LETTER OF CREDIT, REIMBURSEMENT AND
GUARANTY AGREEMENT
Dated as of June 1, 1994
TABLE OF CONTENTS
Pages
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE
GUARANTOR . . . . . . . . . . . . . . . . 10
2.1. Incorporation . . . . . . . . . . . . . . 10
2.2. Power and Authority; No Conflicts;
Enforceability. . . . . . . . . . . . . . 10
2.3. Financial Condition . . . . . . . . . . . 11
2.4. Title to Property and Assets. . . . . . . 11
2.5. Litigation. . . . . . . . . . . . . . . . 11
2.6. Taxes . . . . . . . . . . . . . . . . . . 11
2.7. Trademarks, Franchises and Licenses . . . 12
2.8. No Default. . . . . . . . . . . . . . . . 12
2.9. Governmental Authority. . . . . . . . . . 12
2.10. ERISA Requirements. . . . . . . . . . . . 12
2.11. Pollution and Environmental Control;
Hazardous Substances. . . . . . . . . . . 12
2.12. Capital Structure . . . . . . . . . . . . 13
2.13. Solvent Financial Condition . . . . . . . 13
2.14 Restrictions. . . . . . . . . . . . . . . 13
2.15. Full Disclosure . . . . . . . . . . . . . 13
2.16. Labor Relations . . . . . . . . . . . . . 14
2.17. Compliance with Laws. . . . . . . . . . . 14
2.18 Brokers . . . . . . . . . . . . . . . . . 14
2.19 Trade Relations . . . . . . . . . . . . . 14
2.20 Investment Company Act. . . . . . . . . . 14
2.21. Survival of Representations and
Warranties. . . . . . . . . . . . . . . . 14
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
BORROWER. . . . . . . . . . . . . . . . . 15
3.1. Incorporation . . . . . . . . . . . . . . 15
3.2. Power and Authority . . . . . . . . . . . 15
3.3. Governmental Authority. . . . . . . . . . 15
3.4. Project Site. . . . . . . . . . . . . . . 16
3.5. Survival of Representatives
and Warranties. . . . . . . . . . . . . . 16
ARTICLE IV TERMS OF LETTER OF CREDIT, REIMBURSEMENT,
OTHER PAYMENTS AND GUARANTY . . . . . . . 17
4.1. Letter of Credit. . . . . . . . . . . . . 17
4.2. Reimbursement and Other Payments. . . . . 17
4.3. Tender Advances . . . . . . . . . . . . . 17
4.4. Commission and Fee. . . . . . . . . . . . 19
4.5. Increased Costs . . . . . . . . . . . . . 19
4.6. Computation . . . . . . . . . . . . . . . 20
4.7. Payment Procedure . . . . . . . . . . . . 20
4.8. Business Days . . . . . . . . . . . . . . 20
4.9. Reimbursement of Expenses . . . . . . . . 20
4.10. Expiration Date . . . . . . . . . . . . . 20
4.11. Guaranty. . . . . . . . . . . . . . . . . 20
4.12. Obligations Absolute. . . . . . . . . . . 22
4.13. Waiver of Guarantor's Rights. . . . . . . 23
ARTICLE V SECURITY; INSURANCE . . . . . . . . . . . . . . . . 24
5.1. Security. . . . . . . . . . . . . . . . . 24
5.2. Casualty and Liability Insurance
Required. . . . . . . . . . . . . . . . . 24
5.3. Notice of Casualty or Taking. . . . . . . 24
ARTICLE VI AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . 25
6.1. Financial Reports and Other Data
and Information . . . . . . . . . . . . . 25
6.2. Books, Records and Inspections. . . . . . 26
6.3. Maintenance of Property, Insurance. . . . 27
6.4. Corporate Franchises. . . . . . . . . . . 27
6.5. Compliance with Statutes, etc.. . . . . . 27
6.6. ERISA . . . . . . . . . . . . . . . . . . 27
6.7. Performance of Obligations. . . . . . . . 28
6.8. Taxes and Liens . . . . . . . . . . . . . 28
6.9. Payment of Obligations. . . . . . . . . . 29
6.10. Environmental Matters . . . . . . . . . . 29
ARTICLE VII NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . 30
7.1. Negative Pledge; Liens. . . . . . . . . . 30
7.2. Consolidation or Merger . . . . . . . . . 31
7.3. Sale of Assets, Dissolution, Etc. . . . . 31
7.4. Loans and Investments . . . . . . . . . . 31
7.5. Consolidated Total Liabilities to
Consolidated Tangible Net Worth . . . . . 32
7.6. Coverage Ratio. . . . . . . . . . . . . . 32
7.7. Current Ratio . . . . . . . . . . . . . . 32
7.8. Consolidated Net Worth. . . . . . . . . . 32
ARTICLE VIII CONDITIONS TO ISSUANCE OF LETTER OF
CREDIT. . . . . . . . . . . . . . . . . . 33
8.1. Conditions of Issuance. . . . . . . . . . 33
8.2. Additional Conditions Precedent to
Issuance of the Letter of Credit. . . . . 34
8.3. Conditions Precedent to Each
Tender Advance. . . . . . . . . . . . . . 35
ARTICLE IX DEFAULT . . . . . . . . . . . . . . . . . . . . 36
9.1. Events of Default . . . . . . . . . . . . 36
9.2. No Remedy Exclusive . . . . . . . . . . . 38
ARTICLE X MISCELLANEOUS . . . . . . . . . . . . . . . . . . . 39
10.1. Indemnification . . . . . . . . . . . . . 39
10.2. Transfer of Letter of Credit. . . . . . . 40
10.3. Reduction of Letter of Credit . . . . . . 40
10.4. Liability of the Bank . . . . . . . . . . 40
10.5. Successors and Assigns. . . . . . . . . . 41
10.6. Notices . . . . . . . . . . . . . . . . . 41
10.7. Amendment . . . . . . . . . . . . . . . . 42
10.8. Effect of Delay and Waivers . . . . . . . 42
10.9. Counterparts. . . . . . . . . . . . . . . 42
10.10. Severability. . . . . . . . . . . . . . . 42
10.11. Cost of Collection. . . . . . . . . . . . 42
10.12. Set Off . . . . . . . . . . . . . . . . . 42
10.13. Governing Law . . . . . . . . . . . . . . 43
10.14. References. . . . . . . . . . . . . . . . 43
10.15. Consent to Jurisdiction, Venue. . . . . . 43
EXHIBIT A Form of Letter of Credit
EXHIBIT B Representations of the Guarantor;
Representations of the Borrower
EXHIBIT C Liens
EXHIBIT D Insurance
EXHIBIT E Opinion of Counsel to the Borrower and the Guarantor
EXHIBIT F Opinion of Bond Counsel
LETTER OF CREDIT, REIMBURSEMENT and
GUARANTY AGREEMENT
THIS AGREEMENT, dated as of June 1, 1994 by and among SPENCE
