loans in
accordance with its or their obligations shall not relieve the
other Lenders of their several obligations under this subsection,
but in no event shall the aggregate amount at any one time
outstanding which any Lender shall be required to lend under this
Section 2.1(a) exceed the sum of the amount of such Lender's Loan
Commitment at that time.
(b) Except a Loan that exhausts the full remaining amount of the Aggregate Loan Commitment, each Loan when made shall be in an amount at least equal to $1,000,000 or, if greater, then in such minimum amount plus $100,000 multiples.
(c) Within the limits of the Aggregate Loan Commitment the Borrowers may borrow, prepay (in accordance with Section 2.7) and reborrow Loans, provided that total the number of borrowings hereunder (including the initial Loan) shall not exceed ten, and no more than one borrowing hereunder shall occur in any 30-day period. All Loans shall, in any event, be repaid by the Borrowers on the Maturity Date.
(d) All Loans shall be made by the Lenders simultaneously and pro rata in accordance with the Loan Commitments.
2.2 The Note. The Loans made by each Lender shall all be evidenced by a single promissory note of the Borrowers (each a "Note" and collectively, the "Notes") in principal face amount equal to such Lender's Loan Commitment, payable to the order of such Lender and otherwise in the form attached hereto as Exhibit D. Each Note shall be dated the date the first Loan is made and shall bear interest at the rate per annum and be repayable in accordance with the terms hereof and as specified in such Note. Each Note shall mature upon the Maturity Date, and, upon maturity, each outstanding Loan evidenced thereby shall be due and payable. Each Lender shall maintain records of all Loans evidenced by its Note and of all payments thereon, which records shall be conclusive absent manifest error.
2.3 Funding Procedures.
(a) Each request for a Loan shall be made not later than 11:00 a.m. (Eastern Standard Time) on a Business Day by notice by telephone to each Lender to the attention of the person(s) identified on the signature page hereto or such other person as they shall instruct the Borrowers in writing, and by delivery to each Lender of a written request signed by the Borrowers, in substantially the form attached hereto as Exhibit E, specifying the date and amount of the Loan to be made and wiring instructions for disbursement of such Loan. Subject to the terms and conditions stated herein, Loans shall be made seven Business Days following receipt by each Lender of a request for such Loan (or on such earlier date as all of the Lenders shall agree, with the Lenders using reasonable efforts to agree upon a date that is as soon as possible within such period but in no event shall any Lender be required to make a Loan in fewer than seven Business Days following receipt by such Lender of a request for such Loan). No request shall be effective until actually received by each Lender.
(b) On the date of a Loan, each Lender shall wire to the bank designated by the Borrowers the amount of such Loan in immediately available funds.
2.4 Interest.
(a) Non-Default Rate. Each Loan shall bear interest on the principal amount thereof from the date made until such Loan is paid in full at the rate of 15% per annum, calculated on the basis of the actual number of days elapsed in a year of 360 days.
(b) Default Rate.
(i) If any Event of Default specified in
Section 8.1(a) or Section 8.1(d) shall occur; or
(ii) If any other Event of Default occurs and the Majority Lenders declare the Note to be immediately due and payable;
THEN the rate of interest applicable to each Loan then outstanding shall be the Default Rate. Unless waived by the Lenders, the Default Rate shall apply from the date of the Event of Default (notwithstanding any delay in the declaration of such Event of Default) until the date such Event of Default is cured, and interest accruing at the Default Rate shall be payable upon demand.
2.5 Commitment Fee. The Borrower shall pay to the Lenders as compensation for the Lenders' Loan Commitments a fee (the "Commitment Fee") payable as follows: (i) $200,000 on the date of this Agreement; and (ii) $100,000 on each of the ninety-first, one hundred and eighty-first, two hundred and seventy-first, three hundred and sixty-first and four hundred and fifty-first day following the date of this Agreement. In the event that all Obligations shall not have been paid on the Maturity Date, the Commitment Fee will include an additional $100,000 due and payable on each of the first day following the Maturity Date and the first day of each three month period following the Maturity Date until payment in full of all Obligations.
2.6 Reduction or Termination of Loan Commitment.
(a) Notice. The Borrowers may at any time, on not less than one Business Day's written notice, terminate or permanently reduce the Aggregate Loan Commitment, provided that any reduction shall be in the amount of $1,000,000 or a multiple thereof.
(b) Mandatory Reduction. The Aggregate Loan Commitment shall be reduced from time to time by the portion, if any, of Net Cash Proceeds received by either of the Borrowers or any Subsidiary on or after the date hereof that is not (i) proceeds of a Permitted Disposition or (ii) promptly deposited in the Cash Collateral Account pursuant to Section 7.8; provided, however, that if any such Net Cash Proceeds relate to the disposition the stock or assets of JWSC, 22.3% of the first $15,000,000 thereof shall be applied as follows: first, to reduce the Aggregate Loan Commitment up to the aggregate principal amount of Loans then outstanding; second, to reduce the "Aggregate Loan Commitment" under the MES Facility up to the aggregate principal amount of "Loans" then outstanding thereunder (after the application of the portion of the Net Cash Proceeds initially allocable to the MES Facility); and third, to the further reduction of the Aggregate Loan Commitment.
2.7 Prepayments.
(a) Mandatory Prepayments. In the event the Aggregate Loan Commitment is reduced, the Borrowers shall, simultaneously with such reduction, make a prepayment of principal and interest in respect of the Loans in such amount as is necessary to assure that the aggregate principal amount of Loans outstanding immediately after such reduction will not exceed the Aggregate Loan Commitment as reduced. In the event the Aggregate Loan Commitment is terminated, the Borrowers shall, simultaneously with such termination, make a prepayment of all principal of and interest on all Loans, and shall pay all other Obligations then outstanding (including, without limitation, the then unpaid Commitment Fee).
(b) Voluntary Prepayments. In addition, on one Business Day's notice to the Lender, the Borrowers may, at their option, prepay the Loans in whole at any time or in part from time to time, provided that each partial prepayment shall be in the principal amount of $1,000,000 or, if greater, then in $100,000 multiples.
2.8 Payments.
(a) Interest and Principal. Accrued interest on all Loans shall be due and payable in arrears on the first Business Day of each month and on the Maturity Date. The principal amount of all Loans then outstanding shall be due and payable on the Maturity Date.
(b) Form of Payments, Application of Payments, Payment Administration, Etc. All payments (including prepayments) of principal of or interest on any Loan and all fees and other amounts payable by the Borrowers hereunder shall be made in Dollars, shall be allocated among the Lenders in accordance with their respective Commitment Percentage and, except as otherwise provided herein, shall be remitted to the Lender by wire transfer to the account set forth opposite each Lender's name on the signature page hereof or at such office or account as any such Lender shall specify to the Parent, in immediately available funds not later than 11:00 a.m. (Eastern Time) on the day when due. Whenever any payment is stated as due on a day which is not a Business Day, the maturity of such payment shall be extended to the next succeeding Business Day and interest shall continue to accrue during such extension.
(c) Depositary Procedures.
(i) From and after the date hereof all receipts and other amounts received by the Dyn Borrower or any Subsidiary, from any source, including without limitation payments from any account debtor but excluding (A) funds contained in an Imprest Account, (B) funds held in payroll accounts, employee benefit payment accounts, petty cash accounts, miscellaneous checking accounts, accounts holding retentions, escrow accounts, and accounts required by customers of the Subsidiaries to be excluded from these depositary procedures to the extent the aggregate amount held in all such accounts does not exceed $3,200,000 at any time during the sixty-day period immediately following the Effective Date, $2,200,000 at any time commencing on the 61st day and ending on the 120th day following the Effective Date and $1,200,000 at any time thereafter (excluding from such calculation amounts remitted to any payroll account not more than three days prior to the date of a payroll which amount is necessary to fund such payroll) and (C) funds disbursed by the Parent to a "zero-balance" account of the Dyn Borrower or a Subsidiary or by the Dyn Borrower to a zero balance account of Subsidiary, in each case to cover disbursements in the ordinary course of business drawn on such account, upon receipt, shall be deposited into a depositary account in the name of the Dyn Borrower or such Subsidiary and listed on Schedule 2.8(c) or as set forth in clause (ii) below (each, a "Depositary Account"). All available amounts on deposit in any Depositary Account of the Dyn Borrower or such Subsidiary shall be transferred by same-day or next-day wire transfer to one of the concentration depositary accounts listed on Schedule 2.8(c) (each, a "Concentration Account") maintained by the Dyn Borrower at NationsBank, N.A. (the "Concentration Bank") for application in accordance with this Agreement and the Depositary Agreement and for use by the Dyn Borrower and its Subsidiaries. As of the date of this Agreement, the only depositary accounts maintained by the Dyn Borrower and its Subsidiaries are as set forth on Schedule 2.8(c) hereto. Notwithstanding the provisions of this subsection 2.8(c)(i), Dynalectric Company of Nevada shall not be required to comply with this subsection 2.8(c)(i) until the date 21 days from the Effective Date.
(ii) The Dyn Borrower and any Subsidiary may close Depositary Accounts and/or open new Depositary Accounts only with prior written notice to the Lenders. The Dyn Borrower shall not open any new concentration depositary account without the prior written consent of the Majority Lenders.
(iii) A Lender may at any time request that the Concentration Bank confirm the Agent's security interest in the Concentration Account and the funds and items contained therein granted pursuant to the Depositary Agreement.
(d) Net Payments. All payments made to the Lenders by the Borrowers hereunder, under the Notes or under any other Loan Document will be made without setoff, counterclaim or other defense. All such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or any political subdivision or taxing authority thereof or therein (but excluding, except as provided below, any tax imposed on or measured by the gross or net income of any Lender or its partners (including all interest, penalties or similar liabilities related thereto) pursuant to the laws of the United States of America or any State or political subdivision thereof, or taxing authority of the United States of America or any State or political subdivision thereof, in which the principal office of such Lender is located), and all interest, penalties or similar liabilities with respect thereto (collectively, together with any amounts payable pursuant to the next sentence, "Taxes"). The Borrowers shall also reimburse the Lenders, upon the written request of any Lender, for Taxes imposed on or measured by the gross or net income of such Lender or its partners pursuant to the laws of the United States of America (or any State or political subdivision thereof), or the jurisdiction (or any political subdivision or taxing authority thereof) in which the principal office of such Lender is located as such Lender shall determine are payable by such Lender in respect of Taxes paid to or on behalf of such Lender or its partners pursuant to the preceding sentence. If any Taxes are so levied or imposed, the Borrowers agree to pay the full amount of such Taxes, and such additional amounts as may be necessary so that every payment of all amounts due hereunder, under any Note or under any other Loan Document, after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein or in such Note. The Borrowers will furnish to a Lender upon request certified copies of tax receipts evidencing such payment by the Borrowers. The Borrowers will indemnify and hold harmless each Lender, and reimburse each Lender upon its written request, for the amount of any Taxes so levied or imposed and paid or withheld by such Lender or its partners.
2.9 Priority and Liens.
(a) The Borrowers and the Subsidiaries hereby
covenant, represent and warrant that the Obligations of the
Borrowers shall be secured by a valid and perfected Lien upon and
security interest in (i) all assets of the Dyn Companies
including a pledge of all of the stock of the Subsidiaries, (ii)
a pledge of all of the Parent's stock of the Dyn Borrower, and
(iii) a security interest in the contractual right to the
Concentration Accounts of the Dyn Companies, which Lien, except
as otherwise agreed, will have priority over the Liens of all
other parties except Permitted Liens.
(b) The Obligations shall be further secured by a valid and perfected Lien upon and security interest in all assets of (i) the Parent (other than the stock of the Dyn Borrower, MES, the Software House Companies, SellCo, the Series A Substitute Collateral and the Series B Substitute Collateral, as such terms are defined in the Reorganization Plan) and (ii) MES and its subsidiaries (other than the Lien granted hereunder in vehicles to the extent such Lien cannot be perfected by the filing of financing statements, which may be unperfected), including a pledge of all stock of the subsidiaries of MES (other than, in the case of (i) or (ii) of this subsection (b), the stock and those other securities and instruments expressly excepted as provided by the guarantor security agreement and the pledge and security agreement attached as exhibits to the MES Facility) and a security interest in the contractual right to the concentration depositary accounts of JWP and MES and in the first $15,000,000 of the proceeds of the sale of the stock or assets of JWSC, which Lien and security interest will be superior to and have priority over the Liens of all other persons other than the Lien granted to the Lenders under the MES Facility and "Permitted Liens" (as defined in the MES Facility).
(c) The security interests described above will be granted to the Agent as secured party on behalf of the Lenders.
(d) Upon the maturity (whether by acceleration or otherwise) of any of the Obligations, the Borrowers shall immediately pay all such Obligations and the Lenders shall be entitled to immediately exercise all remedies available to it under this Agreement or otherwise (including remedies against the Subsidiaries or any Collateral owned by a Subsidiary).
III. REPRESENTATIONS AND WARRANTIES
The Borrowers represent and warrant to the Lenders that:
3.1 Organization, Standing. Except as set forth on
Schedule 3.1, each Borrower and Subsidiary (i) is a corporation
duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, (ii) has the
corporate power and authority necessary to own its assets, carry
on its business and enter into and perform its obligations
hereunder and under each Loan Document to which it is a party and
(iii) is qualified to do business and is in good standing in each
jurisdiction where the nature of its business or the ownership of
its properties requires such qualification except where the
failure to be so qualified would not have a material adverse
effect on the business, operations, assets or condition
(financial or otherwise) of the Dyn Companies taken as a whole.
3.2 Corporate Authority, Etc. The making and performance of the Loan Documents to which it is a party are within the power and authority of each of the Borrowers and Subsidiaries and have been duly authorized by all necessary corporate action. The making and performance of the Loan Documents do not and under present law will not require any consent or approval of either of the Borrowers' shareholders or Board of Directors or shareholders of any Subsidiary or any other Person, whose consent or approval has not heretofore been obtained, do not and under present law will not violate any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award, do not violate any provision of the charter or by-laws of either of the Borrowers or any Subsidiary, do not and will not result in any breach of any material agreement, lease or instrument to which either of the Borrowers or any Subsidiary is a party, by which any of them is bound or to which any of their respective assets are or may be subject, and do not and will not give rise to any Lien upon any of the assets of either of the Borrowers or any Subsidiary except in favor of the Agent. Further, except as set forth on Schedule 3.2, neither the Borrowers nor any Subsidiary is in default under any such agreement, lease or instrument except to the extent such default is not likely to have a material adverse effect on the business, operations, assets or condition (financial or otherwise) of the Dyn Companies taken as a whole. Except as set forth on Schedule 3.2, no authorizations, approvals or consents of, and no filings or registrations with, any governmental or regulatory authority or agency (other than filings or notices required to perfect any security interests in favor of the Agent) are necessary for the execution, delivery or performance by either of the Borrowers or any Subsidiary of any Loan Document to which either of the Borrowers or such Subsidiary is a party or for the validity or enforceability thereof.
3.3 Validity of Documents. This Agreement is, and each other Loan Document when executed and delivered, will be, the legal, valid and binding obligation of the Borrowers and each Subsidiary that is a party thereto, enforceable against the Borrowers and/or such Subsidiary in accordance with its terms.
3.4 Litigation. Except as set forth in Schedule 3.4 hereto, as of the date of this Agreement, there is no action, suit or proceeding pending or, to the best knowledge of either of the Borrowers, threatened against or affecting the Borrowers, any Subsidiary or any assets of the Borrowers or any Subsidiary before any court, government agency, or other tribunal, involving claims against the Borrowers or any Subsidiary that are uninsured, exceed insurance coverage, comprise the deductible portion of any such insurance coverage or are otherwise not expressly accepted for coverage without reservation by any applicable insurer, in each case in an amount in excess of $1,700,000. The status (including the tribunal, the nature of the claim and the amount in controversy) of each such litigation matter as of the date of this Agreement is set forth in such Schedule.
3.5 ERISA. The provisions of each Plan in which either of
the Borrowers, any Subsidiary or any ERISA Affiliate participates
or to which either of the Borrowers, any Subsidiary or any ERISA
Affiliate contributes, whether or not they are the sole
participant or contributor, comply, in all material respects,
with all applicable requirements of ERISA and of the Code, and
with all applicable rulings and regulations issued under the
provisions of ERISA and the Code setting forth those
requirements. No event has occurred with respect to any Plan in
which either of the Borrowers, any Subsidiary or any ERISA
Affiliate participates or to which any of them contributes
(hereinafter referred to as a "Covered Plan") that constitutes a
Reportable Event, or, if such event has occurred, the employer
and plan administrator have complied with Section 4043 of ERISA
and the regulations thereunder, and have discharged all
notification obligations, if any, imposed on either of them by
Section 4043 of ERISA, to the extent that the employer or plan
administrator has not been relieved of such obligations by
regulation or otherwise by the PBGC; there does not exist with
respect to any Covered Plan any accumulated funding deficiency
within the meaning of Section 412 of the Code nor has there been
issued either a variance or a waiver of the minimum funding
standards imposed by the Code with respect to any Covered Plan,
nor are there any excise taxes due or hereafter to become due
under Section 4971 of the Code with respect to the funding of any
covered Plan for any plan year or fiscal period ending prior to
the date hereof; except as described on Schedule 3.5, no Covered
Plan to which Section 4021 of ERISA applies has been terminated
or, if such termination has occurred, the requirements of ERISA
Sections 4041 and 4044 have been satisfied and the Internal
Revenue Service has issued a letter of determination that the
Covered Plan met the requirements of Code Section 401(a) at the
time of such termination; no Covered Plan has incurred any
liability to the PBGC under Sections 4062, 4063
or 4064 of ERISA which has not been satisfied or discharged; and,
to the best knowledge of either of the Borrowers or any
Subsidiary, no Covered Plan has engaged in any Prohibited
Transaction. Except as described on Schedule 3.5, none of the
Borrower, any Subsidiary or any ERISA Affiliate has withdrawn
from any Multiemployer Plan or incurred any withdrawal liability
within the meaning of Section 4201 of ERISA which has not been
fully satisfied. As of the date hereof, except as described on
Schedule 3.5, there are no actual or potential withdrawal
liability payments for withdrawals that have occurred, as
determined in accordance with Title IV of ERISA, by either of the
Borrowers, any Subsidiary or any ERISA Affiliate with respect to
all Multiemployer Plans. Except as described on Schedule 3.5, as
of the date of this Agreement, none of the Borrowers, any
Subsidiary or any ERISA Affiliate has established or maintained
any Plan or arrangement which provides post-employment welfare
benefits or coverage (other than (i) severance benefits or (ii)
health care benefits as required pursuant to Section 4980B of the
Code). Except as described on Schedule 3.5, as of the date of
this Agreement, none of the Borrowers, any Subsidiary or any
ERISA Affiliate has ever established, maintained or contributed
to, or has any liability, actual or contingent, with respect to,
a Plan subject to Title IV of ERISA. Each of the Borrowers, each
Subsidiary and each ERISA Affiliate has, as of the date of this
Agreement, made all contributions or payments to or under each
such Plan required by law or the terms of such Plan.
3.6 Financial Statements. Except as set forth on Schedule 3.6, the audited consolidated financial statements of the Parent and its subsidiaries, including the Dyn Companies, as of and for the fiscal years ended December 31, 1993 and December 31, 1992, consisting in each case of a balance sheet, a statement of operations, a statement of shareholders' equity, a statement of cash flows and accompanying footnotes, and the interim unaudited consolidated financial statements of the Parent and its subsidiaries, including the Dyn Companies, as of September 30, 1994 and September 30, 1993 furnished to the Lenders in connection herewith (the "Financial Statements"), present fairly, in all material respects, the financial position, results of operations and cash flows of the Parent and its subsidiaries as of the dates and for the periods referred to, in conformity with Generally Accepted Accounting Principles (subject, in the case of interim statements, to changes resulting from audits and year-end adjustments). There are no liabilities, fixed or contingent, which are not reflected in such financial statements, other than liabilities which are not required to be reflected in such balance sheets in accordance with Generally Accepted Accounting Principles and which do not have a material impact on the financial statements taken as a whole. Except as disclosed on Schedule 5.1, there has been no material adverse change in the business, operations or assets or condition (financial or otherwise) of either of the Borrowers or the Subsidiaries taken as a whole since September 30, 1994. The Summary Work in Progress Report, as of September 30, 1994 as to each of the Dyn Companies provided by the Borrowers to the Lenders is true, complete and correct in all material respects as of the date thereof (subject to changes resulting from audits and annual and quarterly adjustments).
3.7 Use of Proceeds. The proceeds of the Loans shall be
used only (i) for general working capital of the Dyn Borrower,
(ii) to fund loans giving rise to Intercompany Debt to be made by
the Dyn Borrower to the Subsidiaries to the extent permitted by
Section 7.2(f), which Intercompany Debt shall be used by the
Subsidiaries for general working capital and (iii) to pay fees
and expenses incurred in connection with the Loan Documents. In
no event shall the proceeds of any Loan be used by either of the
Borrowers to provide loans or other distributions to any
Subsidiary that is not Solvent at the time of such loan or
distribution from the Borrowers.
3.8 Not in Default. No Event of Default or Potential Default under any Loan Document has occurred and is continuing.
3.9 Taxes. Except as set forth on Schedule 3.9, each Borrower and Subsidiary has filed all federal, state, local and foreign tax returns and reports which it is required by law to file and has paid all taxes, including wage taxes, assessments, withholdings and other governmental charges which are presently due and payable (other than those being contested in good faith by appropriate proceedings). The tax charges, accruals and reserves reflected on the Financial Statements relating to taxes that have accrued but are not presently due and payable are in accordance with Generally Accepted Accounting Principles. The Borrowers and the Subsidiaries are members of an affiliated group of corporations filing consolidated returns for United States federal income tax purposes, and the Parent is the "common parent" of such group.
3.10 Permits, Licenses, Etc. Each Borrower and Subsidiary possesses all permits, licenses, franchises, trademarks, trade names, copyrights and patents necessary to the conduct of its business as presently conducted or as presently proposed to be conducted, except where the failure to possess the same is not likely to have a material effect on the financial condition, operations or assets of the Dyn Companies taken as a whole.
3.11 Compliance With Laws.
(a) Except as set forth on Schedule 3.11 hereto, each Borrower and Subsidiary is in compliance in all material respects with all Regulations applicable to its business (including obtaining all authorizations, consents, approvals, orders, licenses, exemptions from, and making all filings or registrations or qualifications with, any court or governmental department, public body or authority, commission, board, bureau, agency, or instrumentality), the noncompliance with which is likely to have a material adverse effect on the business, operations, assets or condition (financial or otherwise) of the Dyn Companies taken as a whole.
(b) Except as set forth on Schedule 3.11 hereto, each Borrower and Subsidiary has obtained all permits, licenses and other authorizations required under any Regulation relating to pollution or protection of the environment, including laws relating to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment (including, without limitation, ambient air, surface water, groundwater, or land), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes except where the failure to possess the same is not likely to have a material adverse effect on the business, operations, assets or condition (financial or otherwise) of the Dyn Companies taken as a whole. Except as set forth on Schedule 3.11 hereto, each Borrower and Subsidiary is in compliance in all material respects with all terms and conditions of the required permits, licenses and authorizations, and is also in compliance in all respects with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in any Regulation, order, decree, judgment, injunction, notice or demand letter issued, entered, promulgated or approved thereunder which has the force of law, the failure to comply with which is likely to have a material adverse effect on the business, operations, assets or conditions (financial or otherwise) of the Dyn Companies taken as a whole. Except as described on Schedule 3.11 hereto neither of the Borrowers is aware of, or has received written notice of, any past or present events, conditions, circumstances, activities, practices, incidents or actions which may interfere with or prevent compliance or continued compliance with those laws or with any regulation, code, plan, order, decree, judgment, injunction, notice or demand letter issued, entered, promulgated or approved thereunder which has the force of law, or which may give rise to any common law or legal liability, or otherwise form the basis of any claim, action, demand, suit, proceeding, hearing, study or investigation, based on or related to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling, or the emission, discharge, release or threatened release into the environment, of any pollutant, contaminant, chemical, or industrial, toxic or hazardous substance or waste, except where such events, conditions, circumstances, activities, practices, incidents or actions are not likely to have a material adverse effect on the business, operations, assets or condition (financial or otherwise) of the Dyn Companies taken as a whole.
3.12 Amounts Owed to or from Affiliates; Intercompany Agreements.
(a) Affiliates. Except as disclosed on Schedule 3.12, as of September 30, 1994, there is not outstanding and unpaid any Intercompany Debt (i) owing by either of the Borrowers or any Subsidiary to or for the benefit of any Affiliate or (ii) owing to or for the benefit of either of the Borrowers or any Subsidiary from any Affiliate and since September 30, 1994, there has not been paid by either of the Borrowers or any Subsidiary to or for the benefit of any Affiliate any amount for management, administrative, operational, consulting, brokerage or other services other than services provided in the ordinary course of business on terms that could be obtained on an arm's-length basis with a Person that is not an Affiliate and other than compensation paid to officers and directors of the Borrowers and of the Subsidiaries in the ordinary course of business. Since September 30, 1994, none of the Borrowers or the Subsidiaries has paid to or for the benefit of any Affiliate any amount for management, administrative, operational, consulting, brokerage or other services other than payments for such services in the ordinary course of business. All existing Intercompany Debt owing to either of the Borrowers or any Subsidiary from any Affiliate is evidenced by an Intercompany Note.
(b) Intercompany Agreements. Except as disclosed on Schedule 3.12 hereto as of the date of this Agreement, there are no agreements between either of the Borrowers or any Subsidiary and any Affiliate relating to the extension of any funds to or from either of the Borrowers or any Subsidiary, the sharing of any costs among either of the Borrowers, the Subsidiaries and any Affiliate or the provision of any management, administrative, operational, consulting, brokerage or other services to either of the Borrowers or any Subsidiary ("Intercompany Agreements").
(c) Dividends. Except as disclosed on Schedule 3.12 hereto, during the period from September 30, 1994 through the date of this Agreement, neither of the Borrowers nor any Subsidiary declared or paid any dividend on, or purchased, redeemed, retired or otherwise acquired for value any of the Borrowers' or Subsidiaries' capital stock then outstanding, returned any capital stock to its stockholders, or made any distribution with respect to its shares, whether in cash, property or obligations, except (i) to either of the Borrowers and the Subsidiaries or (ii) in accordance with the Reorganization Plan.
3.13 Title to Assets. Each Borrower and Subsidiary has good and marketable title to all of its properties and assets, free and clear of all Liens, other than Permitted Liens.
3.14 Insurance and Surety Bonds.
(a) Except as described on Schedule 3.14, each Borrower and Subsidiary has obtained in commercially reasonable kind and form and with reputable insurers, all risk of physical loss or damage insurance covering the assets of the Borrowers and the Subsidiaries wherever the same may be located, insuring against the risks of fire, explosion, theft and such other risks as are prudently insured against by corporations engaged in the same business and similarly situated with the Borrowers and the Subsidiaries (and specifically including vandalism, malicious mischief coverage, loss overboard and breakage), in an amount usually carried by corporations engaged in the same business and similarly situated with the Borrowers and the Subsidiaries.
(b) Set forth on Schedule 3.14 is a complete and correct list, as of September 30, 1994, of the "backlog" of those contracts of the Dyn Borrower and the Subsidiaries then subject to bonding. Except as set forth on Schedule 3.14 and other than the obligations of the principal of all bonds relating to contracts of the Borrowers and the Subsidiaries and the guaranty by either of the Borrowers and the Subsidiaries of the obligations of a Subsidiary thereunder, there are no letters of credit or other financial accommodations securing the Borrowers' or any Subsidiary's obligations under such bonds. To the best knowledge of the Borrower, Reliance or comparable successor bonding companies are making, and will continue to make, available to the Dyn Companies performance and payment bonds required for the conduct in the ordinary course of business of the Dyn Companies.
3.15 Subsidiaries, Etc. Set forth in Schedule 3.15 hereto is a complete and correct list, as of the date of this Agreement, of all subsidiaries of the Dyn Borrower, and of all Investments held by either of the Borrowers and any of the Subsidiaries in any joint venture or other Person, other than joint ventures or similar pooling of efforts in respect of a specific project or series of related specific projects for a limited or fixed duration to conduct a business of the type in which such Borrower or such Subsidiary is presently engaged consistent with past practice. Except as disclosed in Schedule 3.15 hereto, as of the date hereof, the Dyn Borrower owns, directly or through a Subsidiary, free and clear of Liens other than the Lien granted to the Agent, all outstanding shares of each Subsidiary and all such shares are validly issued, fully paid and non-assessable other than in the case of New York corporations under Section 630 of the New York Business Corporation Law, and the Dyn Borrower (or the respective Subsidiary) also owns, free and clear of Liens, all such Investments. Schedule 3.15 also sets forth as to each Subsidiary the number of shares of each class of such capital stock issued and outstanding and held in treasury and the record and beneficial owners of all such issued and outstanding shares. Except as set forth on Schedule 3.15, all of the issued and outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued and are fully paid and nonassessable other than, in the case of New York corporations, under Section 630 of the New York Business Corporation Law and held free and clear of all Liens whatsoever, and there are no outstanding subscriptions, options, warrants, calls, conversion or exchange rights, commitments or agreements of any character obligating any Subsidiary to issue, deliver or sell additional shares of its capital stock of any class or any securities convertible into or exchangeable for any such capital stock. Except as described on Schedule 3.15, the pledge by the Dyn Borrower or any Subsidiary of the capital stock of any Subsidiary pursuant to the Loan Documents, and the granting by any Subsidiary of a guaranty of the Obligations pursuant to the Loan Documents, which guaranty would be secured by a Lien upon its assets, does not and under present law will not require any consent or approval of the Dyn Borrower's or any Subsidiary's shareholders or any Person, does not and under present law will not violate any law, rule, regulation order, writ, judgment, injunction, decree, determination or award, does not violate any provision of the charter or by-laws of the Dyn Borrower or any Subsidiary and does not and will not result in any breach of any material agreement, lease or instrument to which either of the Borrowers or any Subsidiary is a party, by which it is bound or to which any of its assets are or may be subject.
3.16 Patents, Trademarks, etc. Each Borrower and Subsidiary owns or possesses all patents, patent rights or licenses, patent applications, trademarks, trademark rights, trade names, trade name rights, copyrights and rights with respect to the foregoing which are required to conduct its business as now and presently planned to be conducted without known conflict with the rights of others, and Schedule 3.16 lists all patents and trademarks owned by either of the Borrowers and any Subsidiary, indicating the owner thereof.
3.17 Accounts. The Accounts of each Borrower and Subsidiary are bona fide Accounts created in the ordinary course of business. The reserves for non-payment of the Accounts reflected on the Financial Statements are in accordance with Generally Accepted Account Principles.
3.18 Inventory.
(i) Condition. All Inventory of each Borrower and Subsidiary is in substantially good condition, meets all material standards imposed by any governmental agency, or department or division thereof, having regulatory authority over such goods, their use or sale, and is currently either usable or salable in the normal course of either of the Borrower's or the applicable Subsidiary's business, except to the extent reserved against in the Financial Statements or as otherwise disclosed in writing to the Lenders.
(ii) Location. To the best of either Borrower's knowledge, substantially all Inventory of each Borrower and Subsidiary is located on the premises set forth on Schedule 3.15, is Inventory in transit to one of such locations or is at the site of work currently being performed by such Borrower or such Subsidiary, except as otherwise disclosed in writing to the Lenders.
3.19 Equipment. Substantially all of the Equipment of each Borrower and Subsidiary is in good order and repair in all material respects and is located on the premises set forth on Schedule 3.15 or is at the site of work currently being performed by such Borrower or such Subsidiary.
3.20 Real Property. All real property owned by each Borrower and Subsidiary is described on Schedule 3.20.
3.21 Corporate and Fictitious Names. Except as otherwise disclosed on Schedule 3.15, during the five-year period preceding the date hereof, none of the Borrowers, the Subsidiaries, nor any predecessor thereof has been known as or used any corporate or fictitious name other than the respective corporate names of such Persons on the date hereof.
IV. SECURITY.
4.1 Security Documents. As security for the punctual payment of all Obligations and without any further action being required other than filings under the Uniform Commercial Code of various states and delivery to the Agent on behalf of the Lenders of shares of stock, notes and other securities constituting Collateral to be pledged pursuant to the terms of the Pledge and Security Agreement and the Guarantor Security Agreement, the Loan Documents will create and grant to the Agent on behalf of the Lenders a valid and enforceable security interest in and Lien upon the Collateral, which security interest and Lien shall be perfected except as otherwise contemplated by Section 2.9, securing the Obligations, and no Person, including without limitation any Person that currently provides or shall hereafter provide to the Borrower or any Subsidiary payment or performance bonds, will have any right, title or interest in or to the Collateral that is, or that shall hereafter be, prior, paramount, superior or equal to the right, title or interest of the Agent on behalf of the Lenders therein or thereto, other than Liens expressly permitted by Section 7.3.
4.2 Release of Collateral.
(a) Upon the payment in full of the entire principal balance and all interest in respect of the Notes and the payment in full of all other Obligations and the termination of the Loan Commitments, the Majority Lenders shall direct the Agent to release its Lien and security interest in the Collateral and to do such things as are reasonably requested by the Borrowers and the Subsidiaries to effect such release.
(b) Upon the disposition of any Collateral in compliance with Section 7.8, such Collateral is hereby released by the Agent on behalf of the Lenders from its security interest, and the Majority Lenders shall direct the Agent to do such things as are reasonably requested by either of the Borrowers or the Subsidiaries to evidence such release. In addition, upon receipt by the Lenders of evidence that any liability directly relating to Collateral disposed in compliance with Section 7.8, other than a Permitted Disposition, is then currently due and payable but was not deducted from the proceeds of such disposition to determine Net Cash Proceeds, the Majority Lenders shall direct the Agent to release funds equal to the amount of such liability, not in excess of the Net Cash Proceeds of such disposition, from the Cash Collateral Account.
(c) All costs (including attorneys' fees) of the preparation, execution and filing of any documents or the taking of any steps to release or terminate such security interests shall be for the account of the Borrowers and shall be included in the Obligations.
V. CONDITIONS PRECEDENT.
5.1 Conditions to First Loan. The obligation of the Lenders to make the first Loan hereunder is conditioned upon the following:
(a) Articles, Bylaws. The Lenders shall have received copies of the Articles or Certificates of Incorporation and Bylaws of each Borrower and Subsidiary, certified by the secretary or assistant secretary of either of the Borrower.
(b) Evidence of Authorization. The Lenders shall have received certified copies of all corporate or other action taken by each Person other than the Agent and the Lenders who is a party to any Loan Document to authorize its execution and delivery and performance of the Loan Documents and to authorize the Loans hereunder, together with such other related papers as the Lenders shall reasonably require.
(c) Legal Opinions. The Agent and the Lenders shall have received a favorable written opinion of Stroock & Stroock & Lavan, counsel for the Parent, and the General Counsel of the Parent who shall have acted as counsel for the Dyn Borrower and the Subsidiaries, which shall be addressed to the Agent and the Lenders and be dated the date of the first Loan, in substantially the form attached as Exhibits F and G hereto, respectively, and such other legal opinion or opinions as the Lenders may reasonably request.
(d) Incumbency. The Agent and the Lenders shall have received a certificate signed by the secretary, assistant secretary or other authorized representative of each corporate signatory to the Loan Documents other than the Agent and the Lenders, together with the true signature of the officer or officers or other person authorized to execute and deliver the Loan Documents and certificates thereunder, upon which the Lenders shall be entitled to rely conclusively until the Lenders shall have received a further certificate of the appropriate secretary or assistant secretary amending the prior certificate and submitting the signature of the officer or officers named in the new certificate as being authorized to execute and deliver Loan Documents and certificates thereunder.
(e) Note. Each Lender shall have received an executed Note payable to the order of such Lender and otherwise in the form of Exhibit D hereto. In addition, the Agent and the Lenders shall have received all certificates, instruments and other documents then required to be delivered pursuant to any Loan Documents, in each instance in form and substance reasonably satisfactory to the Agent and the Lenders.
(f) Confirmation and Effectiveness of the Reorganization Plan. Each Lender shall have received a certified copy of the order of the Bankruptcy Court confirming the Reorganization Plan, and each condition precedent to the effectiveness of the Reorganization Plan shall have been satisfied.
(g) Consents. The Borrowers shall have provided to the Agent and the Lenders evidence satisfactory to the Agent and the Lenders that all governmental, shareholder and third party consents and approvals necessary in connection with the transactions contemplated hereby, if any, have been obtained and remain in effect.
(h) Change. Except as disclosed on Schedule 5.1 hereto, no material adverse change shall have occurred in the financial condition, cash flows or operations, including backlog, of the Dyn Borrowers or of the Dyn Companies taken as a whole since September 30, 1994.
(i) Continued Bonding. Reliance or any comparable successor bonding companies, are making available to the Borrowers and the Subsidiaries performance and payment bonds required for the conduct in the ordinary course of business of the Borrowers and the Subsidiaries, and the Parent shall have provided to the Lenders an officer's certificate of the Senior Vice President, and Treasurer, any Executive Vice President or the Vice President and Controller of the Parent that such bonds are available and, to the best knowledge of such officer shall continue to be made available to the Dyn Borrower and the Subsidiaries.
(j) Other Agreements. The Borrowers and the Subsidiaries shall have executed and delivered all Loan Documents required hereunder, including the Pledge and Security Agreement (and the stock certificates pledged thereunder) and the Subsidiary Security Agreement. Each of the Borrowers and the Concentration Bank shall have executed and delivered the Depositary Agreement, and each of the Borrowers and Reliance shall have executed and delivered the Reliance Intercreditor Agreement.
(k) Absence of Defaults. No default by either of the Borrowers or any of the Subsidiaries under any existing material agreements shall exist or occur as a result of consummation of the transactions contemplated hereby.
(l) Documents. The Borrowers shall have delivered and each Lender shall have received a request for a Loan, as provided in Sections 2.1 and 2.3.
(m) Inspection and Management Rights. The Borrower shall have executed and delivered a letter agreement granting to the Lenders certain inspection and management rights in substantially the form of Exhibit H hereto.
(n) Concentration Accounts. The Borrowers shall have provided to the Lenders evidence satisfactory to the Lenders that the Concentration Accounts are established in the name of the Borrower in compliance with Section 2.8(c) hereof.
(o) MES Facility. All documentation relating to the MES Facility shall have been completed to the satisfaction of the Lenders and the Lenders' counsel and all conditions precedent to lending under the MES Facility shall have been satisfied or waived.
5.2 All Loans Subsequent to the First Loan. The obligation of the Lenders to make any Loan after the first Loan is conditioned upon the following:
(a) Documents. The Borrowers shall have delivered and each Lender shall have received a request for a Loan, as provided in Sections 2.1 and 2.3.
(b) Covenants; Representations. Each Person that is a party thereto other than the Agent or any Lender shall be in compliance in all material respects with all covenants, agreements and conditions in each Loan Document and each representation and warranty contained in each Loan Document shall be true with the same effect as if such representation or warranty had been made on the date such Loan is made, except that any such representation or warranty that relates to a specific date shall be correct as of such date. Also, each Lender shall have received a certificate dated the date of the Loan signed by the Chief Executive Officer, Senior Vice President and Treasurer, any Executive Vice President or the Vice President and Controller of the Parent to the foregoing effect.
(c) Defaults. After giving effect to such transaction, no Event of Default or Potential Default shall exist.
(d) Legal Proceedings. Each Lender shall be satisfied that, in its reasonable judgment, there is no (i) injunction, stay, decree or order issued by any court or arbitrator or any governmental body, agency or official or (ii) action, suit or proceeding pending against or affecting, either of the Borrowers or any Subsidiary before any court or arbitrator or any governmental body, agency or official in which there is a reasonable likelihood of an adverse decision, and, in either case, which in any manner draws into question the validity of any of the Loan Documents, the transactions contemplated hereby and thereby or which could materially adversely affect the ability of either of the Borrowers or any Subsidiary to perform any of their obligations hereunder and thereunder.
(e) Continued Bonding. Reliance or any comparable successor bonding companies, are making available to the Dyn Companies performance and payment bonds required for the conduct in the ordinary course of business of the Borrowers and the Subsidiaries, and the Parent shall have provided to the Lenders an officer's certificate of the Senior Vice President, and Treasurer, any Executive Vice President or the Vice President and Controller of the Parent that such bonds are available and, to the best knowledge of such officer shall continue to be made available to the Dyn Borrower and the Subsidiaries.
(f) Absence of Defaults. No default by the Parent or any of the Dyn Companies under any existing material agreements shall exist or occur as a result of consummation of the transactions contemplated hereby.
VI. AFFIRMATIVE COVENANTS
The Borrowers covenant and agree that, without the prior written consent of the Majority Lenders, from and after the date hereof and so long as the Loan Commitments are in effect or any Obligations remain unpaid or outstanding, the Borrowers, and, where applicable, each Subsidiary will:
6.1 Financial Statements and Reports. Prepare, maintain and furnish to the Lenders (and, as to subsections (a) and (b) hereof, simultaneously file with the Securities and Exchange Commission) the following financial information, except that the information required by subsections (d), (f) and (g) hereof shall be furnished to a Lender only upon request of such Lender (which request may be a request for all information required by any such subsection or for any specific portion thereof):
(a) Quarterly Statements. As soon as available but no later than forty-five (45) calendar days after the end of each fiscal quarter of each fiscal year, other than the fourth quarter of each fiscal year, a consolidated balance sheet of the Parent and its subsidiaries and of the Dyn Borrower and the Subsidiaries, and related consolidated statements of operations, shareholders' equity and cash flows for such quarterly period and for the period from the beginning of such fiscal year to the end of such fiscal quarter and with respect to the Parent and its subsidiaries, a corresponding financial statement for the same periods in the preceding fiscal year certified by the Chief Executive Officer, Senior Vice President and Treasurer, Executive Vice President and Chief Financial Officer or Vice President and Controller of the Parent as having been prepared in accordance with Generally Accepted Accounting Principles (subject to changes resulting from audits and year-end adjustments).
(b) Annual Statements. As soon as available but no later than ninety (90) days after the end of each fiscal year, a balance sheet of the Parent and its subsidiaries and of the Dyn Borrower and the Subsidiaries as of the end of such year and, with respect to the Parent and its subsidiaries, the prior year in comparative form, and related statements of operations, shareholders' equity, and cash flows for the Parent and the subsidiaries and for the Dyn Borrower and the Subsidiaries for such fiscal year and, with respect to the Parent and its subsidiaries, the prior fiscal year in comparative form. The financial statements shall be on a consolidated basis. The financial statements shall be in reasonable detail with appropriate notes and be prepared in accordance with Generally Accepted Accounting Principles. The annual financial statements shall be audited and reported on by independent certified public accountants of the Parent, and shall be accompanied by a report of such independent certified public accountants, stating that, in the opinion of such accountants, such financial statements present fairly, in all material respects, the financial position, and the results of operations and the cash flows of the Parent and its subsidiaries and of the Dyn Borrower and the Subsidiaries for the period then ended in conformity with Generally Accepted Accounting Principles, and that the audit by such accountants, if any, of such financial statements has been conducted in accordance with generally accepted auditing standards and included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and assessing the accounting principles used and significant estimates made, as well as evaluating the overall financial statement presentation. Each financial statement prepared under this subsection (b) shall be accompanied by a report signed by such accountants, either stating that, to the extent allowed under the AICPA guidelines, nothing has come to their attention which would cause them to believe that any event has occurred and is continuing which constitutes an Event of Default or Potential Default, or describing each such event. In addition to the annual financial statements, the Borrowers shall, upon request, furnish to the Lenders a copy of each other report submitted to the board of directors of the Parent by its independent certified public accountants, if any, in connection with any annual, interim or special audit made by them of the financial records of the Borrowers or any of the Subsidiaries.