ENGINEERING COMPANY, INC., a Delaware corporation ("the Borrower"), WATTS
INDUSTRIES, INC., a Delaware corporation ("the Guarantor"), and THE FIRST
UNION NATIONAL BANK OF NORTH CAROLINA, a national banking association
organized and existing under the laws of the United States with its
principal offices located in Charlotte, North Carolina (the "Bank");
W I T N E S S E T H:
WHEREAS, arrangements have been made pursuant to a Trust
Indenture of even date herewith (the "Indenture") between the Village of
Walden Industrial Development Agency (the "Issuer") and The First National
Bank of Boston, Boston, Massachusetts (the "Trustee") for the issuance and
sale by the Issuer of its Industrial Development Revenue Refunding Bonds
(Spence Engineering Company, Inc. Project), Series 1994 in the original
aggregate principal amount of $7,500,000 (the "Bonds"); and
WHEREAS, the Bonds have been issued for the purpose of
refunding in whole the outstanding principal amount of the Issuer's
Industrial Development Revenue Refunding Bonds (Spence Engineering Company
Project), Series 1984 in the original aggregate principal amount of
$7,500,000 (the "Prior Bonds"), the proceeds of which were used to finance,
in whole or in part, the cost of acquiring, constructing and installing a
certain project in the Village of Walden, New York (the "Project") owned
and operated by the Company and located in Orange County; and
WHEREAS, in order to enhance the marketability of the Bonds,
the Borrower has requested the Bank to issue an irrevocable direct pay
letter of credit in the form attached hereto as Exhibit A (such letter of
credit or any successor or substitute letter of credit issued by the Bank
herein individually and collectively called the "Letter of Credit") in an
aggregate amount not exceeding $7,875,000, of which (a) $7,500,000 shall
support the payment of principal or portion of the purchase price
corresponding to principal of the Bonds and (b) $375,000 shall support the
payment of up to 120 days' interest or portion of the purchase price
corresponding to interest on the Bonds at an assumed interest rate of 15%
per annum; and
WHEREAS, as a condition precedent to the issuance of the
Letter of Credit, the Bank has requested and the Guarantor has agreed to
unconditionally guarantee the obligations of the Borrower hereunder as
hereinafter provided;
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, including the covenants, terms and
conditions hereinafter appearing, and to induce the Bank to issue the
Letter of Credit, the Borrower and the Guarantor do hereby covenant and
agree with the Bank as follows:
ARTICLE I
Definitions
All words and terms defined in Article I of the Sale
Agreement shall have the same meanings in this Agreement, unless otherwise
specifically defined herein. The terms defined in this Article I have, for
all purposes of this Agreement, the meanings specified hereinabove or in
this Article, unless defined elsewhere herein or the context clearly
requires otherwise.
1.1. "Affiliate" means any person, corporation, association
or other business entity which directly or indirectly controls, or is
controlled by, or is under common control with the Borrower or the
Guarantor.
1.2. "Agreement" shall mean this Letter of Credit,
Reimbursement and Guaranty Agreement, as the same may from time to time be
amended, modified or supplemented in accordance with the terms hereof.
1.3. "Alternate Credit Facility" means any irrevocable
direct pay letter of credit, insurance policy or similar credit enhancement
or support facility for the benefit of the Trustee, the terms of which
Alternate Credit Facility shall in all respects material to the registered
owners of the Bonds be the same (except for the term set forth in such
Alternate Credit Facility) as those of the Letter of Credit.
1.4. "Bankruptcy Code" means 11 U.S.C. (section) 101 et seq., as
amended.
1.5. "Bondholder" or "Bondholders" means the initial and
any future registered owners of the Bond or Bonds as registered on the
books and records of the Bond Registrar pursuant to Section 204 of the
Indenture.
1.6. "Bond Documents" means, collectively, the Sale
Agreement, the Note, the Remarketing Agreement, the Tender Agency
Agreement, the Indenture, the Security Instruments and the Bonds, as the
same may be amended, modified or supplemented from time to time in
accordance with their respective terms.
1.7. "Borrower" means Spence Engineering Company, Inc., a
Delaware corporation.
1.8. "Cash and Cash Equivalents" means as to any Person at
a particular date, the aggregate amount of all items categorized as "cash"
and "cash equivalents" on the balance sheet of such Person, as determined
in accordance with GAAP.
1.09. "Consistent Basis" means, in reference to the
application of GAAP, that the accounting principles observed in the period
referred to are comparable in all material respects to those applied in the
preceding period, except as to any changes consented to by the Bank.
1.10. "Consolidated Net Income" means the consolidated
gross revenues of the Guarantor and the Borrower and the Subsidiaries of
each for such period less all expenses and other proper charges for such
period (including taxes on or measured by income) determined in accordance
with GAAP.
1.11. "Consolidated Net Worth" of the Guarantor and the
Borrower and the Subsidiaries of each shall mean at any time as of which
the amount thereof is to be determined, the sum of the Net Worth of such
Persons.
1.12. "Consolidated Subsidiaries" means the Subsidiaries of
the Guarantor included in the audited consolidated financial statements of
the Guarantor from time to time.
1.13. "Consolidated Tangible Net Worth" of the Guarantor
and the Borrower and the Subsidiaries of each shall mean at any time as of
which the amount thereof is to be determined, the Consolidated Net Worth
less, the sum of the following (without duplication of deductions in
respect of items already deducted in arriving at surplus and retained
earnings): (a) all reserves, except legal reserves and other contingency
reserves (i.e., reserves not allocated to specific purposes and not
deducted from assets), which are properly treated as appropriations of
surplus or retained earnings; (b) the book value of all assets which would
be treated as intangibles under GAAP including, without limitation,
capitalized expenses, goodwill, trademarks, trade names, franchises,
copyrights, patents and unamortized debt discount and expense; and (c) any
treasury stock.
1.14. "Consolidated Total Liabilities" means the sum of the
Total Liabilities of the Guarantor and the Borrower and the Subsidiaries of
each at any time as of which the amount thereof is to be determined.
1.15. "Consultant" means any third-party architect or
engineer satisfactory to the Bank.
1.16. "Current Assets" means Cash and Cash Equivalents and
all other assets or resources of a Person which are expected to be realized
in cash, sold in the ordinary course of business, or consumed within one
year, all determined in accordance with GAAP.
1.17. "Current Liabilities" means the amount of all
liabilities of a Person which by their terms are payable within one year
(including all indebtedness payable on demand or maturing not more than one
year from the date of computation and the current portion of long-term
debt), all determined in accordance with GAAP.
1.18. "Default" means an event or condition the occurrence
of which would, with the lapse of time or the giving of notice, or both,
become an Event of Default.
1.19. "Distribution" means in respect of any corporation
means and includes: (i) the payment of any dividends or other
distributions on capital stock of the corporation (except distributions in
such stock) and (ii) the redemption or acquisition of its Securities unless
made contemporaneously from the net proceeds of the sale of its Securities.
1.20. "Environmental Laws" means all federal, state and
local laws, rules, regulations, ordinances, programs, permits, guidances,
orders and consent decrees relating to health, safety and environmental
matters, including, but not limited to, the Resource Conservation and
Recovery Act; the Comprehensive Environmental Response, Compensation and
Liability Act of 1980; the Toxic Substances Control Act, as amended; the
Clean Water Act; the River and Harbor Act; the Water Pollution Control Act;
the Marine Protection Research and Sanctuaries Act; the Deep-Water Port
Act; the Safe Drinking Water Act; the Superfund Amendments and
Reauthorization Act of 1986; the Federal Insecticide, Fungicide and
Rodenticide Act; the Mineral Lands and Leasing Act; the Surface Mining
Control and Reclamation Act; state and federal superlien and environmental
cleanup programs and laws; and U.S. Department of Transportation
regulations.
1.21. "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, including any rules and regulations promulgated
thereunder.
1.22. "ERISA Affiliate" means a Person under common control
with the Guarantor within the meaning of Section 414(c) of the Internal
Revenue Code of 1986, as amended, or Section 4001(b) of ERISA.
1.23. "Event of Default" means an Event of Default as
defined in Section 9.1 hereof.
1.24. "Expiration Date" means June 17, 1997, the expiration
date of the Letter of Credit, as such date may be extended in accordance
with the terms of Section 4.10 hereof.
1.25. "GAAP" means those principles of accounting set forth
in pronouncements of the Financial Accounting Standards Board and its
predecessors or pronouncements of the American Institute of Certified
Public Accountants or those principles of accounting which have other
substantial authoritative support and are applicable in the circumstances
as of the date of application, as such principles are from time to time
supplemented or amended.
1.26. "Guarantor" means Watts Industries, Inc., a Delaware
corporation.
1.27. "Indebtedness" means with respect to any Person, all
indebtedness of such Person for borrowed money, all indebtedness of such
Person for the acquisition of property other than purchase of products and
merchandise in the ordinary course of business, indebtedness secured by and
any lien, pledge or other encumbrance on the property of such Person
whether or not such indebtedness is assumed, all liability of such Person
by way of endorsements (other than for collection or deposit in the
ordinary course of business); all guarantees of Indebtedness of any other
Person by such Person (including any agreement, contingent or otherwise, to
purchase any obligation representing such Indebtedness or property
constituting security therefor, or to advance or supply funds for such
purpose or to maintain working capital or other balance sheet or income
statement condition, or any other arrangement in substance effecting any of
the foregoing); all leases and other items which in accordance with GAAP
are classified as liabilities on a balance sheet; provided that in no event
shall the term Indebtedness include capital stock, surplus and retained
earnings, minority interests in the common stock of subsidiaries, reserves
for deferred income taxes and investment credits, other deferred credits
and reserves, and deferred compensation obligations.
1.28. "Lien" means any interest in Property securing an
obligation owed to, or a claim by, a Person other than the owner of the
Property, whether such interest is based on the common law, statute or
contract, and including, but not limited to, the security interest,
security title or lien arising from a security agreement, mortgage, deed of
trust, deed to secure debt, encumbrance, pledge, conditional sale or trust
receipt or a lease, consignment or bailment for security purposes. For the
purpose of this Agreement, the Borrower or the Guarantor, respectively,
shall be deemed to be the owner of any Property which it has acquired or
holds subject to a conditional sale agreement or other arrangement pursuant
to which title to the Property has been retained by or vested in some other
Person for security purposes.
1.29. "Material Adverse Effect" means a material adverse
effect on the business, operations or financial condition of the Guarantor
and its Subsidiaries or if applicable, such other Person, taken as a whole.