(c) No Default. Within forty-five (45) calendar days after the end of each fiscal quarter (other than the fourth quarter, which shall be within ninety (90) calendar days), a certificate signed by the Chief Executive Officer, Senior Vice President and Treasurer, any Executive Vice President or the Vice President and Controller of the Parent certifying that, to the best of such officer's knowledge, after due inquiry, (i) the Borrowers and the Subsidiaries have complied with all covenants, agreements and conditions in each Loan Document and (ii) no event has occurred and is continuing which constitutes an Event of Default or Potential Default, or describing each such event and the remedial steps being taken by the Borrowers.
(d) ERISA. All reports and forms filed with respect to all Plans, except as filed in the normal course of business and that would not result in an adverse action to be taken under ERISA, and details of related information of a Reportable Event.
(e) Net Cash Proceeds. Promptly upon receipt of Net Cash Proceeds (other than the Net Cash Proceeds of Inventory sold in the ordinary course of business, machinery and equipment that is obsolete, damaged or no longer used or useful disposed in the ordinary course of business or machinery and equipment replaced with comparable goods within three months of such disposition), a certificate of the Chief Executive Officer, Senior Vice President and Treasurer, any Executive Vice President or the Vice President and Controller of the Parent setting forth the details of the transaction giving rise to such Net Cash Proceeds, the details of the calculation of the Net Cash Proceeds and the source thereof.
(f) Material Changes. Promptly upon its occurrence, notification of any litigation, administrative proceeding, investigation, business development (relating particularly to the Borrowers or the Subsidiaries and not generally to economic conditions or the industry in which they are engaged), or change in financial condition as to which either of the Borrowers has knowledge which could reasonably be expected to have a material adverse effect on the business, operations, including backlog, cash flows, assets or condition (financial or otherwise) of the Dyn Companies taken as a whole.
(g) Other Information. Such other information and reports regarding the operations, business affairs, prospects and financial condition of the Borrowers or the Subsidiaries as the Lenders may reasonably request, including shareholder and Securities and Exchange Commission notices, reports and filings and any material press release. In addition, the Lenders shall be entitled to examine and make abstracts from the books and records, operating reports, budgets and other financial reports of the Borrowers and the Subsidiaries and to visit and inspect the facilities of the Borrowers and, upon reasonable notice to the Borrower, the facilities of the Subsidiaries. Upon request, the Lenders shall be entitled to receive, when available, copies of financial statements, forecasts and projections provided to or approved by the Borrowers' or Subsidiaries' boards of directors.
6.2 Taxes and Other Charges. Pay or cause to be paid after notice that the same are due all taxes, assessments and governmental charges imposed upon the Borrowers and Subsidiaries or any assets that are subject to the Lien of the Agent or which the Borrowers and the Subsidiaries are required to withhold and pay over to the relevant taxing authorities, except (a) as may be contested in good faith by the Borrowers or the Subsidiaries by appropriate proceedings and (b) estimated taxes of the type disclosed on Schedule 3.9, in each case for which reserves in accordance with Generally Accepted Accounting Principles have been established by such Borrower or Subsidiary as reflected in the Borrower's or Subsidiary's financial statements.
6.3 Corporate Existence. Except as otherwise permitted by
Section 7.1, preserve its corporate existence and material
franchises, licenses, patents, copyrights, trademarks and trade
names consistent with good business practice, to the extent
required to continue to comply with the representations and
warranties of Section 3.1.
6.4 Compliance with ERISA. Maintain each Covered Plan in compliance in all material respects with all applicable requirements of ERISA and the Code, including all applicable rulings and regulations under ERISA and the Code. As soon as practicable and, in any event, within 10 days after either of the Borrowers, any Subsidiary or any ERISA Affiliate knows, or has reason to know, that:
(a) any Termination Event with respect to a Pension Plan (other than a Multiemployer Plan) has occurred or will occur; or
(b) either Borrower, any Subsidiary or any ERISA Affiliate has applied for a waiver of the minimum funding standard under Section 412 of the Code with respect to a Pension Plan; or
(c) the aggregate amount of the Unfunded Pension Liabilities under all Pension Plans (other than Multiemployer Plans) has increased to an amount in excess of $1,000,000; or
(d) the aggregate amount of Unrecognized Retiree Welfare Liability under all applicable Plans has increased to an amount in excess of $1,000,000; or
(e) either Borrower, any Subsidiary or any ERISA Affiliate has engaged in a Prohibited Transaction with respect to a Plan; or
(f) there is a partial or complete withdrawal (as described in ERISA Section 4203 or 4205) by either Borrower, any Subsidiary or any ERISA Affiliate from a Multiemployer Plan; or
(g) either Borrower, any Subsidiary or any ERISA Affiliate is in "default" (as defined in ERISA Section 4219(c)(5)) with respect to payments to a Multiemployer Plan by reason of its complete or partial withdrawal from such Multiemployer Plan; or
(h) a Multiemployer Plan terminates or is in "reorganization" (as described in Code Section 418 or Title IV or ERISA); or
(i) the actual withdrawal liability that has been assessed (as determined in accordance with Title IV or ERISA) against either Borrower, any Subsidiary or any ERISA Affiliate with respect to all Multiemployer Plans has, in any year, increased to an amount in excess of $1,000,000; or
(j) there is an action brought against either Borrower, any Subsidiary or any ERISA Affiliate under ERISA Section 502 with respect to its failure to comply with ERISA Section 515;
the Borrowers shall prepare and, upon request of any Lender, furnish or cause to be furnished to any Lender, a notice of such event.
Any notice required hereunder shall include a certificate
addressed to the applicable Lender and signed by the Chief
Executive Officer, Senior Vice President and Treasurer, any
Executive Vice President and Chief Financial Officer or the Vice
President and Controller of the Parent, setting forth all
pertinent details relating to the events described in such notice
is based and the action which is proposed to be taken with
respect
thereto.
6.5 Compliance with Regulations. Comply in all material respects with all Regulations applicable to its business, the noncompliance with which is reasonably likely to have a material adverse effect on the business, operations, assets or condition (financial or otherwise) of the Dyn Companies taken as a whole.
6.6 Notice of Events. Promptly upon discovery by either of the Borrowers of any of the events described in subsections (a) through (e) hereof, the Borrower shall deliver to each Lender telephone notice, and within three (3) calendar days of such telephone notice deliver to each Lender a written notice, which describes the event and all action the Borrowers propose to take with respect thereto:
(a) an Event of Default or Potential Default under this Agreement;
(b) any default or event of default under a contract or series of related contracts which default or event of default (i) involves payments by the Borrowers or any Subsidiary in an aggregate amount equal to or in excess of $1,000,000 or (ii) is reasonably likely to result in the loss by the Borrowers or any Subsidiary of the right to receive payments otherwise owing to the Borrowers or such Subsidiary under any such contract or series of related contracts in an amount equal to or in excess of $1,000,000;
(c) failure by a Subsidiary to comply with its obligation to remit funds received to a Depositary Account for transfer to a Concentration Account in accordance with Section 2.8(c);
(d) the entry of any default judgment, order, stipulated judgment or order or settlement in any suit, action, arbitration, administrative proceeding, criminal prosecution or governmental investigation involving either of the Borrowers or any Subsidiary in which the amount to be paid by the Borrowers or such Subsidiary (but not by its insurers) is at least $500,000; or
(e) any change in any Regulation, including, without limitation, changes in tax laws and regulations, which could reasonably have a material adverse impact on the ability of either of the Borrowers or any of the Subsidiaries to perform their obligations under the Loan Documents or a material adverse effect on the business, operations, assets or condition (financial or otherwise) of either of the Borrowers or Subsidiaries taken as a whole.
6.7 Maintenance of Records; Audits. Create and maintain,
(a) on each Business Day, a report as to cash received by the
Borrowers from each Subsidiary on the immediately preceding
Business Day, the cash provided by the Borrowers to each such
Subsidiary on such preceding Business Day, and a comparison of
each such Subsidiary's net cash against such Subsidiary's monthly
forecast provided to the Borrowers and (b) within two Business
Days after the end of each week, a summary of the Daily Reports
for each day of such preceding week, and, upon request by a
Lender, provide any or all such reports pursuant to (a) or (b)
above to such Lender. The Lenders shall have the right to have
conducted annually by the Lenders or designees (as selected by
the Majority Lenders) an audit of the Borrowers and the
Subsidiaries and all the Borrowers' and the Subsidiaries' books
and records, including without limitation an audit of all books
and records relating to the Collateral, provided that such audits
may be conducted more frequently within the reasonable discretion
of the Majority Lenders. The Borrowers shall bear the expense of
such annual audit, and the Lenders shall bear the expense of such
audits conducted more frequently than annually. In addition, the
Lenders may at any time consult with any director, authorized
officer, employee, agent or representative of either of the
Borrowers or, upon reasonable notice to the Borrowers, of any
Subsidiary regarding any matter deemed by a Lender to be material
to the transactions contemplated hereby or the operations of the
Borrowers or such Subsidiary.
6.8 Generally Accepted Accounting Principles. Maintain its books and records at all times in accordance with Generally Accepted Accounting Principles.
6.9 Sale of Assets of JWSC. Cause SellCo to distribute to the Parent not less than $15,000,000 of Net Cash Proceeds from the sale, lease, transfer or disposition of the stock of JWSC, and cause JWSC to distribute to the Parent not less than $15,000,000 of Net Cash Proceeds from the sale, lease, transfer or disposition of any of its assets, tangible or intangible, from and after the date hereof, in each case promptly upon receipt.
VII. NEGATIVE COVENANTS.
The Borrowers covenant and agree that, without the prior written consent of the Majority Lenders, from and after the date hereof and so long as the Loan Commitments are in effect or any Obligations remain unpaid or outstanding, neither the Dyn Borrower nor any Subsidiary (or, with respect to Sections 7.1, 7.5, 7.8 or 7.11, the Parent) will:
7.1 Merger, Consolidation. Merge or consolidate with or into any corporation except, if no Potential Default or Event of Default shall have occurred and be continuing either immediately prior to or upon the consummation of such transaction, a Subsidiary may be merged into another Subsidiary or the Dyn Borrower.
7.2 Indebtedness for Borrowed Money. Incur, create, or permit to exist any Indebtedness for Borrowed Money, except:
(a) the Obligations;
(b) Indebtedness for Borrowed Money of the Dyn Borrower or any Subsidiary under any lease of property, real or personal, as to which the present value of the minimum rental commitment would be capitalized in accordance with Generally Accepted Accounting Principles ("Capital Leases");
(c) Indebtedness for Borrowed Money of the Dyn Borrower or any Subsidiary incurred to finance the purchase of inventory, machinery or equipment (including vehicles) in the ordinary course of business;
(d) Indebtedness for Borrowed Money consisting of the deferred or financed payment obligation of the Dyn Borrower or any Subsidiary of insurance premiums in the ordinary course of business;
(e) Indebtedness for Borrowed Money of Subsidiaries consisting of reimbursement obligations with respect to documentary letters of credit issued for its own account to support the purchase of goods in the ordinary course of business;
(f) Intercompany Debt among the Parent, the Dyn Borrower and Subsidiaries evidenced by Intercompany Notes; and
(g) Indebtedness for Borrowed Money of the Parent and JWP Systems/Kirkwood Electric Co. Inc. consisting of a contingent note payable to Bank of America in a maximum principal amount of $988,000.
7.3 Liens. Create, assume or permit to exist any Lien on the Dyn Borrower's or any Subsidiary's property or assets, whether now owned or hereafter acquired, or upon any income or profits therefrom, except:
(a) Permitted Liens;
(b) Liens upon assets subject to, and securing, Capital Leases;
(c) purchase money mortgages securing Indebtedness for Borrowed Money permitted by Section 7.2(c);
(d) Liens upon assets of the obligors of Indebtedness for Borrowed Money permitted by Sections 7.2(b) securing such Indebtedness for Borrowed Money;
(e) Liens upon insurance policies securing the financed premiums thereof permitted by Section 7.2(d); and
(f) Liens upon restricted depositary accounts of the Dyn Borrower or the Subsidiaries required to be maintained in connection with specific jobs or contracts into which all or a portion of payments with respect to the respective job or contract are required to be deposited and from which disbursements relating to such job or contract are required to be made (each such account, an "Imprest Account").
7.4 Guarantees. Guarantee or otherwise in any way become or be responsible for indebtedness or obligations (including working capital maintenance, take-or-pay contracts, etc.) of any other person, contingently or otherwise, except:
(a) the endorsement of negotiable instruments of deposit in the normal course of business;
(b) guarantees further described on Schedule 7.4 hereto, which, unless otherwise expressly noted on such Schedule 7.4, are existing on the date hereof, such guarantees not apply to the renewal of the underlying obligation except for such renewals in the ordinary course of business which do not cause the amount of the guarantee to increase;
(c) guarantees by the Dyn Borrower or a Subsidiary of Indebtedness for Borrowed Money permitted by Section 7.2(b) or (c); and
(d) guarantees by the Dyn Borrower or a Subsidiary of the obligations of any Subsidiary or of the Dyn Borrower under performance and payment bonds and guarantees by the Dyn Borrower or a Subsidiary of the Obligations of a Subsidiary or of the Dyn Borrower in the ordinary course of business for the benefit of other Persons to induce such Persons to forego the issuance of a performance bond or payment bond.
7.5 Sale of Stock of Subsidiaries. Except pursuant to the terms of Section 7.8,
(a) sell, assign, pledge or otherwise dispose of any shares of stock or other equity interests in the Dyn Borrower or a Subsidiary (or warrants, rights or options to acquire stock of or equity interests in any Subsidiary) other than (i) the transfer of the shares of a Subsidiary to another Subsidiary or the Dyn Borrower and (ii) the pledge of any such stock if such pledge is a Permitted Lien; or
(b) in the case of a Subsidiary, issue or sell any shares of its stock or other equity interests in itself (or warrants, rights or options to acquire, or securities convertible into, such stock or other equity interests) to any Person other than to the Dyn Borrower or a Subsidiary.
7.6 Judgment, Attachment. Permit any of its assets to be subject to any judgments, attachments or levies the aggregate amount of which exceeds $500,000 and which judgments, attachments or levies have not been stayed by appeal, satisfied, bonded or discharged within thirty (30) calendar days after service of notice thereof to a Borrower or such Subsidiary.
7.7 Loans, Advances and Investments. Purchase or otherwise acquire or hold any Investments, except that:
(a) the Dyn Borrower or a Subsidiary may make and own those Investments in a Person that is an Affiliate which Investments are existing as of the date hereof;
(b) the Dyn Borrower or a Subsidiary may make and own Investments in a Person that is not an Affiliate which Investments are existing as of the date hereof and which, if as to any Investment of greater than $500,000, are set forth on Schedule 7.7;
(c) the Dyn Borrower or a Subsidiary may make and own Investments consisting of Intercompany Debt permitted under Section 7.2(f) above;
(d) the Dyn Borrower or a Subsidiary may make and own stock, obligations or securities received in settlement of debts (created in the ordinary course of business) owing to such Borrower or Subsidiary;
(e) the Dyn Borrower or a Subsidiary may make loans or advances to employees of either Borrower or any Subsidiary, which loans and advances, in the aggregate, will not exceed $500,000 at any time outstanding;
(f) the Dyn Borrower or a Subsidiary may make Investments consisting of notes, bonds, debentures or other securities or instruments (other than general partnership and similar instruments) acquired by such Borrower or Subsidiary in connection with the sale of assets permitted by Section 7.8; provided, however, that such Investments received in connection with any such a disposition of assets shall not exceed 25% of the total consideration received upon such disposition;
(g) the Dyn Borrower or a Subsidiary may make and own:
(i) Investments in certificates of deposit or time deposits having maturities in each case not exceeding one year from the date of issuance thereof and issued by any FDIC-insured commercial bank incorporated in the United States or any state thereof having a combined capital and surplus of not less than $500,000,000;
(ii) Investments in marketable direct obligations issued or unconditionally guaranteed by the United States of America or issued by any agency thereof and backed by the full faith and credit of the United States of America, in each case maturing within one year from the date of issuance or acquisition thereof;
(iii) Investments in commercial paper or demand notes issued by a corporation incorporated in the United States or any State thereof maturing no more than one year from the date of issuance thereof and, at the time of acquisition, having a rating of A-1 (or better) by Standard & Poor's Corporation or P-1 (or better) by Moody's Investors Service, Inc.; and
(iv) Investments in money market mutual funds
all of the assets of which are invested in cash or
investments described in clauses (i), (ii) and
(iii) of this paragraph (g).
(h) a Borrower or any Subsidiary may make and own Investments in the ordinary course of business in connection with its capacity as a co-venturer in a joint venture, corporation, or other similar pooling of efforts in respect of a specific project or series of related specific projects for a limited or fixed duration to conduct a business of the type in which the Dyn Borrower or Subsidiary is presently engaged consistent with past practices;
7.8 Transfer of Assets. Except as otherwise provided in this Agreement, sell, lease, transfer, pledge, assign or otherwise dispose of any assets of either Borrower or any Subsidiary, unless (i) such pledge is a Permitted Lien, (ii) such sale or disposition is a Permitted Disposition or (iii) the Net Cash Proceeds of such transaction are deposited into the Cash Collateral Account (as defined below) and, in any such case, no Event of Default or Potential Default shall have occurred or will thereby occur. The "Cash Collateral Account" shall be a depositary account maintained by the Dyn Borrower, but under the sole dominion and control and subject to the Lien and security interest of the Agent provided in Section 4.1 hereof pursuant to an agreement among the depositary institution holding such account, the Dyn Borrower and the Agent, which agreement shall be in form and substance acceptable to the Agent.
7.9 Modification of Loan Agreements or Policies; Payment of Debt. Except for such changes as are approved by the Majority Lenders in writing, (i) consent to or permit any amendment, modification or waiver of any material provision or term contained in any agreement or indenture governing any Indebtedness for Borrowed Money unless such change is not adverse to the Lenders and would not result in an Event of Default or Potential Default or (ii) prepay, redeem, purchase or otherwise acquire, or make any payment on account of, any Indebtedness for Borrowed Money other than repayments by the Dyn Borrower or a Subsidiary in the ordinary course of business, repayments hereunder or scheduled amortization of debt or outstanding amounts under a revolving credit, other than (A) Intercompany Debt or (B) mandatory prepayments of the contingent note of JWP Systems/Kirkwood Electric Co. Inc. and the Parent in the maximum amount of $988,000.
7.10 Claims. Incur, create, assume or suffer or permit to
exist any claim against either of the Borrowers, any claim
against any Subsidiary, or any Lien on any of the assets that is
subject to the Lien of the Agent, that would be pari passu with
or senior to the Lien of the Agent under the Loan Documents,
other than (a) claims, not relating to Indebtedness for Borrowed
Money, arising in the ordinary course of business, (b) claims
against the Subsidiaries expressly permitted by Section 7.2 and
(c) Liens expressly permitted by Section 7.3 and claims secured
by such Liens.
7.11 Accounting Change. Make or permit any change in financial accounting policies or financial reporting practices, except as required by Generally Accepted Accounting Principles or as may be approved in writing by the Majority Lenders.
7.12 Backlog. Permit the aggregate amount of backlog and work-in-progress at any time of all then-existing contracts of the Dyn Borrower and the Subsidiaries to diminish by an amount in excess of (a) 20% of the total amount of backlog and work-in- progress as of the end of the immediately preceding month or (b) 40% of the total amount of backlog and work-in-progress as of the end of the month immediately preceding the date of this Agreement.
7.13 Losses from Operations. Permit the aggregate of losses
from operations of the Dyn Borrower and the Subsidiaries incurred
(i) as of January 31, 1995 for the one-month period then ended,
(ii) as of February 28, 1995 for the two-month period then ended
and (iii) as of March 31, 1995 and as of the last Business Day of
each month ending thereafter for the three-month period then
ended, to equal or exceed $1,000,000, which losses shall be
determined prior to any adjustment arising out of FAS 112 -
Employer's Accounting for Post-Retirement Benefits.
VIII. DEFAULT.
8.1 Events of Default. The Borrowers shall be in default if any one or more of the following events ("Event of Default") occurs:
(a) Principal, Interest or Other Amounts. The Borrowers fail to pay any principal of or interest on any Note when due and payable (whether at maturity, by notice of intention to prepay, or otherwise) or fails to pay when it is due and payable any other amount payable under any Loan Document;
(b) Covenants.
(i) The Borrowers fail to observe or perform as and when required any of the terms, conditions or covenants contained in any Loan Document (other than those referred to in clause (ii) below unless waived by the Majority Lenders); or
(ii) The Borrowers fail to observe or perform as and when required any of the terms, conditions or covenants contained in Sections 6.3 (other than as to the corporate existence of the Borrower or any Subsidiary), 6.4, 6.5, 6.6(c), 6.6(d) or 6.6(e) of this Agreement, and such failure shall continue for thirty (30) days after written notice to the Borrower by any Lender.