1.30. "Money Borrowed" as applied to Indebtedness, means
(i) Indebtedness for borrowed money; (ii) Indebtedness, whether or not in
any such case the same was for borrowed money, (A) which is represented by
notes payable or drafts accepted that evidence extensions of credit, (B)
which constitutes obligations evidenced by bonds, debentures, notes or
similar instruments, or (C) upon which interest charges are customarily
paid (other than accounts payable) or that was issued or assumed as full or
partial payment for Property; (iii) Indebtedness that constitutes a
Capitalized Lease Obligation; and (iv) Indebtedness under any guaranty of
obligations that would constitute Indebtedness for Money Borrowed under
clauses (i) through (iii) hereof.
1.31. "Net Worth" means the amount of issued and
outstanding share capital, plus the amount of additional paid-in capital,
retained earnings (or, in the case of a deficit, minus the amount of such
deficit), determined in accordance with GAAP.
1.32. "Obligations" means all loans and all other advances,
debts, liabilities, obligations, covenants and duties owing, arising, due
or payable from the Borrower to the Bank of any kind or nature, present or
future, whether or not evidenced by any note, guaranty or other instrument,
whether arising under this Agreement or any of the other Bond Documents or
Security Instruments or otherwise, whether direct or indirect (including
those acquired by assignment), absolute or contingent, primary or
secondary, due or to become due, now existing or hereafter arising and
however acquired. The term includes, without limitation, all interest,
charges, expenses, fees, attorney's fees and any other sums chargeable to
the Borrower under any of the Bond Documents or Security Instruments.
1.33. "Officer's Certificate" means the Certificate of the
Chief Financial Officer or the Controller of the Borrower or the Guarantor,
as the case shall be, as approved by the Bank.
1.34. "Other Agreements" means any and all agreements,
instruments and documents (other than this Agreement and the Security
Instruments), heretofore, now or hereafter executed by the Borrower or the
Guarantor or the Subsidiaries of either or any of them and delivered to the
Bank in respect to the transactions contemplated by this Agreement.
1.35. "Permitted Encumbrances" means and includes:
(a) liens for taxes and assessments not delinquent or
which are being contested in good faith by appropriate
proceedings and against which adequate reserves have been
provided for on the books of the Guarantor or the Borrower,
as applicable;
(b) worker's, mechanic's and materialmen's liens and
similar liens incurred in the ordinary course of business
remaining undischarged or unstayed for not longer than 60
days following Borrower's notice of the attachment thereof;
(c) attachments remaining undischarged or unstayed for
not longer than 60 days from the making thereof;
(d) liens in respect of final judgments or awards
remaining undischarged or unstayed for not longer than 60
days from the making thereof;
(e) liens in respect of pledges or deposits under
worker's compensation laws, liens to secure customs bonds,
unemployment insurance or similar legislation and in respect
of pledges or deposits to secure bids, tenders, contracts
(other than contracts for the payment of money), leases or
statutory obligations, or in connection with surety, appeal
and similar bonds incidental to the conduct of litigation;
(f) any other liens, easements, encumbrances, rights
of way and clouds on title included within the term
"Permitted Encumbrances" as defined in the Deed to Secure
Debt and Security Agreement.
1.36. "Person" means an individual, partnership,
corporation, trust, joint venture, unincorporated organization,
association, or a government, or agency or political subdivision or
instrumentality thereof.
1.37. "Plan" means a pension plan (other than a
multiemployer pension plan as defined in Section 3(37) of ERISA) that is
subject to Title IV of ERISA.
1.38. "Pledge Agreement" means the Pledge Agreement of even
date herewith from the Borrower to the Bank.
1.39. "Prime Rate" means the interest rate publicly
announced from time to time by the Bank to be its prime rate, which may not
necessarily be its best lending rate. In the event the Bank shall abolish
or abandon the practice of announcing its Prime Rate or should the same be
unascertainable, the Bank shall designate a comparable reference rate which
shall be deemed to be the Prime Rate under this Agreement.
1.40. "Private Placement Memorandum" means the Private
Placement Memorandum dated June 17, 1994 relating to the Bonds.
1.41. "Prohibited Transaction" means any transaction set
forth in Section 406 of ERISA or Section 4975 of the Internal Revenue Code
of 1986, as amended from time to time.
1.42. "Project" means the manufacturing facility acquired,
constructed and installed with the proceeds of the Prior Bonds, owned and
operated by the Borrower in the Village of Walden, New York.
1.43. "Property" means any interest in any kind of property
or asset, whether real, personal or mixed, or tangible or intangible.
1.44. "Reportable Event" means any of the events set forth
in Section 4043(b) of ERISA other than those events for which the
obligation to notify the Pension Benefit Guaranty Corporation ("PBGC") has
been waived under 29 C.F.R. Part 2615.
1.45. "Security" means shall have the same meaning as in
Section 2(1) of the Securities Act of 1933, as amended.
1.46. "Security Instruments" means, collectively, the
Pledge Agreement and any and all Other Agreements.
1.47. "Solvent" means as to any Person, such Person (i)
owns Property whose fair saleable value is greater than the amount required
to pay all of such Person's Indebtedness (including contingent debts), (ii)
is able to pay all of its Indebtedness as such Indebtedness matures and
(iii) has capital sufficient to carry on its business and transactions and
all business and transactions in which it is about to engage.
1.48. "Subsidiary" or "Subsidiaries" means, as to any
Person, any corporation whether organized and existing under the laws of
any state of the United States, including the District of Columbia and
Puerto Rico, or under the laws of any foreign country, of which more than
50% of voting stock at any time is owned or controlled directly or
indirectly by the Borrower or the Guarantor, as applicable.
1.49. "Tender Advance" has the meaning assigned to that
term in Section 4.3 of this Agreement.
1.50. "Tender Draft" has the meaning assigned to that term
in the Letter of Credit.
1.51. "Termination Date" means the last day a drawing is
available under the Letter of Credit.
1.52. "Trustee" means any Person or group of Persons at the
time serving as corporate fiduciary under the Indenture.