(c) Representations, Warranties, Etc. Any representation or warranty made by either Borrower or any Subsidiary herein or in any Loan Document or in any exhibit, schedule, report or certificate delivered pursuant hereto or thereto shall prove to have been false, misleading or incorrect in any material respect when made or deemed to have been made;
(d) Bankruptcy, Etc. of Borrowers and any Subsidiary. Either Borrower or any Subsidiary is dissolved or liquidated, other than the voluntary dissolution of B&B Contracting and Supply Company, makes an assignment for the benefit of creditors, files a petition in bankruptcy, is adjudicated insolvent or bankrupt, petitions or applies to any tribunal for any receiver or trustee, commences any proceeding relating to itself under any bankruptcy, reorganization, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, has commenced against it any such proceeding which remains undismissed for a period of forty-five (45) days, indicated its consent to, approval of or acquiescence in any such proceeding, or any receiver of or trustee for such Borrower or Subsidiary or any substantial part of the property of such Borrower or Subsidiary is appointed, or any Borrower or Subsidiary suffers any such receivership or trusteeship to continue undischarged for a period of forty-five (45) days;
(e) Failure to Maintain Bonding in the Ordinary Course. Reliance, or any comparable successor bonding company, shall not continue to make available performance and payment bonds required for the conduct in the ordinary course of the business of the Dyn Companies;
(f) Material Adverse Change. Except as disclosed on Schedule 5.1, any material adverse change shall have occurred in the financial condition, cash flows or operations, including backlog, of either of the Borrowers or of the Dyn Companies taken as a whole since September 30, 1994;
(g) Certain Other Defaults. The Dyn Borrower or any Subsidiary shall fail to pay when due any Indebtedness for Borrowed Money which singularly or in the aggregate exceeds $500,000, and such failure shall continue and not be waived beyond any applicable cure period, or Dyn Borrower or any Subsidiary shall suffer to exist any default or event of default in the performance or observance, subject to any applicable notice or grace period, of any agreement, term, condition or covenant with respect to any agreement or document, if the effect of such default, if not waived, is to permit, with the giving of notice or passage of time or both, the holders thereof, or any trustee or agent for said holders, to terminate or suspend any commitment (which is equal to or in excess of $500,000) to lend money or to cause or declare any portion of any borrowings thereunder to become due and payable prior to the date on which it would otherwise be due and payable, provided that during any applicable cure period the Lenders' obligations hereunder to make further Loans shall be suspended;
THEN and in every such event other than that specified in clause
(d) and, as to each such event other than that specified in
clause (a), only so long as such event shall be continuing, the
Majority Lenders may terminate the Aggregate Loan Commitment and
may declare the Loans and all other Obligations, including
without limitation accrued interest and the then unpaid
Commitment Fee, to be, and the Loans and all other Obligations
shall thereupon become, due and payable without presentment,
demand, protest or other notice of any kind, all of which are
hereby waived by each Borrower and Subsidiary. Upon the
occurrence of any event specified in clause (d) above, the
Aggregate Loan Commitment shall automatically terminate and the
Loans and all other Obligations, including without limitation
accrued interest and the then unpaid Commitment Fee, shall
immediately be due and payable without presentment, demand,
protest or other notice of any kind, all of
which are hereby waived by each Borrower and Subsidiary. Any
date on which the Loans and such other Obligations are declared
due and payable pursuant to this Section 8.1, shall be a Maturity
Date for purposes of this Agreement.
IX. GUARANTY.
9.1 Guaranty.
(a) Each Subsidiary unconditionally and irrevocably guarantees the due and punctual payment by, and performance of, the Obligations of the Borrowers. Each Subsidiary further agrees that the Obligations may be extended or renewed, in whole or in part, without notice or further assent from it (except as may be otherwise required herein), and it will remain bound upon this guaranty notwithstanding any extension or renewal of any Obligation.
(b) Each Subsidiary waives presentation to, demand for payment from and protest to, as the case may be, either of the Borrowers, any Subsidiary or any other guarantor of the Obligations, and also waives notice of protest for nonpayment. The obligations of each Subsidiary hereunder shall not be affected by (i) the failure of any Lender to assert any claim or demand or to enforce any right or remedy against either of the Borrowers, any Subsidiary or any other guarantor of the Obligations under the provisions of this Agreement, any other Loan Document, any other agreement or otherwise; (ii) any extension or renewal of any provision hereof or thereof; (iii) the failure of the Lender to notify or obtain the consent of any Subsidiary with respect to any rescission, waiver, compromise, acceleration, amendment or modification of any of the terms or provisions of this Agreement, the Note, any other Loan Document, or of any other agreement; (iv) the release, exchange, waiver or foreclosure of any security held by the Agent or any Lender for the Obligations or any of them; (v) the failure of a Lender to exercise any right or remedy against any Subsidiary or any other guarantor of the Obligations; or (vi) the release or substitution of any Subsidiary.
(c) Each Subsidiary further agrees that this guaranty constitutes a guaranty of performance and of payment when due and not just of collection, and expressly waives any right to require that any resort be had by the Agent or any Lender to any security held for payment of the Obligations either of or to any balance of any deposit, account or credit on the books of the Agent or any Lender in favor of the Borrowers, any Subsidiary or any other guarantor of the Obligations or to any other Person.
(d) Each Subsidiary hereby expressly assumes all responsibilities to remain informed of the financial condition of the Borrower and any circumstances affecting the ability of either of the Borrowers to perform under this Agreement or any other Loan Document.
(e) Each Subsidiary's guaranty shall not be affected by the genuineness, validity, regularity or enforceability of the Obligations, the Notes or any other Loan Documents, or by the existence, validity, enforceability, perfection, or extent of an collateral therefor or by any other circumstances relating to the Obligations which might otherwise constitute a defense to this Guaranty. The Lender makes no representation or warranty in respect to any such circumstances and has no duty or responsibility whatsoever to each Subsidiary in respect to the management and maintenance of the Obligations or any collateral security for the Obligations.
9.2 No Impairment of Guaranty. The obligations of each Subsidiary hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including, without limitation, any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Subsidiary hereunder shall not be discharged or impaired or otherwise affected by the failure of the Agent or any Lender to assert any claim or demand or to enforce any remedy under this Agreement or any other agreement, by any waiver or modification of any provision thereof, by any default, failure or modification of any provision thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of such Subsidiary or would otherwise operate as a discharge of such Subsidiary as a matter of law, unless and until the Obligations are finally and indefeasibly paid in full.
9.3 Continuation and Reinstatement, Etc.
(a) Each Subsidiary further agrees that its guaranty hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or is otherwise restored by any Lender. In furtherance of the provisions of this Section 9, and not in limitation of any other right which a Lender may have at law or in equity against either of the Borrowers or a Subsidiary by virtue hereof, upon failure of the Borrowers to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice or otherwise, each Subsidiary hereby promises to and will, upon receipt of written demand by any Lender, forthwith pay or cause to be paid to such Lender in cash an amount equal to the unpaid amount of all the Obligations with interest at a rate of interest equal to the rate specified in Section 2.4(b) hereof.
(b) All rights of the Subsidiaries against either of the Borrowers, arising as a result of the payment by any Subsidiary of the sums to a Lender by way of right of subrogation or otherwise shall in all respects be subordinated and junior in right of payment to the prior final and indefeasible payment in full of all the Obligations to the Agent and the Lenders. If any amount shall be paid to such Subsidiary for the account of either of the Borrowers, such amount shall be held in trust for the benefit of the Lenders and shall forthwith be paid to the Lenders to be credited and applied to the Obligations, whether matured or unmatured.
(c) Each Subsidiary shall have a right of contribution from each other Subsidiary with respect to any sums paid by a Subsidiary to a Lender hereunder, which right of contribution shall in all respects be subordinated and junior in right of payment to the prior final and indefeasible payment in full of the Obligations to the Agent and the Lenders.
(d) The obligations of the Subsidiaries hereunder shall terminate upon the final and indefeasible payment in full of the Obligations to the Agent and the Lenders. In addition, the Agent and the Lenders shall release a Subsidiary from its obligations hereunder upon the disposition of all of the capital stock of such Subsidiary in accordance with Section 7.8.
9.4 Representations and Warranties. Each Subsidiary hereby represents and warrants to the Lenders that each representation and warranty by either of the Borrowers set forth in this Agreement and each other Loan Document relating to such Subsidiary or any Subsidiary of such Subsidiary, including without limitation the representations and warranties contained in Article III hereof, is true, correct and complete in all respects.
X. MISCELLANEOUS.
10.1 Waiver. No failure or delay on the part of any Lender or any holder of any Note in exercising any right, power or remedy under any Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy under any Loan Document. The remedies provided under the Loan Documents are cumulative and not exclusive of any remedies provided by law.
10.2 Amendments. No amendment, modification, termination or waiver of any Loan Document or any provision thereof nor any consent to any departure by either of the Borrowers or any Subsidiary therefrom shall be effective unless the same shall have been approved by the Majority Lenders, be in writing and be signed by the Majority Lenders and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Notwithstanding any other provision contained in any Loan Document, no amendment, modification, termination or waiver shall affect payment of principal (including without limitation the date when due), reduce any interest rate or any fee provided herein, increase any Loan Commitment, release any Collateral, modify the definition of "Majority Lenders," modify this Section 10.2 or adversely affect the security interest or any voting rights of the Lenders herein without the written consent of all the Lenders. No notice to or demand on the Borrower shall entitle either of the Borrowers to any other or further notice or demand in similar or other circumstances.
10.3 Governing Law. The Loan Documents and all rights and obligations of the parties thereunder shall be governed by and be construed and enforced in accordance with the laws of the State of New York without regard to principles of conflict of laws.
10.4 Assignments and Participations. Each Loan Document shall bind and inure to the benefit of each Borrower, each Subsidiary and each Lender and their respective successors and assigns, except that neither of the Borrowers nor any Subsidiary shall have the right to assign any of its rights or interests under any Loan Document without the prior written consent of all of the Lenders. No person not a party to any Loan Document is intended to be benefitted thereby.
10.5 Captions. Captions in the Loan Documents are included for convenience of reference only and shall not constitute a part of any Loan Document for any other purpose.
10.6 Notices. All notices, requests, demands, directions, declarations and other communications between the Lenders, the Borrower and the Subsidiaries provided for in any Loan Document shall, except as otherwise expressly provided, be mailed by registered or certified mail, return receipt requested, or telegraphed, or telefaxed, or delivered in hand to the applicable party at its address indicated below:
If to a Lender, to the persons set forth on Schedule 10.6 hereto.
with copies to:
Fidelity Management & Research Co.
82 Devonshire Street F7C
Boston, Massachusetts 02109
Attention: Portfolio Manager
Telecopier No.: 617-570-7688
and
TCW Special Credits, as agent
865 South Figueroa Street, 18th Floor
Los Angeles, CA 90017
Attention: Richard Masson, Managing Director
Telecopier: 213-244-0494
and
Morgan, Lewis & Bockius
2000 One Logan Square
Philadelphia, Pennsylvania 19103
Attention: Michael A. Bloom, Esquire
Telecopier No.: 215-963-5299
If to the Borrower or any Subsidiary, to:
JWP INC.
Six International Drive
Rye Brook, New York 10573
Attention: President
Telecopier No.: 914-935-4178
with a copy to:
Stroock & Stroock & Lavan
Seven Hanover Square
New York, New York 10004
Attention: Lawrence Handelsman, Esquire
Telecopier No.: 212-806-6006
The foregoing shall be effective and deemed received three days after being deposited in the mails, postage prepaid, addressed as aforesaid and shall whenever sent by telegram, telegraph or telefax or delivered in hand be effective when received. Any party may change its address by a communication in accordance herewith.
10.7 Expenses of the Agent and the Lenders; Indemnification of the Agent and the Lenders.
(a) Not less frequently than monthly, the Borrowers
will reimburse the Agent and the Lenders promptly following
demand for all out-of-pocket expenses (including the reasonable
fees and expenses of legal counsel) in connection with (i) the
preparation of the Loan Documents, (ii) the making of any Loans,
(iii) the administration of the Loan Documents, and (iv) the
enforcement of the Loan Documents.
(b) In addition to the payment of the foregoing expenses, the Borrowers hereby agree to indemnify, protect and hold the Agent, the Lenders and any holder of the Note and the officers, directors, employees, agents, affiliates and attorneys of the Lenders and such holder (collectively, the "Indemnitees") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature, including reasonable fees and expenses of legal counsel, which may be imposed on, incurred by, or asserted against such Indemnitee by the Borrowers or other third parties and arise out of or relate to this Agreement or the other Loan Documents or any other matter whatsoever related to the transactions contemplated by or referred to in this Agreement or the other Loan Documents; provided, however, that the Borrowers shall have no obligation to an Indemnitee hereunder to the extent that the liability incurred by such Indemnitee has been determined by a court of competent jurisdiction to be the result of gross negligence or willful misconduct of such Indemnitee. For purposes of this Section 10.7, the past or future purchase by the Agent, a Lender or any other Indemnitee of any debt or equity securities of the Borrowers, other than the Notes and any interest thereon, shall not be deemed to be related to the transactions contemplated by or referred to in this Agreement or the other Loan Documents.
10.8 Survival of Warranties and Certain Agreements. All agreements, representations and warranties made or deemed made herein shall survive the execution and delivery of this Agreement, the making of the Loans hereunder and the execution and delivery of the Note. Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of the Borrowers set forth in Section 10.7 shall survive the payment of the Loans and the termination of this Agreement. This Agreement shall remain in full force and effect until the latest to occur of the termination of the Aggregate Loan Commitment or the repayment in full of all amounts owed by the Borrowers under any Loan Document.
10.9 Severability. The invalidity, illegality or unenforceability in any jurisdiction of any provision in or obligation under this Agreement, the Notes or other Loan Documents shall not affect or impair the validity, legality or enforceability of the remaining provisions or obligations under this Agreement, the Notes or other Loan Documents or of such provision or obligation in any other jurisdiction.
10.10 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. EACH BORROWER AND SUBSIDIARY HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE BOROUGH OF MANHATTAN, CITY OF NEW YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO MAJORITY LENDERS' ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THE NOTE, THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. EACH BORROWER AND SUBSIDIARY ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE NOTE, OR SUCH OTHER LOAN DOCUMENT. EACH BORROWER AND SUBSIDIARY DESIGNATES AND APPOINTS PRENTICE HALL (OR SUCH OTHER PERSON AS SHALL ACT AS REGISTERED AGENT OF ANY BORROWER OR SUBSIDIARY IN NEW YORK AND AS TO WHOM ANY BORROWER OR SUBSIDIARY SHALL PROVIDE NOTICE IN WRITING TO THE LENDERS) AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY SUCH PERSON WHICH IRREVOCABLY AGREE IN WRITING TO SO SERVE AS ITS AGENT TO RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY EACH BORROWER AND SUBSIDIARY TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO EACH BORROWER AND SUBSIDIARY, AS APPLICABLE, AT ITS ADDRESS AS PROVIDED IN SECTION 10.6, EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY ANY BORROWER OR SUBSIDIARY REFUSES TO ACCEPT SERVICE, EACH BORROWER AND SUBSIDIARY HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST ANY BORROWER OR SUBSIDIARY IN THE COURTS OF ANY OTHER JURISDICTION.
10.11 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS, THE SUBSIDIARIES AND THE LENDERS HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE LENDER/BORROWER RELATIONSHIP ESTABLISHED HEREBY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH OF THE BORROWERS, SUBSIDIARIES AND THE LENDERS ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO THE TRANSACTION, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH BORROWER, SUBSIDIARY AND THE LENDERS FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
10.12 Counterparts; Effectiveness. This Agreement and any amendment hereto or waiver hereof may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement and any amendments hereto or waivers hereof shall become effective when the Lenders shall have received signed counterparts or notice by telecopy of the signature page that the counterpart has been signed and is being delivered to the Lenders or facsimile that such counterparts have been signed by all the parties hereto or thereto.
10.13 Use of Defined Terms. All words used herein in the singular or plural shall be deemed to have been used in the plural or singular where the context or construction so requires.
Any defined term used in the singular preceded by "any" shall be taken to indicate any number of the members of the relevant class.
10.14 Lender Obligations. Each Borrower and Subsidiary hereby acknowledges that TCW Special Credits is entering into this Agreement, and undertaking the obligations of a Lender hereunder, only as agent or nominee for each Fund and on each Fund's behalf and not individually, and that TCW Special Credits is not personally liable with respect to the obligations of a Lender hereunder. Each Borrower and Subsidiary further acknowledges that the liability of the Funds is several and not joint and several, in accordance with and in proportion to their respective percentage interest set forth on Schedule A hereto, and each Fund shall be liable for its breach hereby only to the extent such breach and any loss, cost or damages incurred by Borrower as a result thereof, relates to such Fund. TCW Special Credits represents and warrants that (i) as of the date of this Agreement each of the Funds has a net worth equal to not less than $25,000,000, and (ii) investors in the Funds cannot unilaterally withdraw all or any portion of their investment in the Funds at any time on or before the Maturity Date.
IN WITNESS WHEREOF, the Borrowers, the Subsidiaries and the Lenders have caused this Agreement to be executed by their proper corporate officers thereunto duly authorized as of the day and year first above written.
JWP INC.
DYN SPECIALTY CONTRACTING,
INC.
B&B CONTRACTING AND SUPPLY
COMPANY
DYNAELECTRIC COMPANY
CONTRA COSTA ELECTRIC, INC.
DYNAELECTRIC COMPANY OF
NEVADA, INC.
JWP SYSTEMS/KIRKWOOD
ELECTRIC COMPANY, INC.
BELMONT CAPITAL PARTNERS II,
L.P.
By: Fidelity Capital Partners
II Corp.,
Managing General Partner
TCW SPECIAL CREDITS, as agent
and nominee for the entities
listed on Schedule A annexed
hereto, AS LENDER
By: TCW Asset Management
Company,
its managing general
partner
|
ALBERT FRIED & COMPANY
UBS MORTGAGE FINANCE INC.
EXHIBIT 10(ee)
GUARANTOR SECURITY AGREEMENT
by and among
the Subsidiaries of
DYN SPECIALTY CONTRACTING, INC.,
signatory hereto
THE LENDERS NAMED HEREIN
and
CORESTATES BANK, N.A.
as Agent
December ___, 1994
GUARANTOR SECURITY AGREEMENT
THIS GUARANTOR SECURITY PLEDGE AGREEMENT, dated as of December ____, 1994 (this "Agreement"), is entered into by and among the subsidiaries of DYN SPECIALTY CONTRACTING, INC. that are signatories hereto (each, a "Pledgor" and collectively, the "Pledgors"), BELMONT CAPITAL PARTNERS II, L.P. ("BELMONT"), TCW SPECIAL CREDITS, a California general partnership, as agent and nominee for the entities (each a "Fund") set forth in the Schedule attached hereto, ALBERT FRIED & COMPANY, UBS MORTGAGE FINANCE INC. and KEVIN C. TONER (each "Lender" and collectively, the "Lenders") and CORESTATES BANK, N.A., a national banking association (the "Agent"), solely in its capacity as agent for the Lenders.
WITNESSETH:
WHEREAS, JWP INC. (the "Parent") and Dyn Specialty Contracting, Inc. ("Dyn" and together with the Parent, the "Borrowers"), the Pledgors as guarantors, and the Lenders are parties to that certain Credit Agreement, dated as of the date hereof, whereby the Lenders are providing to the Borrowers credit facilities in the maximum aggregate amount of $10,000,000;
WHEREAS, each Pledgor has agreed to secure its obligations under the Credit Agreement pursuant to the terms and conditions set forth herein;
WHEREAS, it is a condition to the issuance of the initial loans under the Credit Agreement that this Agreement be executed and delivered.
NOW, THEREFORE, in consideration of the premises and intending to be legally bound hereby, the parties hereto agree as follows:
1. Definitions.
a. As used herein the following terms shall have the meanings indicated:
"Accounts" shall have the meaning assigned to such term under the Uniform Commercial Code, now or hereafter acquired, wherever located, excluding any accounts that are prohibited from assignment by an enforceable provision of any contract giving rise thereto.
"Affiliate" shall mean any Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, a Pledgor. A Person shall be deemed to control another Person if such Person possesses, directly or indirectly, the power (i) to vote 10% or more of the outstanding stock or other ownership interests having ordinary voting power for the election of directors of such other Person or (ii) to direct or cause the direction of the management and policies of such corporation, whether by contract or otherwise.
"Agent" has the meaning set forth in the preliminary paragraph hereof.
"Borrowers" has the meaning set forth in the preliminary paragraph hereof.
"Case" shall mean the case of the Parent before the United States Bankruptcy Court for the Southern District of New York.
"Chattel Paper" shall have the meaning assigned to such term under the Uniform Commercial Code, now or hereafter acquired, wherever located.
"Collateral" shall mean, as to each Pledgor, all of
such Pledgor's now-existing or hereafter acquired or arising (i)
Accounts, (ii) General Intangibles, including but not limited to
Intercompany Notes, Chattel Paper, Contracts and Instruments
derived from or related to any Accounts, (iii) guarantees of any
Accounts of which any of the Pledgors are the beneficiaries and
all other security held for the payment or satisfaction thereof,
(iv) goods or services the sale or lease of which gave rise to
any Account, including returned goods, (v) balance of any
deposit, agency or other account with any financial institution,
(vi) Inventory, (vii) Equipment, (viii) Pledged Securities and
the certificates representing the Pledged Securities, (ix)
Patents and Trademarks and (x) books, records and other property
at any time evidencing or related to the foregoing, together with
all products and Proceeds (including insurance Proceeds) of any
of the foregoing, including all such Proceeds held in the Cash
Collateral Account.
"Concentration Account" shall mean a concentration depositary account maintained by Dyn at a Concentration Bank and subject to a Depositary Agreement.
"Concentration Banks" shall mean NationsBank, N.A. or such other financial institution designated by a Borrower and approved by the Majority Lenders to maintain Concentration Accounts.
"Contract" shall have the meaning assigned to such term under the Uniform Commercial Code, now or hereafter acquired, wherever located, excluding any contract or rights thereunder that are prohibited from assignment by an enforceable provision of such contract.
"Credit Agreement" shall mean the Credit Agreement, dated the date hereof, among the Parent, Dyn, the Pledgors, as guarantors, and the Lenders, as hereafter amended from time to time.
"Depositary Agreement" shall mean an agreement among the Parent, Dyn, the Agent and a Concentration Bank, providing, among other things, that the Agent shall have a security interest in funds held in each Concentration Account and that, upon the terms and conditions provided therein, the Agent may require the Concentration Banks to transfer funds deposited into the Concentration Accounts solely in accordance with the instructions of the Agent, and authorizing the Agent to cause the Concentration Banks to remit to the Agent amounts necessary to pay the Lenders any amount payable under the Credit Agreement, Notes or any other Loan Document, as defined in the Credit Agreement, which is not paid in a timely manner; such agreement shall be in substantially the form of Exhibit A of the Credit Agreement.
"Equipment" shall have the meaning assigned to such term under the Uniform Commercial Code, now or hereafter acquired, wherever located.
"General Intangibles" shall have the meaning assigned to such term under the Uniform Commercial Code, now or hereafter acquired, wherever located.
"Generally Accepted Accounting Principles" shall mean generally accepted accounting principles as in effect in the United States from time to time, consistently applied.
"Instruments" shall have the meaning assigned to such term under the Uniform Commercial Code, now or hereafter acquired, wherever located.
"Intercompany Debt" shall mean any debt, loan or advance to, investment in, or guarantee of the obligations of, an Affiliate, other than indebtedness (i) arising in the ordinary course of business, (ii) under normal trade practices, (iii) on terms no less favorable than could be obtained between independent parties on an arm's-length basis and (iv) not for borrowed money.
"Intercompany Note" shall mean a promissory note evidencing Intercompany Debt (which Intercompany Debt may be in the nature of a revolving loan).
"Inventory" shall have the meaning assigned to such term under the Uniform Commercial Code, now or hereafter acquired, wherever located, and in any event, including all inventory, merchandise, goods and other personal property that are held by or on behalf of a Person for sale or lease or to be furnished under a contract of service, in each case in the ordinary course of business.
"Lenders" shall have the meaning assigned to such term in the Credit Agreement.
"Lien" shall mean any lien, mortgage, security interest, chattel mortgage, pledge or other encumbrance (statutory or otherwise) of any kind securing satisfaction or performance of an obligation, including any agreement to give any of the foregoing, any conditional sales or other title retention agreement, any lease in the nature thereof, and the filing of or the agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction or similar evidence of any encumbrance, whether within or outside the United States.
"Majority Lenders" shall mean Lenders holding Commitment Percentages aggregating 51%, until such time as the Agent shall have received notice from such Majority Lenders that the MES Obligations have been paid in full and satisfied, at which time the Majority Lenders shall mean "Lenders under the Dyn Credit Agreement holding "Commitment Percentages" (as such term is defined under the Dyn Credit Agreement) aggregating 51%.
"Obligations" shall mean all now existing or hereafter arising debts, obligations, covenants, and duties of payment or performance of every kind, matured or unmatured, direct or contingent, owing, arising, due, or payable to the Lenders by or from any of the Borrowers or any of the Pledgors arising out of the Credit Agreement or any other Loan Document, including, without limitation, all obligations to repay principal of and interest on all Loans and to pay interest, fees, costs, charges, expenses, professional fees, and all sums chargeable to the Borrowers and the Pledgors under the Loan Documents, whether or not evidenced by any note or other instrument.
"Patents and Trademarks" shall mean, as to each Pledgor, patents and trademarks owned, directly or indirectly, by such Pledgor.
"Permitted Investments" shall mean:
(i) Investments in certificates of deposit or time deposits having maturities in each case not exceeding one year from the date of issuance thereof and issued by any FDIC-insured commercial bank incorporated in the United States or any state thereof having a combined capital and surplus of not less than $500,000,000;
(ii) Investments in marketable direct obligations issued or unconditionally guaranteed by the United States of America or issued by any agency thereof and backed by the full faith and credit of the United States of America, in each case maturing within one year from the date of issuance or acquisition thereof;
(iii) Investments in commercial paper or demand notes issued by a corporation incorporated in the United States or any State thereof maturing no more than one year from the date of issuance thereof and, at the time of acquisition, having a rating of A-1 (or better) by Standard & Poor's Corporation or P-1 (or better) by Moody's Investors Service, Inc.; and
(iv) Investments in money market mutual funds, including one which may be created managed, underwritten, or to which investment advice is rendered or the shares of which are shold by the Agent, all of the assets of which are invested in cash or investments described in clauses (i), (ii) and (iii) above.
"Person" shall mean any individual, corporation, partnership, joint venture, association, company or entity.
"Pledged Securities" shall mean, as to each Pledgor, all of the capital stock of those Subsidiaries held directly by such Pledgor. Set forth on Schedule A attached hereto is a listing of each of the Pledged Securities existing on the date hereof.
"Prevailing Interest Rate" as at any date shall mean the highest rate of interest then payable by the Borrowers under the Credit Agreement.
"Proceeds" shall have the meaning assigned to such term under the Uniform Commercial Code, now or hereafter acquired, wherever located.
"Subsidiaries" shall mean, as to any Pledgor, any Person at least 50% of the voting stock of which is held, directly or indirectly, by such Pledgor.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in effect from time to time in the State of New York.
b. Capitalized terms used herein and not otherwise defined herein shall have their respective meanings assigned in the Credit Agreement.
2. Grant of Security.
To secure the payment, promptly when due, and the punctual performance of all of the Obligations, each Pledgor hereby pledges and assigns to the Agent, for the benefit of the Lenders, and grants to the Agent, for the benefit of the Lenders, and agrees that the Agent, for the benefit of the Lenders, shall have a security interest in and valid Lien upon the Collateral.
3. Deposit of Pledged Securities and Intercompany Notes; Reregistration of Shares.
a. To perfect the security interest of the Agent in and to the Pledged Securities, as provided in Section 6(a) hereof, each Pledgor hereby deposits with the Agent the Pledged Securities owned by such Pledgor, in each case endorsed in blank, except as set forth on Schedule A hereto. At any time and from time to time the Agent may cause all or any of the Pledged Securities to be transferred into its name or into the name of its nominee or nominees.
b. Except as set forth on Schedule A hereto, if any of the Collateral of a Pledgor is or becomes evidenced by a promissory note, draft, trade acceptance, Chattel Paper or Instrument, including, without limitation, any Intercompany Notes, such Pledgor will promptly deliver the same to the Agent appropriately endorsed to the Agent's order. Regardless of the form of such endorsement, each Pledgor hereby waives presentment, demand, notice of dishonor, protest and notice of protest and all other notices with respect thereto. All such promissory notes, drafts, trade acceptances, Chattel Paper or Instruments existing on the date hereof are set forth on Schedule A hereto.
4. Reservation of Voting Rights.
At any time after the occurrence and during the continuation of an Event of Default, the Agent shall be entitled to exercise any and all voting power with respect to the Pledged Securities and shall exercise such power as directed by the Majority Lenders. At all other times the Pledgor of such Pledged Securities shall be entitled to exercise as it thinks fit, but in a manner not inconsistent with the provisions of the Loan Documents, all voting power with respect to the Pledged Securities.
5. Additional Collateral Security.
If, upon the dissolution or liquidation (in whole or in
part) of any Pledgor, or any of the Subsidiaries of any of the
Pledgors, any sum shall be paid upon or with respect to any of
the Pledged Securities, such sum shall be paid over to the Agent
as additional Collateral for the Obligations to be held by the
Agent in the Cash Collateral Account. In case any stock dividend
shall be declared on any of the Pledged Securities, or any shares
of stock or fractions thereof shall be issued pursuant to any
stock split involving any of the Pledged Securities, or any
distribution of capital shall be made on any of the Pledged
Securities, or any property shall be distributed upon or with
respect to the Pledged Securities pursuant to any
recapitalization or reclassification of
the capital of any of the Pledgors or pursuant to a
reorganization thereof, the shares or other property so
distributed shall be delivered to the Agent and any funds
included in such distribution shall be deposited in the Cash
Collateral Account. Funds in the Cash Collateral Account shall
be invested by the Agent as directed by the Majority Lenders or,
in the absence of such direction, shall be invested by the Agent
in Permitted Investments.
6. Representations and Warranties.
Each Pledgor represents and warrants to and agrees with the Agent and the Lenders as follows:
a. The security interest and Lien granted hereby is a perfected and enforceable security interest in and Lien upon the Collateral of such Pledgor to the extent such security interest and Lien can be perfected by the filing of Uniform Commercial Code financing statements or delivery of the Pledged Securities and such other securities and instruments as are contemplated to be delivered pursuant to Section 3(b) hereof, and no Person, including without limitation any Person that currently provides or shall hereafter provide to any Pledgor or any Subsidiary of any Pledgor payment or performance bonds, will have any right, title or interest in or to the Collateral that is, or that shall hereafter be, prior, paramount, superior or equal to the right, title or interest of the Lenders therein or thereto, other than Liens expressly permitted by Section 7.3 of the Credit Agreement.
b. The Pledged Securities owned by such Pledgor are duly and validly issued, fully paid and non-assessable, subject, if the issuer thereof is a New York corporation, to Section 630 of the New York Business Corporation Law, and have been duly and validly pledged hereunder in accordance with law, and each Pledgor warrants and covenants to defend the Agent's right and security interest in and to such Pledged Securities against the claims and demands of all persons whomsoever. The Pledgor is the exclusive legal and equitable owners of, and have good title to, all of the Pledged Securities, free and clear of all claims, Liens, security interests and other encumbrances (except for the security interest created hereby in favor of the Agent and Liens expressly permitted by Section 7.3 of the Credit Agreement), and the Pledgor has the unqualified legal right to pledge the same hereunder. Each certificate evidencing any of the Pledged Securities pledged hereunder by the Pledgor and delivered pursuant to Section 3 hereof is issued in the name of one of the Pledgors and has attached a stock power duly signed in blank by such Pledgor and bears no restrictive or cautionary legend. The Pledgor acknowledges that no filings or recordings (including without limitation filings under the Uniform Commercial Code) are necessary to be made under present law in order to perfect, protect and preserve the security interest of the Agent in the Pledged Securities created by this Agreement or intended so to be; and
c. The Pledgor for itself and its successors and assigns, does hereby irrevocably waive and release all preemptive, first-refusal and other similar rights of the Pledgor to purchase any or all of the Pledged Securities upon any sale thereof by the Agent hereunder, whether such right to purchase arises under the Certificate or Articles of Incorporation or any By-Law of the issuer of the Pledged Securities, by operation of law or otherwise.
7. Books and Records.
Each Pledgor shall faithfully keep complete and accurate books and records and make all necessary entries therein to reflect the amounts, identity of account debtors and all events and transactions giving rise to the Collateral of such Pledgor and all payments, credits and adjustments applicable thereto and shall permit the Agent to have such access to them and to any other records pertaining to such Pledgor's business as the Agent may request from time to time.
8. Collection of Accounts.
Until otherwise notified by the Agent after the occurrence of a Potential Event of Default or an Event of Default, each Pledgor may collect all amounts due on the Collateral of such Pledgor from the respective account debtors or obligors liable thereon, but the Proceeds so collected by such Pledgor shall be deposited into a Concentration Account. After the occurrence of a Potential Default or an Event of Default, the Agent may, upon notice to a Pledgor, terminate the authority hereby given to such Pledgor to make such collections and, acting if it so chooses in the name of such Pledgor, collect any amounts due on the Collateral directly or through an agent, sell, assign, compromise, discharge or extend the time for payment of any Account or other Collateral, institute legal action for the collection of any Account or other Collateral and do all acts and things necessary or incidental thereto, and each Pledgor hereby ratifies that the Agent shall lawfully do under the authority hereby granted to it. After the occurrence of a Potential Default or an Event of Default, the Agent may at any time, upon notice to a Pledgor, notify any account debtor on any Account pledged by such Pledgor or obligor with respect to any other Collateral pledged by such Pledgor that the Collateral has been assigned to the Agent and is to be paid directly to the Agent. Alternatively, at its election, the Agent may, after the occurrence of a Potential Default or an Event of Default, require a Pledgor to, and in such event such Pledgor at its sole expense will, notify account debtors and obligors that payments are thenceforth to be made directly to the Agent. After the occurrence of a Potential Default or an Event of Default, no Pledgor shall, without the written consent of the Majority Lenders in each case, compromise, discharge, extend the time for payment of or otherwise grant any indulgence or allowance with respect to any Account or other Collateral.
9. Title to Collateral.
Each Pledgor has acquired or shall acquire absolute and exclusive title to each and every item or unit of the Collateral owned by such Pledgor free and clear of all Liens, except Liens expressly permitted by Section 7.3 of the Credit Agreement, and each Pledgor shall warrant and defend its title to the Collateral, subject to the rights of the Agent, against the claims and demands of all persons whomsoever.
10. Maintenance of Collateral.
Without the written consent of the Majority Lenders, no Pledgor shall amend or terminate any contract or other document or instrument constituting part of the Collateral pledged by such Pledgor, except for transactions in the ordinary course of business. Without the prior written consent of the Majority Lenders, (i) no Pledgor will, other than in the ordinary course of business, sell, exchange, lease or otherwise dispose of, voluntarily or involuntarily, any of the Collateral pledged by such Pledgor or any of such Pledgor's rights therein, except only to the extent specifically permitted by Sections 7.1 or 7.8 of the Credit Agreement. Each Pledgor will maintain the Collateral pledged by such Pledgor in good condition and repair, will give it suitable preventative maintenance in the case of machinery and equipment, and will pay the cost of all repairs to or maintenance of the same which may be required from time to time. No Pledgor will do or permit to be done anything which might impair the value of any item of the Collateral owned by it or the security intended to be afforded hereby. Each Pledgor will immediately notify the Agent and the Lenders of any event causing any material loss or depreciation in value of the Collateral pledged by such Pledgor and of the extent of such loss or depreciation. Each Pledgor, upon the Agent's request and upon prior notice to Dyn, will permit the Agent at any time and from time to time, through its officers or other agents, to have access to the Collateral pledged by such Pledgor for the purpose of inspecting or, after a Potential Default or an Event of Default, assembling and removing the same.
11. Taxes and Liens.
Except for Liens expressly permitted by Section 7.3 of the Credit Agreement, each Pledgor shall immediately notify the Agent and the Lenders in the event there ever arises against any of the Collateral of such Pledgor any Lien, assessment, tax or other liability, whether or not entitled to priority over, or pari passu with, the Agent's security interest hereunder. In any such event, whether or not such notice is given, the Agent shall have the right (but shall be under no obligation) to pay (with funds advanced by the Lenders) any tax or other liability of such Pledgor deemed by the Agent in good faith to affect the Agent's interests hereunder. Such Pledgor shall repay to the Agent (and the Agent shall remit to the Lenders) on demand all sums which the Agent shall have paid under this section in respect of taxes or other liabilities of such Pledgor, with interest thereon at the Prevailing Interest Rate, and such Pledgor's liability to the Agent for such repayment with interest shall be included in the Obligations. The Agent shall be subrogated to the extent of any such payment by it to all the rights and Liens of the payee against the applicable Pledgor's assets. Each Pledgor shall furnish to the Agent from time to time upon the Agent's request proof satisfactory to the Agent of the making of all payments or deposits required by applicable law to be made with respect to amounts withheld by such Pledgor from wages and salaries of employees and amounts contributed by such Pledgor on account of federal, state or other income or wage taxes and amounts due under the Federal Insurance Contributions Act or the Federal Unemployment Tax Act or any similar legislation.
12. Significant Locations; Name.
Each Pledgor represents and warrants to the Agent and the Lenders that none of the books and records relating to the Collateral of such Pledgor is or will be located or used at any location other than their respective locations identified on Schedule 3.15 to the Credit Agreement. The applicable Pledgor shall notify the Agent in writing prior to any change in location of any such books and records. If any of the Collateral of a Pledgor or any of such Pledgor's records concerning any of the Collateral of such Pledgor are at any time to be located on premises leased by such Pledgor, the Pledgor shall, at the request of the Agent or the Majority Lenders, obtain and deliver to the Agent, prior to the delivery of any such Collateral or books or records to such premises, an agreement in form satisfactory to the Majority Lenders waiving the landlord's right to enforce against the Collateral or such Pledgor's records concerning the same and assuring the Agent's access to such Collateral and books and records to facilitate the Agent's exercise of its rights to take possession thereof. The location of each Pledgor's chief executive office and, if different, the location of such Pledgor's principal place of business are set forth on Schedule 3.15 of the Credit Agreement, and each Pledgor agrees to provide the Agent prior written notice of any change of any such chief executive office or principal place of business of such Pledgor. No Pledgor shall change its name, identity or corporate structure in any manner which might make any financing or continuation statement filed in connection herewith seriously misleading under any applicable provision of the Uniform Commercial Code, unless such Pledgor shall have given the Agent at least 30 days prior written notice thereof and shall have taken all action necessary or reasonably requested by the Agent or any Lender to amend such financing statement or continuation statement so that it is not seriously misleading.
13. Further Assurances.
Each Pledgor shall execute and deliver to the Agent from time to time all such other agreements, instruments and other documents (including, without limitation, all requested financing and continuation statements and all requested documents relating to the creation, perfection or protection of Liens and security interests) and do all such other and further acts and things as the Agent or the Majority Lenders may reasonably request in order to further evidence or carry out the intent of this Agreement or to perfect and protect the Liens and security interests created hereby or intended so to be.
14. Release of Collateral.
Upon the payment in full of the entire principal balance and all interest in respect of the Notes and the payment in full of all other Obligations, and the termination of each Loan Commitment, the Majority Lenders shall direct the Agent to, and the Agent shall, release its Lien and security interest in the Collateral and shall do such things as are reasonably requested by the Pledgors to effect such release. In addition, upon the disposition of any Collateral in compliance with Section 7.8 of the Credit Agreement, such Collateral is hereby released by the Agent from its security interest, and the Agent shall do such things as are reasonably requested by the applicable Pledgor to evidence such release. All costs (including attorneys' fees) of the preparation, execution and filing of any documents or the taking of any steps to release or terminate such security interests shall be for the account of the applicable Pledgor and shall be included in the Obligations.
15. Default and Remedies.
a. Each Pledgor shall be in default hereunder upon the occurrence of an Event of Default (as defined in the Credit Agreement).
b. Upon the occurrence of any Event of Default and so long as the same shall be continuing, the Agent may at its option exercise from time to time any and all rights and remedies available to it under the Uniform Commercial Code or otherwise, including the right to foreclose or otherwise realize upon any of the Collateral and to dispose of any of the Collateral at one or more public or private sales or other proceedings, and each Pledgor agrees that the Agent or any Lender, or the nominee of the Agent or any Lender, may become the purchaser at any such sale or sales. Each Pledgor agrees that ten (10) days shall be reasonable prior notice of the date of any public sale or other disposition of all or any part of the Collateral, or of the date on or after which any private sale or other disposition of the same may be made. All rights and remedies granted to the Agent hereunder or under any other agreement between the Agent, any of the Borrowers and any of the Pledgors shall be deemed concurrent and cumulative and not alternative, and the Agent may proceed with any number of remedies at the same time or at different times until all the Obligations are fully satisfied. The exercise of any one right or remedy shall not be deemed a waiver or release of or any election against any other right or remedy, and the Agent may proceed against any of the Borrowers and/or any of the Pledgors and the Collateral and any other collateral granted by the Borrowers or the Pledgors to the Agent under any other agreement, all in any order and through any available remedies. All property of any kind held at any time by the Agent as Collateral shall stand as one general continuing collateral security for all the Obligations and may be retained by the Agent as security until all the Obligations are fully satisfied. Notwithstanding the foregoing, unless and until the Agent shall have received written directions from the Majority Lenders, the Agent shall not be obligated to take any action with respect to such Event of Default as the Agent may deem advisable. Any rights and remedies of the Agent hereunder may, at the option of the Majority Lenders and upon written notice to the Agent, be exercised by the Majority Lenders or their designee.
c. The Pledgors shall pay to the Agent on demand any and all expenses (including reasonable attorneys' fees and legal expenses) which may have been incurred by the Agent, with interest at the Prevailing Interest Rate, in connection with the custody, preservation, use, operation, preparation for sale or sale of any of the Collateral, the incurring of which are hereby authorized to the extent the Agent deems the same advisable. The Pledgors' liability to the Agent for any such payment with interest at the Prevailing Interest Rate shall be included in the Obligations.
d. The Proceeds of any Collateral received by the Agent upon the occurrence and during the continuance of an Event of Default, whether from a sale or other disposition of Collateral or otherwise, or the Collateral itself, shall be applied (i) first, to the Agent (in its capacity as such) in an amount equal to the reasonable fees, indemnitees, costs and expenses incurred by the Agent through the date of such enforcement or sale, including reasonable compensation for and expenses of the Agent's representatives and counsel, and all changes, expenses, liabilities and advances incurred or made by the Agent in connection with such enforcement or sale, whether provided for under this Agreement or otherwise, and (ii) second, to payment in full or in part of such of the remaining Obligations and in such order and manner as the Agent shall be directed in writing by the Majority Lenders, and each Pledgor shall remain liable for any deficiency. Each Pledgor to the extent of its rights in the Collateral waives and releases any right to require the Agent to collect any of the Obligations from any particular Collateral or any other collateral then held by the Agent under any theory of marshalling of assets or otherwise.
e. In the event the Agent is permitted to sell any of the
Pledged Securities pursuant to this Section 15, upon the written
request of the Agent to cause any registration, qualification or
compliance under any federal or state securities law or laws to
be effected with respect to any of the Pledged Securities, each
Pledgor of such Pledged Securities as soon as practicable and at
its sole expense, will use its best efforts to cause such
registration, qualification or compliance to be effected (and be
kept effective) as may be so requested and as would permit or
facilitate the sale and distribution of such Pledged Securities.