1.53. "Uniform Customs and Practice" shall mean the Uniform
Customs and Practice for Documentary Credits, 1993 Revision, ICC
Publication No. 500.
ARTICLE II
Representations and Warranties of the Guarantor
The Guarantor represents and warrants to the Bank (which
representations and warranties shall survive the delivery of the documents
mentioned herein and the issuance of the Letter of Credit) that:
2.1. Incorporation. Each of the Guarantor and its
Consolidated Subsidiaries is a corporation, partnership or joint venture,
respectively, duly organized, existing and in good standing under the laws
of its respective jurisdiction, except where the failure to be in good
standing would not have a Material Adverse Effect and has the corporate or
other power to own its respective properties and to carry on its respective
business as now or at such future time being conducted, and is duly
qualified as a foreign corporation or otherwise to do business in every
jurisdiction in which the failure to be so qualified would have a Material
Adverse Effect. On the date of the execution and delivery of this
Agreement, the Guarantor has the respective Consolidated Subsidiaries shown
on Exhibit B hereto, and no other Subsidiaries.
2.2. Power and Authority; No Conflicts; Enforceability. It
is duly authorized under all applicable provisions of law to execute,
deliver and perform this Agreement and the Other Agreements to which it is
a party, and all corporate action on its part required for the lawful
execution, delivery and performance hereof and thereof has been duly taken;
and this Agreement and the Other Agreements to which it is a party, upon
the due execution and delivery hereof, will be the valid, binding and legal
obligation of the Guarantor enforceable in accordance with their respective
terms, subject to bankruptcy, insolvency, reorganization, moratorium, or
similar laws affecting creditors' rights generally and to general
principles of equity. Neither the execution of this Agreement, nor the
fulfillment of or compliance with the respective provisions and terms
hereof, will (A) conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a violation of or default under
any applicable law, regulation, judgment, writ, order or decree to which
the Guarantor or any Consolidated Subsidiary or any of their respective
properties are subject, or the charter or bylaws of the Guarantor or any
Consolidated Subsidiary, or any agreement or instrument to which the
Guarantor or any Consolidated Subsidiary is now a party and (b) create any
lien, charge or encumbrance upon any of the property or assets of the
Guarantor or any Consolidated Subsidiary pursuant to the terms of any
agreement or instrument to which the Guarantor or any Subsidiary is a party
or by which they, or any of them, or any of their respective properties,
are bound except pursuant to the Security Instruments.
2.3. Financial Condition. The consolidated balance sheet
of the Guarantor and its Consolidated Subsidiaries for the fiscal year
ended as of June 30, 1993 [and the fiscal quarters ended September 30,
1993, December 31, 1993 and March 31, 1994], and the related consolidated
statements of income and retained earnings and changes in financial
position for the period then ended, copies of which have been furnished to
the Bank, are correct, complete and fairly present the financial condition
of the Guarantor and its Consolidated Subsidiaries in all material respects
as at the respective date of said balance sheets, and the results of its
respective operations for each such period. The Guarantor and its
Consolidated Subsidiaries do not have any material direct or contingent
liabilities as of the date of this Agreement which are not provided for or
reflected in the balance sheets dated March 31, 1994, or referred to in
notes thereto or set forth in Exhibit B hereto. There has been no material
adverse change in the business, properties or condition, financial or
otherwise, of the Guarantor and its Consolidated Subsidiaries since
March 31, 1994.
2.4. Title to Property and Assets. It has good and
marketable title to its Property, including the properties and assets
reflected in the financial statements and notes thereto described in
Section 2.3 hereof, except for such assets as have been disposed of since
the date of said financial statements in the ordinary course of business or
as are no longer useful in the conduct of its business, and all such
properties and assets are free and clear of all material Liens, mortgages,
pledges, encumbrances or charges of any kind except Liens reflected in the
financial statements or Exhibit B hereto or permitted under Section 7.2
hereof.
2.5. Litigation. There are no pending or, to the best of
its knowledge, threatened material actions, suits or proceedings before any
court, arbitrator or governmental or administrative body or agency which
may materially adversely affect the properties, business or condition,
financial or otherwise, of the Guarantor and its Consolidated Subsidiaries
on a consolidated basis, except as disclosed in the financial statements
and notes thereto described in Section 2.3 hereof or Exhibit B hereto.
2.6. Taxes. It has filed all material tax returns required
to be filed by it and all material taxes due with respect thereto have been
paid, and except as described in Exhibit B hereto, no controversy in
respect of a material amount of additional taxes, state, federal or
foreign, of the Guarantor is pending, or, to the knowledge of the
Guarantor, threatened. The federal income taxes of the Guarantor have been
examined and reported on or closed by applicable statutes for all fiscal
years to and including the fiscal year ending June 30, 1990, and adequate
reserves have been established for the payment of all such taxes for
periods ended subsequent to June 30, 1990.
2.7. Trademarks, Franchises and Licenses. It owns,
possesses, or has the right to use all necessary material patents,
licenses, franchises, trademarks, trademark rights, trade names, trade name
rights and copyrights to conduct business as now conducted, without known
conflict with any patent, license, franchise, trademark, trade name, or
copyright of any other Persons.
2.8. No Default. It is not in default in the performance,
observance or fulfillment of any of its material obligations, covenants or
conditions contained in any agreement or instrument to which it is a party
or by which it may be bound, the effect of which default would allow any
Person to cause such obligation under the agreement or instrument to become
due prior to its stated maturity.
2.9. Governmental Authority. It has received the written
approval of all federal, state, local and foreign governmental authorities,
if any, necessary to carry out the terms of this Agreement, and no further
governmental consents or approvals are required in the making or
performance of this Agreement by it.