Such Pledgor will use its best efforts to cause the Agent and the
Lenders to be kept reasonably advised in writing as to the
progress of each such registration, qualification or compliance
and as to the completion thereof and will furnish or use its best
efforts to cause to be furnished to the Agent and the Lenders,
without expense to the Agent or the Lenders, such number of
prospectuses or offering circulars and other documents incident
thereto as the Agent or the Lenders may from time to time
reasonably request. Each Pledgor will indemnify and hold
harmless the Agent and the Lenders from and against any claims or
liabilities caused by any untrue statement of a material fact or
omission of a material fact required to be stated in any
registration statement, offering circular or prospectus used in
connection with such registration or compliance, or necessary to
make the statements therein not misleading, except insofar as
such claims or liabilities are caused by any untrue statement or
omission based on or in conformity with any written statement
supplied by the Agent or such Lender. If at any time when the
Agent shall determine to exercise its rights to sell all or any
part of the Pledged Securities pursuant to this Section 15, such
Pledged Securities or the part thereof to be sold shall not, for
any reason, be effectively registered under the Securities Act of
1933 (the "Securities Act"), the Agent is hereby expressly
authorized to sell such Pledged Securities or such part thereof
by private sale in such manner and under such circumstances as
the Agent may deem necessary or advisable in order that such sale
may legally be effected without such registration. Without
limiting the generality of the foregoing, in any such event the
Agent: (i) may proceed to make such private sale whether or not
a registration statement for the purpose of registering the
Pledged Securities or such part thereof shall have been filed
under the Securities Act; (ii) may approach and negotiate with a
restricted number of potential purchasers to effect such sale;
and (iii) may restrict such sale to purchasers as to their
number, nature of business, level of sophistication and
investment intention (including without limitation, to purchasers
each of whom will represent and agree to the satisfaction of the
Agent that such purchaser is purchasing for its own account, for
investment, and not with a view to the distribution or sale of
such Pledged Securities or part thereof), it being understood
that the Agent may require the Pledgor of such Pledged
Securities, and each such Pledgor hereby agrees upon the written
request of the Agent, to cause: (i) a legend or legends to be
placed on the certificates to be delivered to such purchasers to
the effect that the offering and sale of the Pledged Securities
represented thereby have not been registered under the Securities
Act and setting forth or referring to any required restrictions
on the transferability of such Securities; (ii) the issuance of
stop transfer instructions to such Pledgor's transfer agent, if
any, with respect to the Pledged Securities (or if such Pledgor
transfers its own securities, a notation in the appropriate
records of such Pledgor); and (iii) to be delivered to the
purchasers a signed written agreement of such Pledgor that such
purchasers will be entitled to the rights of the Agent under this
Section 15. In addition, it is understood that any such
purchasers may be required as a condition of any such sale to
furnish a signed written agreement that the Pledged Securities
will not be sold without registration or other compliance with
the requirements of the Securities Act. In the event of any such
sale, each Pledgor hereby consents and agrees that neither the
Agent nor any Lender will incur any responsibility or liability
for selling all or any part of the Pledged Securities at a price
which the Agent or the Majority Lenders may deem reasonable under
the circumstances, notwithstanding the possibility that a
substantially higher price might be realized if the sale were
public and deferred until after registration as aforesaid.
f. In any suit, proceeding or action brought by the Agent or any Lender relating to any Collateral, for any sum owing thereunder or to enforce any provision thereof, each Pledgor agrees to indemnify and keep harmless the Agent or such Lender from and against all expenses, loss or damage suffered by reason of any defense, setoff, counterclaim, recoupment or reduction of liability whatsoever of the obligor thereunder for any reason, including without limitation, arising out of a breach by any Pledgor of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to, or in favor of, such obligor or its successors from such Pledgor and, in any such case, all such obligations of such Pledgor shall be and remain enforceable against and only against such Pledgor and shall not be enforceable against the Agent or any Lender.
16. Power of Attorney.
Each Pledgor hereby irrevocably appoints any officer, employee or agent of the Agent as such Pledgor's true and lawful attorney-in-fact with power to, upon the occurrence of an Event of Default: (i) endorse such Pledgor's name upon any notes, checks, drafts, money orders, or other instruments or payments or other Collateral that may come into the Agent's possession; (ii) sign and endorse such Pledgor's name upon any invoices, assignments, verifications and notices in connection with any of the Collateral, and any instruments or documents relating thereto or to such Pledgor's rights therein; and (iii) at any time whether or not an Event of Default has occurred, to execute in such Pledgor's name and file one or more financing, amendment or continuation statements covering the Collateral. Any such attorney of a Pledgor shall have full power to do any and all things necessary to be done with respect to the above transactions as fully and effectually as such Pledgor might do, and each Pledgor hereby ratifies all that said attorney shall lawfully do or cause to be done by virtue hereof.
17. Financing Statements.
Each Pledgor shall execute all financing statements and amendments thereto and continuations thereof as the Agent may request from time to time to evidence the security interest granted, or intended to be granted, to the Agent hereunder and will pay all filing fees and taxes, if any, necessary to effect the filing thereof. Wherever permitted by law, each Pledgor authorizes the Agent to file financing statements with respect to the Collateral without the signature of such Pledgor. A copy of this Agreement or a copy of any financing statement prepared in connection with this Agreement may itself be filed as a financing statement.
18. Agent
a. Each Lender hereby irrevocably appoints and authorizes the Agent to take such action on its behalf and to exercise such powers under this Agreement and the Loan Documents as are specifically delegated to the Agent by the terms hereof or thereof, together with such other powers as are reasonably incidental thereto. Nothing in this Agreement or any Loan Document shall be construed to impose on the Agent any duties or responsibilities other than those for which express provision is made herein or therein. In performing its duties and functions hereunder, the Agent does not assume and shall not be deemed to have assumed, and hereby expressly disclaims, any obligation with or for the Pledgors. As to matters not expressly provided for in this Agreement or any Loan Document, the Agent shall not be required to exercise any discretion or to take any action or communicate any notice, but shall be fully protected in so acting or refraining from acting upon the instructions of the Majority Lenders and their respective successors and assigns; provided, however, that in no event shall the Agent be required to take any action which (i) exposes it to personal liability, (ii) requires it to qualify to do business or subjects it to liabilities for taxes in any jurisdiction other than jurisdictions in which the Agent is otherwise so liable or (iii) which is contrary to this Agreement, any Loan Document or applicable law, and the Agent shall be fully justified in failing or refusing to take any action hereunder unless it shall first be specifically 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 omitting to take any such action. If an indemnity furnished to the Agent for any purpose shall, in the reasonable opinion of the Agent, be insufficient or become impaired, the Agent may call for additional indemnity from the Lenders and not commence or cease to do the acts for which such indemnity is requested until such additional indemnity is furnished.
b. In performing its functions and duties hereunder on behalf of the Lenders, the Agent shall exercise the same care and skill as it would exercise in dealing with collateral for its own account. Neither the Agent nor any of its directors, officers, employees or other agents shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement or any Loan Document except for its or their own gross negligence or willful misconduct. Without limiting the generality of the foregoing, the Agent (a) may consult with legal counsel and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith and in accordance with the advice of such experts; (b) makes no representation or warranty to any Lender as to, and shall not be responsible to any Lender for, any recital, statement, representation or warranty made in or in connection with this Agreement, any Loan Document or in any written or oral statement (including a financial or other such statement), instrument or other document delivered in connection herewith or therewith or furnished to any Lender by or on behalf of the Pledgors; (c) except as expressly required hereunder, shall have no duty to ascertain or inquire into the Pledgors' performance or observance of any of the covenants or conditions contained herein or to inspect any of the property (including the books and records) of the Pledgor or inquire into the use of the proceeds of the Loans or (unless the officers of the Agent active in their capacity as officers of the Agent for performance of the Agent's duties hereunder have actual knowledge thereof or have been notified in writing thereof) to inquire into the existence or possible existence of any Event of Default or Potential Default; (d) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, effectiveness, genuineness, sufficiency, collectability or value of this Agreement or any other Loan Document or any instrument or document executed or issued pursuant hereto or in connection herewith, except to the extent that such may be dependent on the due authorization and execution by the Agent itself; (e) except as expressly provided herein in respect of information and data furnished to the Agent for distribution to the Lenders, shall have no duty or responsibility, either initially or on a continuing basis, to provide to any Lender any credit or other information with respect to the Pledgors, whether coming into its possession before the making of the Loans or at any time or times thereafter; and (f) shall incur no liability under or in respect of this Agreement or any other Loan Document for, and shall be entitled to rely and act upon, any notice, consent, certificate or other instrument or writing (which may be by facsimile (telecopier), telegram, cable, or other electronic means) believed by it to be genuine and correct and to have been signed or sent by the proper party or parties. Furthermore, the Agent shall not be deemed to have knowledge of any Event of Default or Potential Default unless and until the Agent shall have received written notice thereof from a Borrower, a Lender or a Pledgor, and notwithstanding any provision hereof to the contrary, the Agent shall have no obligation to take any action permitted or required to be taken upon such occurrence unless and until the Agent shall have received such written notice.
c. The Agent and its affiliates may (without having to account therefor to any of the Lenders) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with the Pledgors or their affiliates as if it were not acting for the benefit of the Lenders as the Agent.
d. The Lenders agree to indemnify the Agent (to the extent not reimbursed by the Borrowers or the Pledgors), ratably in proportion to each Lender's Commitment Percentage, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Agent in such capacity in any way relating to or arising out of this Agreement or any Loan Document or any action taken or omitted to be taken by the Agent in such capacity hereunder or under any Loan Document; provided that none of the Lenders shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's gross negligence or willful misconduct. Without limiting the generality of the foregoing, each Lender agrees to reimburse the Agent, promptly on demand, for such Lender's ratable share (based upon the aforesaid apportionment) of any out-of-pocket expenses (including counsel fees and disbursements) incurred by the Agent in connection with the preparation, execution, administration or enforcement of, or the preservation of any rights under, this Agreement and the Loan Documents to the extent that the Agent is not reimbursed for such expenses by the Borrowers or the Pledgors.
e. The Agent may resign at any time by giving written notice of such resignation to the Lenders and the Borrowers, such resignation to be effective only upon the appointment of a successor Agent as hereinafter provided. Upon any such notice of resignation, the Majority Lenders shall appoint a successor Agent upon written notice to the Borrowers, the Pledgors and the retiring Agent. If no successor Agent shall have been appointed by the Majority Lenders or shall have not accepted such appointment within thirty (30) days after the retiring Agent shall have given notice of resignation, the retiring Agent may, upon notice to the Borrowers, the Pledgors and the Lenders, appoint a successor Agent. In addition, subject to the appointment of a successor Agent hereunder, the Agent may be removed as Agent at any time with or without cause by the Majority Lenders. Upon its acceptance of any appointment as Agent hereunder, the successor Agent shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent and the retiring Agent shall take all actions as shall reasonably be determined by the Majority Lenders or the successor Agent as necessary or desirable to assign to such successor Agent the security interest granted to the Agent hereunder (including without limitation the transfer to the successor Agent of Pledged Securities and all other Collateral then held by the retiring or removed Agent). All actions taken by the retiring or removed Agent shall be considered part of its duties hereunder, and the retiring or removed Agent otherwise shall be discharged from its duties and obligations as Agent under this Agreement and the Loan Documents. After any retiring or removed Agent's resignation or removal hereunder, the provisions hereof shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Agent under this Agreement and the Loan Documents.
19. Miscellaneous.
a. This Agreement shall remain in full force and effect until the latest to occur of the termination of each Loan Commitment or the repayment in full of all of the Obligations.
b. No amendment, modification, termination or waiver of this Agreement or any provision thereof nor any consent to any departure by a Pledgor therefrom shall be effective unless the same shall have been approved by the Agent and the Majority Lenders, be in writing and be signed by the Agent and the Majority Lenders and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No notice to or demand on any Pledgor shall entitle any Pledgor to any other or further notice or demand in similar or other circumstances.
c. The Pledgors, jointly and severally, agree to:
i. pay or reimburse the Agent for all of its reasonable out-of-pocket costs and expenses incurred in connection with the preparation, execution and delivery of, and any amendment, consent or waiver, supplement or modification to, this Agreement and the Loan Documents, including the fees and disbursements of counsel to the Agent (but not in-house counsel), such payments or reimbursements to be made, to the extent due and payable on the date hereof and, thereafter, from time to time upon demand;
ii. pay or reimburse the Agent on demand for all of its reasonable costs and expenses incurred in connection with the enforcement or preservation of, or any waiver of or consent with respect to, any rights under this Agreement including the fees and disbursements of counsel of the Agent (but not in-house counsel) and the fees and disbursements of all agents and attorneys-in-fact employed by the Agent;
iii. pay, indemnify, and hold the Agent harmless on demand from any and all recording and filing fees and any and all liabilities with respect to, or resulting from, any delay in paying 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, or consummation of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement; and
iv. the obligations of the Pledgors under this
Section 19(c) shall survive the termination of this
Agreement.
d. The remedies provided under this Agreement are cumulative and not exclusive of any remedies provided by law.
e. This Agreement shall bind and inure to the benefit of each Pledgor and the Lenders and the Agent and their respective successors and assigns, and upon any trustee or successor subsequently appointed in any Chapter 7 proceeding, except that no Pledgor shall have the right to assign any of its rights or interests under this Agreement. No person not a party to this Agreement is intended to be benefitted thereby.
f. The invalidity, illegality or unenforceability in any jurisdiction of any provision in or obligation under this Agreement shall not affect or impair the validity, legality or enforceability of the remaining provisions or obligations under this Agreement, or of such provision or obligation in any other jurisdiction.
g. Each Pledgor acknowledges that this Agreement and the obligations of the Pledgors hereunder and the security created or intended to be created hereby have constituted, and were intended by each Pledgor to constitute, a material inducement to the Lenders to enter into the Credit Agreement, knowing that the Lenders will rely upon this Agreement.
h. This Agreement and all rights and obligations of the parties hereunder shall be governed by and be construed and enforced in accordance with the laws of the State of New York without regard to principles of conflict of laws.
i. This Agreement and any amendment hereto or waiver hereof may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement and any amendments hereto or waivers hereof shall become effective when the Agent shall have received signed counterparts or notice by telecopy of the signature page that the counterpart has been signed and is being delivered to the Agent or facsimile that such counterparts have been signed by all the parties hereto or thereto.
j. All notices, requests, demands, directions, declarations and other communications between the Lenders and any of the Pledgors shall be given in conformity with Section 10.6 of the Credit Agreement, and any such notices, requests, demands, directions, declarations and other communications to the Agent shall be given to the following address:
CoreStates Bank, N.A.
510 Walnut Street, 6th Floor
Philadelphia, PA 19106
Attention: Corporate Trust
Telecopier: 215-973-2955
k. All words used herein in the singular or plural shall be deemed to have been used in the plural or singular where the context or construction so requires. Any defined term used in the singular preceded by "any" shall be taken to indicate any number of the members of the relevant class.
l. Each Pledgor and the Agent hereby acknowledges that TCW Special Credits is entering into this Agreement, and undertaking the obligations of a Lender hereunder, only as agent or nominee for each Fund and on each Fund's behalf and not individually, and that TCW Special Credits is not personally liable with respect to the obligations of a Lender hereunder. Each Pledgor and the Agent further acknowledges that the liability of the Funds is several and not joint and several, in accordance with and in proportion to their respective percentage interest set forth on Schedule A hereto, and each Fund shall be liable for its breach hereby only to the extent such breach and any loss, cost or damages incurred by a Borrower or the Agent as a result thereof, relates to such Fund.
IN WITNESS WHEREOF, this Agreement has been duly executed under due authorization as of the day and year first above written.
B&B CONTRACTING & SUPPLY
COMPANY
By:___________________________
Title:
CONTRA COSTA ELECTRIC, INC.
By:___________________________
Title:
DYNAELECTRIC COMPANY OF NEVADA
By:___________________________
Title:
DYNAELECTRIC COMPANY
By:___________________________
Title:
JWP SYSTEMS/KIRKWOOD ELECTRICCO.,
INC.
By:___________________________
Title:
CORESTATES BANK, N.A.
By: ___________________________
Title:
BELMONT CAPITAL PARTNERS II, L.P TCW SPECIAL CREDITS,
By: Fidelity Capital Partners as agent and nominee for the
entities
II Corp., listed on the Schedule of TCW
Funds
annexed hereto AS LENDER
Managing General Partner
By: _________________________ By: TCW ASSET MANAGEMENT
Title: COMPANY,
its managing general
partner
ALBERT FRIED & COMPANY By: ___________________________
|
Richard Masson Managing Director
By: _______________________
Title:
By: ___________________________
Kenneth Liang
Senior Vice President
UBS MORTGAGE FINANCE INC. __________________________
KEVIN C. TONER
By: _______________________
Title:
|
SCHEDULE OF TCW FUNDS
Fund Percentage Interest Weyerhaeuser Company Master Retirement Trust 26% The Common Fund for Bond Investments 5% TCW Special Credits Trust 7% TCW Special Credits Fund lllb 32% TCW Special Credits Trust lllb 25% Delaware State Employees Retirement Fund 5% TOTAL 100% |
SCHEDULE A
PLEDGED SECURITIES
The following is a listing of each of the Pledged Securities and other pledged instruments existing on the date hereof:
EXHIBIT 10(ff)
PLEDGE AND SECURITY AGREEMENT
by and among
JWP INC.,
DYN SPECIALTY CONTRACTING, INC.,
THE LENDERS NAMED HEREIN
and
CORESTATES BANK, N.A.
as Agent
December ___, 1994
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY PLEDGE AGREEMENT, dated as of December ____, 1994 (this "Agreement"), is entered into by and among JWP INC. (the "Parent"), a Delaware corporation, DYN SPECIALTY CONTRACTING, INC. ("Dyn"), a Virginia corporation, BELMONT CAPITAL PARTNERS II, L.P. ("BELMONT"), TCW SPECIAL CREDITS, a California general partnership, as agent and nominee for the entities (each a "FUND") set forth in the Schedule attached hereto, ALBERT FRIED & COMPANY, UBS MORTGAGE FINANCE INC. and KEVIN C. TONER (each, a "Lender" and collectively, the "Lenders") and CORESTATES BANK, N.A., a national banking association (the "Agent"), solely in its capacity as agent for the Lenders. JWP and Dyn are sometime referred to herein collectively as the "Borrowers" and individually as a "Borrower".
WITNESSETH:
WHEREAS, the Borrowers, each of the subsidiaries of Dyn, as guarantors, and the Lenders are parties to that certain Credit Agreement, dated as of the date hereof, whereby the Lenders are providing to the Borrowers credit facilities in the maximum aggregate amount of $10,000,000;
WHEREAS, the Borrowers have agreed to secure their obligations under the Credit Agreement pursuant to the terms and conditions set forth herein;
WHEREAS, it is a condition to the issuance of the initial loans under the Credit Agreement that this Agreement be executed and delivered.
NOW, THEREFORE, in consideration of the premises and intending to be legally bound hereby, the parties hereto agree as follows:
1. Definitions.
a. As used herein the following terms shall have the meanings indicated:
"Accounts" shall have the meaning assigned to such term under the Uniform Commercial Code, now or hereafter acquired, wherever located, excluding any accounts that are prohibited from assignment by an enforceable provision of any contract giving rise thereto.
"Affiliate" shall mean any Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, any of the Borrowers. A Person shall be deemed to control another Person if such Person possesses, directly or indirectly, the power (i) to vote 10% or more of the outstanding stock or other ownership interests having ordinary voting power for the election of directors of such other Person or (ii) to direct or cause the direction of the management and policies of such corporation, whether by contract or otherwise.
"Agent" has the meaning set forth in the preliminary paragraph hereof.
"Borrowers" has the meaning set forth in the preliminary paragraph hereof.
"Case" shall mean the case of the Parent before the United States Bankruptcy Court for the Southern District of New York.
"Cash Collateral Account" shall mean a depositary account maintained in the name of a Borrower with the Agent, but under the sole control and subject to the lien and security interest of the Agent pursuant to this Agreement.
"Chattel Paper" shall have the meaning assigned to such term under the Uniform Commercial Code, now or hereafter acquired, wherever located.
"Collateral" shall mean (a) all of Dyn's now-existing
or hereafter acquired or arising (i) Accounts, (ii) General
Intangibles, including but not limited to Intercompany Notes,
Chattel Paper, Contracts and Instruments derived from or related
to any Accounts, (iii) guarantees of any Accounts of which Dyn is
the beneficiary and all other security held for the payment or
satisfaction thereof, (iv) goods or services the sale or lease of
which gave rise to any Account, including returned goods, (v)
balance of any deposit, agency or other
account with any financial institution, including but not limited
to funds in the Cash Collateral Account or any Concentration
Account, (vi) Inventory, (vii) Equipment, (viii) Pledged
Securities and the certificates representing the Pledged
Securities, (ix) Patents and Trademarks and (x) books, records
and other property at any time evidencing or related to the
foregoing and (b) the Dyn Stock pledged
by the Parent, together with all products and Proceeds (including
insurance Proceeds) of any of the foregoing, including all such
Proceeds held in the Cash Collateral Account and, upon receipt by
the Parent, shall include the Proceeds of the stock or assets of
JWSC, but only to the extent of the first $15,000,000 of such
Proceeds.
"Concentration Account" shall mean a concentration depositary account maintained by Dyn at a Concentration Bank and subject to a Depositary Agreement.
"Concentration Banks" shall mean NationsBank, N.A. or such other financial institution designated by a Borrower and approved by the Majority Lenders to maintain Concentration Accounts.
"Contract" shall have the meaning assigned to such term under the Uniform Commercial Code, now or hereafter acquired, wherever located, excluding any contract or rights thereunder that are prohibited from assignment by an enforceable provision of such contract.
"Credit Agreement" shall mean the Credit Agreement, dated the date hereof, among the Parent, Dyn, the Subsidiaries of Dyn as guarantors and the Lenders, as hereafter amended from time to time.
"Depositary Agreement" shall mean an agreement among
the Parent, Dyn, the Agent and a Concentration Bank, providing,
among other things, that the Agent shall have a security interest
in funds held in each Concentration Account and that, upon the
terms and conditions provided therein, the Agent may require the
Concentration Banks to transfer funds deposited into the
Concentration Accounts solely in accordance with the instructions
of the Agent, and authorizing the Agent to cause the
Concentration Banks to remit to the
Agent amounts necessary to pay the Lenders any amount payable
under the Credit Agreement, Notes or any other Loan Document, as
defined in the Credit Agreement, which is not paid in a timely
manner; such agreement shall be in substantially the form of
Exhibit A of the Credit Agreement.