2.10. ERISA Requirements. It has not incurred any material
liability to the PBGC established under ERISA (or any successor thereto
under ERISA) in connection with any Plan established or maintained by it or
by any Person under common control with it (within the meaning of
Section 414(c) of the Internal Revenue Code of 1986, as amended (the
"Code"), or of Section 4001(b) of ERISA), or in which its employees are
entitled to participate. No such Plan has incurred any material
accumulated funding deficiency within the meaning of ERISA. No Reportable
Event in connection with any such Plan has occurred or is continuing.
2.11. Pollution and Environmental Control; Hazardous
Substances. It has obtained all permits, licenses and other authorizations
which are required under any Environmental Laws, except to the extent that
failure to have obtained any such permit, license or authorization will not
have a Material Adverse Effect, and is in material compliance with, all
federal, state, and local Environmental Laws and regulations relating,
without limitation, to pollution, reclamation or protection of the
environment, including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants or hazardous or toxic
materials or wastes into air, water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or hazardous or toxic
substances, materials or wastes the failure to comply with which would have
a Material Adverse Effect. Neither any Guarantor, nor to Guarantor's
knowledge any previous owner of the Project Site, has disposed of any
hazardous substances on any portion of the Project Site. As used in this
subparagraph, "hazardous substances" shall have the meaning set forth in
the Comprehensive Environmental Response, Compensation, and Liability Act,
42 U.S.C. (section) 6901, et. seq., and the regulations adopted pursuant to such
act.
2.12. Capital Structure. Exhibit B attached hereto and
made a part hereof states the correct name of each of the Consolidated
Subsidiaries of the Guarantor, the jurisdiction of organization or
incorporation and the percentage of its voting stock owned by the
Guarantor. The Guarantor has good title to all of the shares it purports
to own of the stock of each Consolidated Subsidiary, free and clear in each
case of any Lien other than Permitted Liens. All such shares have been
duly issued and are fully paid and non-assessable.
2.13. Solvent Financial Condition. It is now, and after
giving effect to the transactions contemplated hereby, will be Solvent.
2.14. Restrictions. It is not a party or subject to any
contract, agreement, or charter or other corporate restriction, which
Guarantor believes materially and adversely affects its business or the use
or ownership of any of its Properties. The Guarantor is not a party or
subject to any contract or agreement which restricts its right or ability
to incur Indebtedness, other than as set forth on Exhibit B attached
hereto, none of which prohibit the execution of or compliance with this
Agreement by the Guarantor.
2.15. Full Disclosure. The Financial Statements referred
to in Section 2.3 above, do not, nor does this Agreement or the Bond
Documents or any Other Agreement or written statement of the Guarantor to
the Bank (including, without limitation, the Guarantor's filings, if any,
with the Securities and Exchange Commission), taken as a whole, contain any
untrue statement of a material fact or omit a material fact necessary to
make the statements contained therein or herein not misleading. There is
no fact which the Guarantor has failed to disclose to the Bank in writing
which materially affects adversely or, so far as the Guarantor can now
foresee, will materially affect adversely the Properties, business,
prospects, profits, or condition (financial or otherwise) of the Guarantor
or any of its Consolidated Subsidiaries or the ability of the Guarantor or
the Borrower to perform this Agreement or the Bond Documents.
2.16. Labor Relations. Except as described on Exhibit B
attached hereto and made a part hereof, there are no material grievances,
disputes or controversies with any union or any other organization of the
Guarantor's employees, or threats of strikes, work stoppages or any
asserted pending demands for collective bargaining by any union or
organization which could have a Material Adverse Effect.
2.17. Compliance With Laws. It has duly complied in all
material respects with, and its Properties, business operations and
leaseholds are in compliance in all material respects with, the provisions
of all federal, state and local laws, rules and regulations applicable to
the Guarantor, its Properties or the conduct of its business, including,
without limitation, OSHA and all Environmental Laws, the failure to comply
with which would have a Material Adverse Effect.
2.18. Brokers. There are no claims for brokerage
commissions, finder's fees or investment banking fees in connection with
the transactions contemplated by this Agreement, except for fees owed to
the Bank and its affiliates.
2.19. Trade Relations. There exists no actual or
threatened termination, cancellation or limitation of, or any modification
or change in, the business relationship between the Guarantor and any
customer or any group of customers whose purchases individually or in the
aggregate are material to the business of the Guarantor, or with any
material supplier, and there exists no present condition or state of facts
or circumstances which would materially affect adversely the Guarantor or
prevent the Guarantor from conducting such business after the consummation
of the transaction contemplated by this Agreement in substantially the same
manner in which it has heretofore been conducted.
2.20. Investment Company Act. The Guarantor is not an
"investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
2.21. Survival of Representations and Warranties. It
covenants, warrants and represents to the Bank that all representations and
warranties of the Guarantor contained in this Agreement or any of the Bond
Documents or Other Agreements shall be true at the time of its execution of
this Agreement and, the Bond Documents or Other Agreements, and shall
survive the execution, delivery and acceptance thereof by the Bank and the
parties thereto and the closing of the transactions described therein or
related thereto.
ARTICLE III
Representations and Warranties of the Borrower
The Borrower represents and warrants to the Bank (which
representations and warranties shall survive the delivery of the documents
mentioned herein and the issuance of the Letter of Credit) that:
3.1. Incorporation. It is a corporation duly incorporated,
existing and in good standing under the laws of the State of its
incorporation, and has the corporate or other power to own its Property and
to carry on its business as now being conducted.