"Dyn Stock" shall mean all issued and outstanding shares of capital stock of Dyn.
"Equipment" shall have the meaning assigned to such term under the Uniform Commercial Code, now or hereafter acquired, wherever located.
"General Intangibles" shall have the meaning assigned to such term under the Uniform Commercial Code, now or hereafter acquired, wherever located.
"Generally Accepted Accounting Principles" shall mean generally accepted accounting principles as in effect in the United States from time to time, consistently applied.
"Guarantor" shall mean each of the Subsidiaries of Dyn.
"Instruments" shall have the meaning assigned to such term under the Uniform Commercial Code, now or hereafter acquired, wherever located.
"Intercompany Debt" shall mean any debt, loan or advance to, investment in, or guarantee of the obligations of, an Affiliate, other than indebtedness (i) arising in the ordinary course of business, (ii) under normal trade practices, (iii)on terms no less favorable than could be obtained between independent parties on an arm's length basis, and (iv)not for borrowed money.
"Intercompany Note" shall mean a promissory note
evidencing Intercompany Debt (which Intercompany Debt may be in
the nature
of a
revolving loan).
"Inventory" shall have the meaning assigned to such term under the Uniform Commercial Code, now or hereafter acquired, wherever located, and in any event, including all inventory, merchandise, goods and other personal property that are held by or on behalf of a Person for sale or lease or to be furnished under a contract of service, in each case in the ordinary course of business.
"Lenders" shall have the meaning assigned to such term in the Credit Agreement.
"Lien" shall mean any lien, mortgage, security interest, chattel mortgage, pledge or other encumbrance (statutory or otherwise) of any kind securing satisfaction or performance of an obligation, including any agreement to give any of the foregoing, any conditional sales or other title retention agreement, any lease in the nature thereof, and the filing of or the agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction or similar evidence of any encumbrance, whether within or outside the United States.
"Majority Lenders" shall mean Lenders holding Commitment Percentages aggregating 51%, until such time as the Agent shall have received notice from such Majority Lenders that the MES Obligations have been paid in full and satisfied, at which time the Majority Lenders shall mean "Lenders under the Dyn Credit Agreement holding "Commitment Percentages" (as such term is defined under the Dyn Credit Agreement) aggregating 51%.
"Obligations" shall mean all now existing or hereafter arising debts, obligations, covenants, and duties of payment or performance of every kind, matured or unmatured, direct or contingent, owing, arising, due, or payable to the Lenders by or from any of the Borrowers or any of the Guarantors arising out of the Credit Agreement or any other Loan Document, including, without limitation, all obligations to repay principal of and interest on all Loans and to pay interest, fees, costs, charges, expenses, professional fees, and all sums chargeable to the Borrowers and the Guarantors under the Loan Documents, whether or not evidenced by any note or other instrument.
"Patents and Trademarks" shall mean patents and trademarks owned, directly or indirectly, by Dyn.
"Permitted Investments" shall mean:
(i) Investments in certificates of deposit or time deposits having maturities in each case not exceeding one year from the date of issuance thereof and issued by any FDIC-insured commercial bank incorporated in the United States or any state thereof having a combined capital and surplus of not less than $500,000,000;
(ii) Investments in marketable direct obligations issued or unconditionally guaranteed by the United States of America or issued by any agency thereof and backed by the full faith and credit of the United States of America, in each case maturing within one year from the date of issuance or acquisition thereof;
(iii) Investments in commercial paper or demand notes issued by a corporation incorporated in the United States or any State thereof maturing no more than one year from the date of issuance thereof and, at the time of acquisition, having a rating of A-1 (or better) by Standard & Poor's Corporation or P-1 (or better) by Moody's Investors Service, Inc.; and
(iv) Investments in money market mutual funds, including one which may be created managed, underwritten, or to which investment advice is rendered or the shares of which are shold by the Agent, all of the assets of which are invested in cash or investments described in clauses (i), (ii) and (iii) above.
"Person" shall mean any individual, corporation, partnership, joint venture, association, company or entity.
"Pledged Securities" shall mean all of the capital stock of the Guarantors and the Dyn Stock. Set forth on Schedule A attached hereto is a listing of each of the Pledged Securities existing on the date hereof.
"Prevailing Interest Rate" as at any date shall mean the highest rate of interest then payable by the Borrowers under the Credit Agreement.
"Proceeds" shall have the meaning assigned to such term under the Uniform Commercial Code, now or hereafter acquired, wherever located.
"Subsidiaries" shall mean any Person at least 50% of the voting stock of which is held, directly or indirectly, by Dyn.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in effect from time to time in the State of New York.
b. Capitalized terms used herein and not otherwise defined herein shall have their respective meanings assigned in the Credit Agreement.
2. Grant of Security.
To secure the payment, promptly when due, and the punctual performance of all of the Obligations, each Borrower hereby pledges and assigns to the Agent, for the benefit of the Lenders, and grants to the Agent, for the benefit of the Lenders, and agrees that the Agent, for the benefit of the Lenders, shall have a security interest in and valid Lien upon the Collateral.
3. Deposit of Pledged Securities and Intercompany Notes; Reregistration of Shares.
a. To perfect the security interest of the Agent in and to the Pledged Securities, as provided in Section 6(a) hereof, the Borrowers hereby deposit with the Agent the Pledged Securities, in each case endorsed in blank, except as set forth on Schedule A hereto. At any time and from time to time the Agent may cause all or any of the Pledged Securities to be transferred into its name or into the name of its nominee or nominees.
b. Except as set forth on Schedule A hereto, if any of the Collateral is or becomes evidenced by a promissory note, draft, trade acceptance, Chattel Paper or Instrument, including, without limitation, any Intercompany Notes the Borrowers will promptly deliver the same to the Agent appropriately endorsed to the Agent's order. Regardless of the form of such endorsement, each Borrower hereby waives presentment, demand, notice of dishonor, protest and notice of protest and all other notices with respect thereto. All such promissory notes, drafts, trade acceptances, Chattel Paper or Instruments existing on the date hereof are set forth on Schedule A hereto.
4. Reservation of Voting Rights.
At any time after the occurrence and during the continuation of an Event of Default, the Agent shall be entitled to exercise any and all voting power with respect to the Pledged Securities and shall exercise such power as directed by the Majority Lenders. At all other times each Borrower shall be entitled to exercise as it thinks fit, but in a manner not inconsistent with the provisions of the Loan Documents, all voting power with respect to the Pledged Securities.
5. Additional Collateral Security.
If, upon the dissolution or liquidation (in whole or in part) of Dyn or any of the Subsidiaries, any sum shall be paid upon or with respect to any of the Pledged Securities, such sum shall be paid over to the Agent as additional Collateral for the Obligations to be held by the Agent in the Cash Collateral Account. In case any stock dividend shall be declared on any of the Pledged Securities, or any shares of stock or fractions thereof shall be issued pursuant to any stock split involving any of the Pledged Securities, or any distribution of capital shall be made on any of the Pledged Securities, or any property shall be distributed upon or with respect to the Pledged Securities pursuant to any recapitalization or reclassification of the capital of any of the Borrowers or pursuant to a reorganization thereof, the shares or other property so distributed shall be delivered to the Agent and any funds included in such distribution shall be deposited in the Cash Collateral Account. Funds in the Cash Collateral Account shall be invested by the Agent as directed by the Majority Lenders or, in the absence of such direction, shall be invested by the Agent in Permitted Investments.
6. Representations and Warranties.
Each of the Borrowers represents and warrants to and agrees with the Agent and the Lenders as follows:
a. The security interest and Lien granted hereby is a
perfected and enforceable security interest in and Lien upon the
Collateral to the extent such security interest and Lien can be
perfected by the filing of Uniform Commercial Code financing
statements or delivery of the Pledged Securities and such other
securities and instruments as are contemplated to be delivered
pursuant to Section 3(b) hereof, and no Person, including without
limitation any Person that currently provides or shall hereafter
provide to the Borrower or any Subsidiary payment or performance
bonds, will have any right, title or interest in or to the
Collateral that is, or that shall hereafter be, prior, paramount,
superior or equal to the right, title or interest of the Lenders
therein or thereto, other than Liens expressly permitted by
Section 7.3 of the Credit Agreement.
b. The Pledged Securities are duly and validly issued, fully paid and non-assessable, subject, if the issuer thereof is a New York corporation, to Section 630 of the New York Business Corporation Law, and have been duly and validly pledged hereunder in accordance with law, and each of the Borrowers warrants and covenants to defend the Agent's right and security interest in and to the Pledged Securities against the claims and demands of all persons whomsoever. The Borrowers are the exclusive legal and equitable owners of, and have good title to, all of the Pledged Securities, free and clear of all claims, Liens, security interests and other encumbrances (except for the security interest created hereby in favor of the Agent and Liens expressly permitted by Section 7.3 of the Credit Agreement), and the Borrowers have the unqualified legal right to pledge the same hereunder. Each certificate evidencing any of the Pledged Securities pledged hereunder by the Borrowers and delivered pursuant to Section 3 hereof is issued in the name of one of the Borrowers and has attached a stock power duly signed in blank by such Borrower and bears no restrictive or cautionary legend. The parties acknowledge that no filings or recordings (including without limitation filings under the Uniform Commercial Code) are necessary to be made under present law in order to perfect, protect and preserve the security interest of the Agent in the Pledged Securities created by this Agreement or intended so to be; and
c. The Borrowers, for the Borrowers and their respective successors and assigns, do hereby irrevocably waive and release all preemptive, first-refusal and other similar rights of the Borrowers to purchase any or all of the Pledged Securities upon any sale thereof by the Agent hereunder, whether such right to purchase arises under the Certificate or Articles of Incorporation or any By-Law of the issuer of the Pledged Securities, by operation of law or otherwise.
7. Books and Records.
Each Borrower shall faithfully keep complete and accurate books and records and make all necessary entries therein to reflect the amounts, identity of account debtors and all events and transactions giving rise to the Collateral and all payments, credits and adjustments applicable thereto and shall permit the Agent to have such access to them and to any other records pertaining to each Borrower's business as the Agent may request from time to time.
8. Collection of Accounts.
Until otherwise notified by the Agent after the occurrence of a Potential Event of Default or an Event Default, the Borrowers may collect all amounts due on the Collateral from the respective account debtors or obligors liable thereon, but the Proceeds so collected by a Borrower shall be deposited into a Concentration Account. After the occurrence of a Potential Default or an Event of Default, the Agent may, upon notice to the Borrowers, terminate the authority hereby given to a Borrower to make such collections and, acting if it so chooses in the name of such Borrower, collect any amounts due on the Collateral directly or through an agent, sell, assign, compromise, discharge or extend the time for payment of any Account or other Collateral, institute legal action for the collection of any Account or other Collateral and do all acts and things necessary or incidental thereto, and the Borrowers hereby ratify that the Agent shall lawfully do under the authority hereby granted to it. After the occurrence of a Potential Default or an Event of Default, the Agent may at any time, upon notice to the Borrowers, notify any account debtor on any Account or obligor with respect to any other Collateral that the Collateral has been assigned to the Agent and is to be paid directly to the Agent. Alternatively, at its election, the Agent may, after the occurrence of a Potential Default or an Event of Default, require the Borrowers to, and in such event the Borrowers at their sole expense will, notify account debtors and obligors that payments are thenceforth to be made directly to the Agent. After the occurrence of a Potential Default or an Event of Default, no Borrower shall, without the written consent of the Majority Lenders in each case, compromise, discharge, extend the time for payment of or otherwise grant any indulgence or allowance with respect to any Account or other Collateral.
9. Title to Collateral.
The Borrowers have acquired or shall acquire absolute and exclusive title to each and every item or unit of the Collateral owned by the Borrowers free and clear of all Liens, except Liens expressly permitted by Section 7.3 of the Credit Agreement, and the Borrowers shall warrant and defend their title to the Collateral, subject to the rights of the Agent, against the claims and demands of all persons whomsoever.
10. Maintenance of Collateral.
Without the written consent of the Majority Lenders, none of the Borrowers shall amend or terminate any contract or other document or instrument constituting part of the Collateral, except for transactions in the ordinary course of business. Without the prior written consent of the Majority Lenders, (i) the Borrowers will not, other than in the ordinary course of business, sell, exchange, lease or otherwise dispose of, voluntarily or involuntarily, any of the Collateral or any of the Borrowers' rights therein, except only to the extent specifically permitted by Section 7.8 of the Credit Agreement. The Borrowers will maintain the Collateral in good condition and repair, will give it suitable preventative maintenance in the case of machinery and equipment, and will pay the cost of all repairs to or maintenance of the same which may be required from time to time. The Borrowers will not do or permit to be done anything which might impair the value of any item of the Collateral owned by any Borrower or the security intended to be afforded hereby. The Borrowers will immediately notify the Agent and the Lenders of any event causing any material loss or depreciation in value of the Collateral and of the extent of such loss or depreciation. The Borrowers, upon the Agent's request, will permit the Agent at any time and from time to time, through its officers or other agents, to have access to the Collateral for the purpose of inspecting or, after a Potential Default or an Event of Default, assembling and removing the same.
11. Taxes and Liens.
Except for Permitted Liens and Liens expressly permitted by
Section 7.3 of the Credit Agreement, the Borrowers shall
immediately notify the Agent and the Lenders in the event there
ever arises against any of the Collateral any Lien, assessment,
tax or other liability, whether or not entitled to priority over,
or pari passu with, the Agent's security interest hereunder. In
any such event, whether or not such notice is given, the Agent
shall have the right (but shall be under no obligation) to pay
(with funds advanced by the Lenders) any tax or other liability
of the Borrowers deemed by the Agent in good faith to affect the
Agent's interests hereunder. The Borrowers shall repay to the
Agent (and the Agent shall remit to the Lenders) on demand all
sums which the Agent shall have paid under this
section in respect of taxes or other liabilities of any Borrower,
with interest thereon at the Prevailing Interest Rate, and the
Borrowers' liability to the Agent for such repayment with
interest shall be included in the Obligations. The Agent shall
be subrogated to the extent of any such payment by it to all the
rights and Liens of the payee against the Borrowers' assets. The
Borrowers shall furnish to the Agent from time to time upon the
Agent's request proof satisfactory to the Agent of the making of
all payments or deposits required by applicable law to be made
with respect to amounts withheld by each Borrower from wages and
salaries of employees and amounts contributed by each Borrower on
account of federal, state or other income or wage taxes and
amounts due under the Federal Insurance Contributions Act or the
Federal Unemployment Tax Act or any similar legislation.
12. Significant Locations; Name.
Each Borrower represents and warrants to the Agent and the
Lenders that none of the books and records relating to the
Collateral is or will be located or used at any location other
than their respective locations identified on Schedule 3.15 to
the Credit Agreement. The Borrowers shall notify the Agent in
writing prior to any change in location of any such books and
records. If any of the Collateral or any Borrower's records
concerning any of the Collateral are at any time to be located on
premises leased by such Borrower, the
Borrowers shall, at the request of the Agent or the Majority
Lenders, obtain and deliver to the Agent, prior to the delivery
of any such Collateral or books or records to such premises, an
agreement in form satisfactory to the Majority Lenders waiving
the landlord's right to enforce against the Collateral or such
Borrower's records concerning the same and assuring the Agent's
access to such Collateral and books and records to facilitate the
Agent's exercise of its rights to take possession thereof. The
location of the each Borrower's chief executive office and, if
different, the location of each Borrower's principal place of
business are set forth on Schedule 3.15 to the
Credit Agreement, and the Borrowers agree to provide the Agent
prior written notice of any change of any such chief executive
office or principal place of business of any Borrower. Neither
Borrower shall change its name, identity or corporate structure
in any manner which might make any financing or continuation
statement filed in connection herewith seriously misleading under
any applicable provision of the Uniform Commercial Code, unless
such Borrower shall have given the Agent at least 30 days prior
written notice thereof and shall have taken all action necessary
or reasonably requested by the Agent or any Lender to amend such
financing statement or continuation statement so that it is not
seriously misleading.
13. Further Assurances.
Each Borrower shall execute and deliver to the Agent from time to time all such other agreements, instruments and other documents (including, without limitation, all requested financing and continuation statements and all requested documents relating to the creation, perfection or protection of Liens and security interests) and do all such other and further acts and things as the Agent or the Majority Lenders may reasonably request in order to further evidence or carry out the intent of this Agreement or to perfect and protect the Liens and security interests created hereby or intended so to be.
14. Release of Collateral.
Upon the payment in full of the entire principal balance and all interest in respect of the Notes and the payment in full of all other Obligations, and the termination of each Loan Commitment, the Majority Lenders shall direct the Agent to, and the Agent shall, release its Lien and security interest in the Collateral and shall do such things as are reasonably requested by the Borrowers to effect such release. In addition, upon the disposition of any Collateral in compliance with Section 7.8 of the Credit Agreement, such Collateral is hereby released by the Agent from its security interest, and the Agent shall do such things as are reasonably requested by the Borrowers to evidence such release. In addition, upon receipt by the Majority Lenders of evidence that any liability directly relating to Collateral disposed in compliance with Section 7.8 of the Credit Agreement, other than a Permitted Disposition, is currently due and payable but was not deducted from the proceeds of such disposition to determine Net Cash Proceeds, the Majority Lenders shall direct the Agent to, and the Agent shall, release funds equal to the amount of such liability, not in excess of the Net Cash Proceeds of such disposition, from the Cash Collateral Account. All costs (including attorneys' fees) of the preparation, execution and filing of any documents or the taking of any steps to release or terminate such security interests shall be for the account of the Borrowers and shall be included in the Obligations.
15. Default and Remedies.
a. The Borrowers shall be in default hereunder upon the occurrence of an Event of Default (as defined in the Credit Agreement).
b. Upon the occurrence of any Event of Default and so long as the same shall be continuing, the Agent may at its option exercise from time to time any and all rights and remedies available to it under the Uniform Commercial Code or otherwise, including the right to foreclose or otherwise realize upon any of the Collateral and to dispose of any of the Collateral at one or more public or private sales or other proceedings, and each Borrower agrees that the Agent or any Lender, or the nominee of the Agent or any Lender, may become the purchaser at any such sale or sales. The Borrowers agree that ten (10) days shall be reasonable prior notice of the date of any public sale or other disposition of all or any part of the Collateral, or of the date on or after which any private sale or other disposition of the same may be made. All rights and remedies granted to the Agent hereunder or under any other agreement between the Agent and any of the Borrowers shall be deemed concurrent and cumulative and not alternative, and the Agent may proceed with any number of remedies at the same time or at different times until all the Obligations are fully satisfied. The exercise of any one right or remedy shall not be deemed a waiver or release of or any election against any other right or remedy, and the Agent may proceed against any of the Borrowers and the Collateral and any other collateral granted by the Borrowers to the Agent under any other agreement, all in any order and through any available remedies. All property of any kind held at any time by the Agent as Collateral shall stand as one general continuing collateral security for all the Obligations and may be retained by the Agent as security until all the Obligations are fully satisfied. Notwithstanding the foregoing, unless and until the Agent shall have received written directions from the Majority Lenders, the Agent shall not be obligated to take any action with respect to such Event of Default as the Agent may deem advisable. Any rights and remedies of the Agent hereunder may, at the option of the Majority Lenders and upon written notice to the Agent, be exercised by the Majority Lenders or their designee.
c. The Borrowers shall pay to the Agent on demand any and all expenses (including reasonable attorneys' fees and legal expenses) which may have been incurred by the Agent, with interest at the Prevailing Interest Rate, in connection with the custody, preservation, use, operation, preparation for sale or sale of any of the Collateral, the incurring of which are hereby authorized to the extent the Agent deems the same advisable. The Borrowers' liability to the Agent for any such payment with interest at the Prevailing Interest Rate shall be included in the Obligations.
d. The Proceeds of any Collateral received by the Agent upon the occurrence and during the continuance of an Event of Default, whether from a sale or other disposition of Collateral or otherwise, or the Collateral itself, shall be applied (i) first, to the Agent (in its capacity as such) in an amount equal to the reasonable fees, indemnitees, costs and expenses incurred by the Agent through the date of such enforcement or sale, including reasonable compensation for and expenses of the Agent's representatives and counsel, and all changes, expenses, liabilities and advances incurred or made by the Agent in connection with such enforcement or sale, whether provided for under this Agreement or otherwise, and (ii) second, to payment in full or in part of such of the remaining Obligations and in such order and manner as the Agent shall be directed in writing by the Majority Lenders, and each Borrower shall remain liable for any deficiency. Each Borrower to the extent of its rights in the Collateral waives and releases any right to require the Agent to collect any of the Obligations from any particular Collateral or any other collateral then held by the Agent under any theory of marshalling of assets or otherwise.
e. In the event the Agent is permitted to sell any of the Pledged Securities pursuant to this Section 15, upon the written request of the Agent to cause any registration, qualification or compliance under any federal or state securities law or laws to be effected with respect to any of the Pledged Securities, each Borrower as soon as practicable and at its sole expense will use its best efforts to cause such registration, qualification or compliance to be effected (and be kept effective) as may be so requested and as would permit or facilitate the sale and distribution of such Pledged Securities. Each Borrower will use its best efforts to cause the Agent and the Lenders to be kept reasonably advised in writing as to the progress of each such registration, qualification or compliance and as to the completion thereof and will furnish or use its best efforts to cause to be furnished to the Agent and the Lenders, without expense to the Agent or the Lenders, such number of prospectuses or offering circulars and other documents incident thereto as the Agent or the Lenders may from time to time reasonably request. The Borrowers will indemnify and hold harmless the Agent and the Lenders from and against any claims or liabilities caused by any untrue statement of a material fact or omission of a material fact required to be stated in any registration statement, offering circular or prospectus used in connection with such registration or compliance, or necessary to make the statements therein not misleading, except insofar as such claims or liabilities are caused by any untrue statement or omission based on or in conformity with any written statement supplied by the Agent or such Lender. If at any time when the Agent shall determine to exercise its rights to sell all or any part of the Pledged Securities pursuant to this Section 15, such Pledged Securities or the part thereof to be sold shall not, for any reason, be effectively registered under the Securities Act of 1933 (the "Securities Act"), the Agent is hereby expressly authorized to sell such Pledged Securities or such part thereof by private sale in such manner and under such circumstances as the Agent may deem necessary or advisable in order that such sale may legally be effected without such registration. Without limiting the generality of the foregoing, in any such event the Agent: (i) may proceed to make such private sale whether or not a registration statement for the purpose of registering the Pledged Securities or such part thereof shall have been filed under the Securities Act; (ii) may approach and negotiate with a restricted number of potential purchasers to effect such sale; and (iii) may restrict such sale to purchasers as to their number, nature of business, level of sophistication and investment intention (including without limitation, to purchasers each of whom will represent and agree to the satisfaction of the Agent that such purchaser is purchasing for its own account, for investment, and not with a view to the distribution or sale of such Pledged Securities or part thereof), it being understood that the Agent may require each Borrower, and each Borrower hereby agrees upon the written request of the Agent, to cause: (i) a legend or legends to be placed on the certificates to be delivered to such purchasers to the effect that the offering and sale of the Pledged Securities represented thereby have not been registered under the Securities Act and setting forth or referring to any required restrictions on the transferability of such Securities; (ii) the issuance of stop transfer instructions to such Borrower's transfer agent, if any, with respect to the Pledged Securities (or if such Borrower transfers its own securities, a notation in the appropriate records of such Borrower); and (iii) to be delivered to the purchasers a signed written agreement of such Borrower that such purchasers will be entitled to the rights of the Agent under this Section 15. In addition, it is understood that any such purchasers may be required as a condition of any such sale to furnish a signed written agreement that the Pledged Securities will not be sold without registration or other compliance with the requirements of the Securities Act. In the event of any such sale, each Borrower hereby consents and agrees that neither the Agent nor any Lender will incur any responsibility or liability for selling all or any part of the Pledged Securities at a price which the Agent or the Majority Lenders may deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might be realized if the sale were public and deferred until after registration as aforesaid.
f. In any suit, proceeding or action brought by the Agent or any Lender relating to any Collateral, for any sum owing thereunder or to enforce any provision thereof, each Borrower agrees to indemnify and keep harmless the Agent or such Lender from and against all expenses, loss or damage suffered by reason of any defense, setoff, counterclaim, recoupment or reduction of liability whatsoever of the obligor thereunder for any reason, including without limitation, arising out of a breach by any Borrower of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to, or in favor of, such obligor or its successors from such Borrower and, in any such case, all such obligations of such Borrower shall be and remain enforceable against and only against such Borrower and shall not be enforceable against the Agent or any Lender.