3.2. Power and Authority. It is duly authorized under all
applicable provisions of law to execute, deliver and perform this Agreement
and the Bond Documents, and all action, corporate or otherwise, as
applicable, on its part required for the lawful execution, delivery and
performance hereof has been duly taken; and this Agreement and the Bond
Documents, upon the due execution and delivery hereof, will be its valid
and binding obligation enforceable in accordance with their respective
terms, subject to bankruptcy, insolvency, reorganization, moratorium, or
similar laws affecting creditors' rights generally and to general
principles of equity. Neither the execution of this Agreement nor the Bond
Documents, nor the fulfillment of or compliance with their respective
provisions and terms, will (a) conflict with, or result in a breach of the
terms, conditions or provisions of, or constitute a violation of or default
under any applicable law, regulation, judgment, writ, order or decree to
which it or any of its properties is subject, or its charter or by-laws, or
any agreement or instrument to which it or any of its Subsidiaries is now a
party or by which it or any of its Subsidiaries or any of their respective
properties is bound or affected, or (b) create any lien, charge or
encumbrance upon any of its or any of its Subsidiaries' property or assets
pursuant to the terms of any agreement or instrument to which it or any of
its Subsidiaries is a party or by which it or any of its Subsidiaries or
any of their respective properties is bound except pursuant to the Security
Instruments.
3.3. Governmental Authority. It has received the written
approval of all federal, state, local and foreign governmental authorities,
if any, necessary to carry out the terms of this Agreement, and no further
governmental consents or approvals are required in the making or
performance of this Agreement and the Bond Documents.
3.4. Project Site. The operation of the Project complies
in all material respects with presently existing zoning and other land use
restrictions affecting the Project Site, including without limitation, any
restrictive covenants.
3.5. Survival of Representations and Warranties. It
covenants, warrants and represents to the Bank that all representations and
warranties of contained in this Agreement or any of the Bond Documents
shall be true at the time of its execution of this Agreement and the Bond
Documents, and shall survive the execution, delivery and acceptance thereof
by the Bank and the parties thereto and the closing of the transactions
described therein or related thereto.
ARTICLE IV
Terms of Letter of Credit, Reimbursement, Other Payments
and Guaranty
4.1. Letter of Credit. The Bank agrees, on the terms and
conditions hereinafter set forth, to issue and deliver the Letter of Credit
in favor of the Trustee in substantially the form of Exhibit A attached
hereto upon fulfillment of the applicable conditions set forth in
Article VIII hereof. The Bank agrees that any and all payments under the
Letter of Credit will be made with the Bank's own funds.
4.2. Reimbursement and Other Payments. The Borrower shall
pay to the Bank:
(a) on or before 3:00 P.M., EST, but after the
honoring of a draw by the Bank, on the date that any amount
is drawn under the Letter of Credit, a sum equal to such
amount so drawn under the Letter of Credit;
(b) on demand, interest on any and all amounts
remaining unpaid by the Borrower when due hereunder from the
date such amounts become due until payment thereof in full,
at a fluctuating interest rate per annum equal at all times
to the lesser of (i) the Prime Rate plus two percent (2%) or
(ii) the highest lawful rate permitted by applicable law;
(c) on demand, any and all reasonable expenses
incurred by the Bank in enforcing any rights under this
Agreement and the Bond Documents; and
(d) on demand all charges, commissions, costs and
expenses set forth in Sections 4.4, 4.5 and 4.9 hereof.
4.3. Tender Advances. (a) If the Bank shall make any
payment of that portion of the purchase price corresponding to principal
and interest of the Bonds drawn under the Letter of Credit pursuant to a
Tender Draft and the conditions set forth in Section 8.3 all have been
fulfilled, such payment shall constitute a tender advance made by the Bank
to the Borrower on the date and in the amount of such payment (a "Tender
Advance"); provided that if the conditions of said Section 8.3 have not
been fulfilled, the amount so drawn pursuant to the Tender Draft shall be
payable in accordance with the terms of Section 4.2(a) above.
Notwithstanding any other provision hereof, the Borrower shall repay the
unpaid amount of each Tender Advance, together with all unpaid interest
thereon on the earlier to occur of (i) such date as Bonds purchased
pursuant to a Tender Draft are resold as provided in
paragraph 4.3(d) hereof, (ii) on the date 366 days following the date of
such Tender Advance, or (iii) the Termination Date.
The Borrower may prepay the outstanding amount of any Tender
Advance in whole or in part, together with accrued interest to the date of
such prepayment on the date such amount is prepaid. The Borrower shall
notify the Bank prior to 11:00 A.M., EST on the date of such prepayment of
the amount to be prepaid.
(b) The Borrower shall pay interest on the unpaid amount of
each Tender Advance from the date of such Tender Advance until such amount
is paid in full, payable monthly, in arrears, on the first day of each
month during the term of each Tender Advance and on the date such amount is
paid in full, at a fluctuating interest rate per annum in effect from time
to time equal to the Prime Rate, provided that the unpaid amount of any
Tender Advance which is not paid when due shall bear interest at the lesser
of the Prime Rate plus two percent (2%) or the highest rate permitted by
applicable law, payable on demand and on the date such amount is paid in
full.
(c) Pursuant to the Pledge Agreement the Borrower has
agreed that, in accordance with the terms of the Indenture, Bonds purchased
with proceeds of any Tender Draft shall be delivered by the Tender Agent to
the Bank or its designee to be held by the Bank or its designee in pledge
as collateral securing the Borrower's payment obligations to the Bank
hereunder. Bonds so delivered to the Bank or its designee shall be
registered in the name of the Bank, or its designee, as pledgee of the
Borrower, as provided for in Section 3 of the Pledge Agreement.
(d) Prior to or simultaneously with the resale of Pledged
Bonds, the Borrower shall prepay or cause the Tender Agent to prepay as
provided below the then outstanding Tender Advances (in the order in which
they were made) by paying to the Bank an amount equal to the sum of (a) the
amounts advanced by the Bank pursuant to the corresponding Tender Drafts
relating to such Bonds, plus (b) the aggregate amount of accrued and unpaid
interest on such Tender Advances. Such payment shall be applied by the
Bank in reimbursement of such drawings (and as prepayment of Tender
Advances resulting from such drawings in the manner described below), and,
upon receipt by the Bank of a certificate completed and signed by the
Trustee in substantially the form of Annex F to the Letter of Credit, the
Borrower irrevocably authorizes the Bank to rely on such certificate and to
reinstate the Letter of Credit in accordance therewith. Funds held by the
Tender Agent as a result of sales of the Pledged Bonds by the Remarketing
Agent shall be paid to the Bank by the Tender Agent to be applied to the
amounts owing by the Borrower to the Bank pursuant to this paragraph (d).