16. Power of Attorney.
Each Borrower hereby irrevocably appoints any officer, employee or agent of the Agent as each Borrower's true and lawful attorney-in-fact with power to, upon the occurrence of an Event of Default: (i) endorse any Borrower's name upon any notes, checks, drafts, money orders, or other instruments or payments or other Collateral that may come into the Agent's possession; (ii) sign and endorse any Borrower's name upon any invoices, assignments, verifications and notices in connection with any of the Collateral, and any instruments or documents relating thereto or to any Borrower's rights therein; and (iii) at any time whether or not an Event of Default has occurred, to execute in any Borrower's name and file one or more financing, amendment or continuation statements covering the Collateral. Any such attorney of any Borrower shall have full power to do any and all things necessary to be done with respect to the above transactions as fully and effectually as any Borrower might do, and the Borrowers hereby ratify all that said attorney shall lawfully do or cause to be done by virtue hereof.
17. Financing Statements.
Each Borrower shall execute all financing statements and amendments thereto and continuations thereof as the Agent may request from time to time to evidence the security interest granted, or intended to be granted, to the Agent hereunder and will pay all filing fees and taxes, if any, necessary to effect the filing thereof. Wherever permitted by law, each Borrower authorizes the Agent to file financing statements with respect to the Collateral without the signature of any Borrower. A copy of this Agreement or a copy of any financing statement prepared in connection with this Agreement may itself be filed as a financing statement.
18. Agent
a. Each Lender hereby irrevocably appoints and authorizes the Agent to take such action on its behalf and to exercise such powers under this Agreement and the Loan Documents as are specifically delegated to the Agent by the terms hereof or thereof, together with such other powers as are reasonably incidental thereto. Nothing in this Agreement or any Loan Document shall be construed to impose on the Agent any duties or responsibilities other than those for which express provision is made herein or therein. In performing its duties and functions hereunder, the Agent does not assume and shall not be deemed to have assumed, and hereby expressly disclaims, any obligation with or for the Borrowers. As to matters not expressly provided for in this Agreement or any Loan Document, the Agent shall not be required to exercise any discretion or to take any action or communicate any notice, but shall be fully protected in so acting or refraining from acting upon the instructions of the Majority Lenders and their respective successors and assigns; provided, however, that in no event shall the Agent be required to take any action which (i) exposes it to personal liability, (ii) requires it to qualify to do business or subjects it to liabilities for taxes in any jurisdiction other than jurisdictions in which the Agent is otherwise so liable or (iii) which is contrary to this Agreement, any Loan Document or applicable law, and the Agent shall be fully justified in failing or refusing to take any action hereunder unless it shall first be specifically 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 omitting to take any such action. If an indemnity furnished to the Agent for any purpose shall, in the reasonable opinion of the Agent, be insufficient or become impaired, the Agent may call for additional indemnity from the Lenders and not commence or cease to do the acts for which such indemnity is requested until such additional indemnity is furnished.
b. In performing its functions and duties hereunder on behalf of the Lenders, the Agent shall exercise the same care and skill as it would exercise in dealing with collateral for its own account. Neither the Agent nor any of its directors, officers, employees or other agents shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement or any Loan Document except for its or their own gross negligence or willful misconduct. Without limiting the generality of the foregoing, the Agent (a) may consult with legal counsel and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith and in accordance with the advice of such experts; (b) makes no representation or warranty to any Lender as to, and shall not be responsible to any Lender for, any recital, statement, representation or warranty made in or in connection with this Agreement, any Loan Document or in any written or oral statement (including a financial or other such statement), instrument or other document delivered in connection herewith or therewith or furnished to any Lender by or on behalf of the Borrowers; (c) except as expressly required hereunder, shall have no duty to ascertain or inquire into the Borrowers' performance or observance of any of the covenants or conditions contained herein or to inspect any of the property (including the books and records) of the Borrowers or inquire into the use of the proceeds of the Loans or (unless the officers of the Agent active in their capacity as officers of the Agent for performance of the Agent's duties hereunder have actual knowledge thereof or have been notified in writing thereof) to inquire into the existence or possible existence of any Event of Default or Potential Default; (d) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, effectiveness, genuineness, sufficiency, collectability or value of this Agreement or any other Loan Document or any instrument or document executed or issued pursuant hereto or in connection herewith, except to the extent that such may be dependent on the due authorization and execution by the Agent itself; (e) except as expressly provided herein in respect of information and data furnished to the Agent for distribution to the Lenders, shall have no duty or responsibility, either initially or on a continuing basis, to provide to any Lender any credit or other information with respect to the Borrowers, whether coming into its possession before the making of the Loans or at any time or times thereafter; and (f) shall incur no liability under or in respect of this Agreement or any other Loan Document for, and shall be entitled to rely and act upon, any notice, consent, certificate or other instrument or writing (which may be by facsimile (telecopier), telegram, cable, or other electronic means) believed by it to be genuine and correct and to have been signed or sent by the proper party or parties. Furthermore, the Agent shall not be deemed to have knowledge of any Event of Default or any Potential Default unless and until the Agent shall have received written notice thereof from a Borrower, a Lender or a Subsidiary, and not withstanding any provision hereof to the contrary, the Agent shall have no obligation to take any action permitted or required to be taken upon such occurrence unless and until the Agent shall have received such written notice.
c. The Agent and its affiliates may (without having to account therefor to any of the Lenders) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with the Borrowers or their affiliates as if it were not acting for the benefit of the Lenders as the Agent.
d. The Lenders agree to indemnify the Agent (to the extent not reimbursed by the Borrowers), ratably in proportion to each Lender's Commitment Percentage, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Agent in such capacity in any way relating to or arising out of this Agreement or any Loan Document or any action taken or omitted to be taken by the Agent in such capacity hereunder or under any Loan Document; provided that none of the Lenders shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's gross negligence or willful misconduct. Without limiting the generality of the foregoing, each Lender agrees to reimburse the Agent, promptly on demand, for such Lender's ratable share (based upon the aforesaid apportionment) of any out-of-pocket expenses (including counsel fees and disbursements) incurred by the Agent in connection with the preparation, execution, administration or enforcement of, or the preservation of any rights under, this Agreement and the Loan Documents to the extent that the Agent is not reimbursed for such expenses by the Borrowers.
e. The Agent may resign at any time by giving written notice of such resignation to the Lenders and the Borrowers, such resignation to be effective only upon the appointment of a successor Agent as hereinafter provided. Upon any such notice of resignation, the Majority Lenders shall appoint a successor Agent upon written notice to the Borrowers and the retiring Agent. If no successor Agent shall have been appointed by the Majority Lenders or shall have not accepted such appointment within thirty (30) days after the retiring Agent shall have given notice of resignation, the retiring Agent may, upon notice to the Borrowers and the Lenders, appoint a successor Agent. In addition, subject to the appointment of a successor Agent hereunder, the Agent may be removed as Agent at any time with or without cause by the Majority Lenders. Upon its acceptance of any appointment as Agent hereunder, the successor Agent shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent and the retiring Agent shall take all actions as shall reasonably be determined by the Majority Lenders or the successor Agent as necessary or desirable to assign to such successor Agent the security interest granted to the Agent hereunder (including without limitation the transfer to the successor Agent of Pledged Securities and all other Collateral then held by the retiring or removed Agent). All actions taken by the retiring or removed Agent shall be considered part of its duties hereunder, and the retiring or removed Agent otherwise shall be discharged from its duties and obligations as Agent under this Agreement and the Loan Documents. After any retiring or removed Agent's resignation or removal hereunder, the provisions hereof shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Agent under this Agreement and the Loan Documents.
19. Miscellaneous.
a. This Agreement shall remain in full force and effect until the latest to occur of the termination of each Loan Commitment or the repayment in full of all Obligations.
b. No amendment, modification, termination or waiver of this Agreement or any provision thereof nor any consent to any departure by any Borrower therefrom shall be effective unless the same shall have been approved by the Agent and the Majority Lenders, be in writing and be signed by the Agent and the Majority Lenders and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No notice to or demand on the Borrowers shall entitle the Borrowers to any other or further notice or demand in similar or other circumstances.
c. The Borrowers, jointly and severally, agree to:
i. pay or reimburse the Agent for all of its reasonable out-of-pocket costs and expenses incurred in connection with the preparation, execution and delivery of, and any amendment, consent or waiver, supplement or modification to, this Agreement and the Loan Documents, including the fees and disbursements of counsel to the Agent (but not in-house counsel), such payments or reimbursements to be made, to the extent due and payable on the date hereof and, thereafter, from time to time upon demand;
ii. pay or reimburse the Agent on demand for all of its reasonable costs and expenses incurred in connection with the enforcement or preservation of, or any waiver of or consent with respect to, any rights under this Agreement including the fees and disbursements of counsel of the Agent (but not in-house counsel) and the fees and disbursements of all agents and attorneys-in-fact employed by the Agent;
iii. pay, indemnify, and hold the Agent harmless on demand from any and all recording and filing fees and any and all liabilities with respect to, or resulting from, any delay in paying 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, or consummation of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement; and
iv. the obligations of the Borrowers under this
Section 19(c) shall survive the termination of this
Agreement.
d. The remedies provided under this Agreement are cumulative and not exclusive of any remedies provided by law.
e. This Agreement shall bind and inure to the benefit of the Borrowers, the Lenders and the Agent and their respective successors and assigns successor subsequently appointed in any Chapter 7 proceeding, except that no Borrower shall have the right to assign any of its rights or interests under this Agreement. No person not a party to this Agreement is intended to be benefitted thereby.
f. The invalidity, illegality or unenforceability in any jurisdiction of any provision in or obligation under this Agreement shall not affect or impair the validity, legality or enforceability of the remaining provisions or obligations under this Agreement, or of such provision or obligation in any other jurisdiction.
g. Each Borrower acknowledges that this Agreement and the obligations of the Borrowers hereunder and the security created or intended to be created hereby have constituted, and were intended by the Borrowers to constitute, a material inducement to the Lenders to enter into the Credit Agreement, knowing that the Lenders will rely upon this Agreement.
h. This Agreement and all rights and obligations of the parties hereunder shall be governed by and be construed and enforced in accordance with the laws of the State of New York without regard to principles of conflict of laws.
i. This Agreement and any amendment hereto or waiver hereof may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement and any amendments hereto or waivers hereof shall become effective when the Agent shall have received signed counterparts or notice by telecopy of the signature page that the counterpart has been signed and is being delivered to the Agent or facsimile that such counterparts have been signed by all the parties hereto or thereto.
j. All notices, requests, demands, directions, declarations and other communications between the Lenders and the Borrowers shall be given in conformity with Section 10.6 of the Credit Agreement, and any such notices, requests, demands, directions, declarations and other communications to the Agent shall be given to the following address:
CoreStates Bank, N.A.
510 Walnut Street, 6th Floor
Philadelphia, PA 19106
Attention: Corporate Trust
Telecopier: 215-973-2955
k. All words used herein in the singular or plural shall be deemed to have been used in the plural or singular where the context or construction so requires. Any defined term used in the singular preceded by "any" shall be taken to indicate any number of the members of the relevant class.
l. Each Borrower and the Agent hereby acknowledges that TCW Special Credits is entering into this Agreement, and undertaking the obligations of a Lender hereunder, only as agent or nominee for each Fund and on each Fund's behalf and not individually, and that TCW Special Credits is not personally liable with respect to the obligations of a Lender hereunder. Each Borrower and the Agent further acknowledges that the liability of the Funds is several and not joint and several, in accordance with and in proportion to their respective percentage interest set forth on Schedule A hereto, and each Fund shall be liable for its breach hereby only to the extent such breach and any loss, cost or damages incurred by a Borrower or the Agent as a result thereof, relates to such Fund.
IN WITNESS WHEREOF, this Agreement has been duly executed under due authorization as of the day and year first above written.
JWP INC.
By:___________________________
Title:
DYN SPECIALTY CONTRACTING, INC.
By:___________________________
Title:
CORESTATES BANK, N.A.
By: ___________________________
Title:
TCW SPECIAL CREDITS,
as agent and nominee for the entities listed on
the Schedule of TCW Funds annexed
hereto, AS LENDER
By TCW ASSET MANAGEMENT COMPANY,
its managing general partner
By: ___________________________
Richard Masson
Managing Director
By: ___________________________
Kenneth Liang
Senior Vice President
ALBERT FRIED & COMPANY
By: _________________________
Title
UBS MORTGAGE FINANCE INC.
By: _________________________
Title
BELMONT CAPITAL PARTNERS II, L.P
By: Fidelity Capital Partners II Corp.
Managing General Partner
By: _________________________
Title
SCHEDULE OF TCW FUNDS
Fund Percentage Interest
Weyerhaeuser Company Master
Retirement Trust 26%
The Common Fund for Bond
Investments 5%
TCW Special Credits Trust 7%
TCW Special Credits Fund lllb 32%
TCW Special Credits Trust lllb 25%
Delaware State Employees
Retirement Fund 5%
TOTAL 100%
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SCHEDULE A
PLEDGED SECURITIES
The following is a listing of each of the Pledged Securities and other pledged instruments existing on the date hereof:
Exhibit 21
SUBSIDIARIES OF EMCOR GROUP, INC. ("EMCOR")
Dyn Specialty Contracting Inc.
B&B Contracting and Supply Company
Contra Costa Electric, Inc.
Dynalectric Company
Dynalectric Company of Nevada
JWP Systems/Kirkwood Electric Co., Inc.
SellCo Corporation ("SellCo") (for subsidiaries of SellCo, see Annex A attached hereto)
MES Holdings Corporation ("MES") (for subsidiaries of MES see
Annex
B attached hereto)
JWP Energy Products, Inc.
JWP/MEC Corp.
University Energy Services of California, Inc.
University Technical Services, Inc.
JWP Telecom, Inc.
JWP Telecommunication Services Inc.
JWP Telephone Services Inc.
Standard Telecommunications, Inc.
Standard Telecommunications Equipment Inc.
MEC Constructors Inc.
Jamaica Technical Trading Company
JWP Technical Services (C.N.M.I.) Inc.
JWP Technical Services Hong Kong Limited
JWP Technical Services (Singapore) PTE Ltd.
JWP Thailand Ltd.
ANNEX A
SUBSIDIARIES (Direct and Indirect) OF SELLCO
(All subsidiaries are 100% owned unless otherwise indicated. The level of indentation indicates the level of ownership. SellCo is a wholly-owned subsidiary of EMCOR)
Afgo Engineering Corporation
Afgo Engineering Corp. of Washington
American Cable Products, Inc.
Antwerp Education Center N.V.
AZCO Inc.
A to Z Equipment Corp.
Brandt Engineering Company of Arkansas, Inc.
Brandt Service Company
Drake & Scull France SARL
E.M.A. International, Inc.
Gone Inc.
Guzovsky/JWP Electrical Inc.
Jamaica Water Securities Corp.
Jamaica Water Supply Company (97%)
Sea Cliff Water Company
JWP Asset Management Inc.
JWP Brandt Engineering Co., Inc.
JWP Communications Inc.
Computer Maintenance Corporation
JWP/IS Network Integration Services, Inc.
JWP Controls Holding, Inc.
Case/Acme Systems, Inc.
Fort Corp.
Intec Business Phones Inc.
JWP Controls Inc.
ISYS Security Systems, Inc.
JWP Unrestricted Sub 3 Inc.
JWP/SHI Corp.
Photo-Scan Management Systems, Inc.
JWP Credit Corp.
JWP E.C. Corp.
JWP Environmental Services Company
JWP Equipment Services Inc.
General Energy Development Inc.
JWP Voc 1, Inc.
JWP Voc 2, Inc.
JWP Environmental Composting Technologies, Inc.
JWP Espana SA
JWP France SARL
JWP Guzovsky Electrical Corp.
JWP/HCCII Corp.
JWP of Hartford, Inc.
JWP Information Services, Inc.
Businessland Canada Ltd.
Businessland (Hong Kong) Limited
JWP Information Services SARL
JWP Mechanical Services of New York, Inc.
JWP Merger Sub Inc.
JWP Environmental Services III Inc.
JWP New England Inc.
JWP TS Corp.
Kerby Saunders, Inc.
Kerby Saunders-Warkol, Inc.
Marlon of Texas, Inc.
Metalair Industries, Inc.
MicroAvenue
MicroCom
North American Heating & Air Conditioning Company
Sivea Benelux
SLR Constructors Inc.
Superior Engineering Corporation
Sutter Hill Industries, Inc.
Teletime Limited
University Cogeneration, Inc.
University Mechanical Contractors, Inc.
University Nuclear Systems, Inc.
Wachtel, Duklauer & Fein, Incorporated
Wachtel, Duklauer & Fein Incorporated (NJ) (90%)
Walker Engineering, Inc.
Worldwide Communications, Inc.
JWP Unrestricted Sub 9 Inc.
JWP Unrestricted Sub 12 Inc.
ANNEX B
SUBSIDIARIES (Direct and Indirect) OF MES HOLDINGS CORPORATION
(All subsidiaries are 100% owned unless otherwise indicated.
The level of indentation indicates the level of ownership.
MES is a wholly-owned subsidiary of EMCOR)
EMCOR Mechanical/Electrical Services, Inc.
EMCOR Mechanical/Electrical Services (East), Inc.
Heritage Air Systems Inc.
Forest Electric Corp.
J.C. Higgins Corp.
Penguin Maintenance and Service, Inc.
EMCOR/Penguin Air Conditioning Corp.
Welsbach Electric Corp.
Welsbach Electric Corp. of L.I.
EMCOR Mechanical/Electrical Services (Midwest), Inc.
JWP/Hyre Electric Co. of Indiana, Inc.
EMCOR Midwest, Inc.
Gibson Electric Co., Inc.
JWP Technical Services of Ohio, Inc. Zack Power & Industrial Company EMCOR Mechanical/Electrical Services (West), Inc. University Mechanical & Engineering Contractors, Inc.
(California)
T.L. Cholette, Inc.
Hansen Mechanical Contractors, Inc.
University Mechanical & Engineering Contractors,
Inc. (Arizona)
Trautman & Shreve, Inc.
EMCOR Mechanical/Electrical Services (South), Inc.
EMCOR Gowan Inc.
Defender Indemnity, Ltd.
EMCOR Risk Holdings Inc.
EMCOR International Inc.
Comstock Limited
Comstock Canada (Limited Partnership) (50%)
Drake & Scull (Cayman Islands) Limited
Drake & Scull Assarain (LLC) (49%)
Lunar Drake & Scull (UAE) (49%)
JWP (Cayman Islands) Ltd.
JWP-NESMA Ltd. (50%)
JWP Technical Services of Guam, Inc.
JWP NRO Holdings Inc.
EMCOR (U.K.) Limited
Businessland Holdings Ltd.
BL Distribution Ltd.
JWP Leasing Limited
Drake & Scull Holdings Limited DEL Commerce (Contract Services) Limited Drake & Scull Group Services Limited Drake & Scull Engineering Limited Drake & Scull Airport Services Limited Drake & Scull (Scotland) Limited HKW Consultancy Limited Drake & Scull Overseas Limited Drake & Scull International Limited Forest Datacom (UK) Ltd.
Forest Drake Scull Electric Limited
Forest Electric (U.K.) Limited
Heritage Air Systems Limited
H. & F. Kornfeld (U.K.) Limited
923452 Ontario Limited
Comstock Canada (Limited Partnership) (50%)
Inte-Fac Corp.