Upon payment to the Bank of the amount of such Tender Advance to be
prepaid, together with accrued interest on such Tender Advance to the date
of such prepayment on the amount to be prepaid, the principal amount
outstanding of Tender Advances shall be reduced by the amount of such
prepayment and interest shall cease to accrue on the amount prepaid.
4.4. Commission and Fee. (a) The Borrower shall pay to the
Bank a commission at the rate of one-half of one percent per annum on the
undrawn amount available to be drawn under the Letter of Credit (computed
on the date that such commission is payable) from and including the date of
issuance of the Letter of Credit until the Termination Date, payable (i) as
to the year in which the Letter of Credit is issued, on such date of
issuance, and (ii) thereafter payable annually in advance in full on the
first day of each anniversary of the issuance of the Letter of Credit. If
the Letter of Credit is terminated or if there is a drawing under the
Letter of Credit to pay the principal of the Bonds during the year
preceding such anniversary date, the Bank will refund to the Borrower the
applicable unused portion of the commission calculated on a pro rata basis.
(b) The Borrower shall pay to the Bank, upon each drawing
under the Letter of Credit in accordance with its terms, a fee of $150 per
drawing.
(c) The Borrower shall pay to the Bank, upon transfer of
the Letter of Credit in accordance with its terms, a transfer fee of
$1,000.
4.5. Increased Costs. In the event of any change in any
existing or future law, regulation, ruling or interpretation thereof
affecting the Bank which shall either (a) impose, modify or make applicable
any reserve, special deposit, capital requirement, assessment or similar
requirement against the Letter of Credit or (b) impose on the Bank any
other condition regarding the Letter of Credit, and the result of any event
referred to in clause (a) or (b) above shall be to increase the cost
(including a reasonable allocation of resources) or decrease the yield to
the Bank of issuing or maintaining the Letter of Credit (which increase in
cost shall be the result of the Bank's reasonable allocation of the
aggregate of such cost increases or yield decreases resulting from such
events), then, upon demand by the Bank, the Borrower shall immediately pay
to the Bank, from time to time as specified by the Bank, additional amounts
which shall be sufficient to compensate the Bank for such increased cost or
decreased yield. A statement of charges submitted by the Bank, shall be
conclusive, absent manifest error, as to the amount owed.
4.6. Computation. All payments of interest, commission and
other charges under this Agreement shall be computed on the per annum
basis, based upon a year of 365 (or 366, as the case may be) days, and
calculated for the actual number of days elapsed.
4.7. Payment Procedure. All payments made by the Borrower
under this Agreement shall be made to the Bank in lawful currency of the
United States of America and in immediately available funds at the Bank's
offices described at the beginning of this Agreement before 12:00 Noon, EST
on the date when due, except for payments made in accordance with the terms
of Section 4.2(a).
4.8. Business Days. If the date for any payment hereunder
falls on a day which is not a Business Day, then for all purposes of this
Agreement the same shall be deemed to have fallen on the next succeeding
Business Day, and such extension of time shall in such case be included in
the computation of payments of interest or commission, as the case may be.
4.9. Reimbursement of Expenses. The Borrower will pay all
reasonable legal fees (computed without regard to any statutory
presumption) incurred by the Bank in connection with the preparation,
execution and delivery of this Agreement, the Letter of Credit, the Bond
Documents, and all transactions contemplated hereby and thereby (including
any amendments hereto or thereto or consents or waivers hereunder or
thereunder) and will also pay all fees, charges or taxes for the recording
or filing of Security Instruments. The Borrower will also pay for all
reasonable legal expenses of the Bank in connection with the administration
of the Letter of Credit, this Agreement and the Bond Documents. The
Borrower will, upon request, promptly reimburse the Bank for all amounts
expended, advanced or incurred by the Bank to collect or satisfy any
obligation of the Borrower under this Agreement or any of the Bond
Documents, or to enforce the rights of the Bank under this Agreement or any
of the Bond Documents, which amounts will include, without limitation, all
court costs, reasonable attorneys' fees, fees of auditors and accountants
and investigation expenses incurred by the Bank in connection with any such
matters.
4.10. Expiration Date. The Letter of Credit will expire on
its stated Expiration Date, unless the Bank notifies the Borrower in
writing at least 120 days prior to the Expiration Date that the Bank will
extend such applicable Expiration Date for an additional one-year period
from the then applicable Expiration Date.
4.11. Guaranty. (a) the Guarantor hereby absolutely and
unconditionally guarantees, the full and timely payment when due, whether
at stated maturity, by acceleration or otherwise, of all obligations of the
Borrower now or hereafter existing under this Agreement or any of the
Security Instruments, whether for principal, interest, fees, expenses or
otherwise. The Guarantor further agrees to pay any and all expenses
(including without limitation reasonable attorneys' fees and expenses)
incurred by the Bank in enforcing or protecting its rights against the
Guarantor under this Agreement or any of the Security Instruments.
(b) This is a guaranty of payment and not of collection,
and the Guarantor expressly waives any right to require that any action be
brought against the Borrower or any other guarantor or to require that
resort be had to any security, whether held by or available to the Bank or
to any other guaranty. If the Borrower shall default in payment of the
principal, interest, or fees on or any other amount payable hereunder when
and as the same shall become due, whether by acceleration, call for
prepayment, or otherwise, or upon the occurrence of any other Event of
Default hereunder, the Guarantor, upon demand by the Bank or its successors
or assigns, will promptly and fully make such payments. All payments by
the Guarantor shall be made in immediately available coin or currency of
the United States of America which on the respective dates of payment
thereof is legal tender for the payment of public and private debts. Each
default in payment of the principal, interest, fees or any other amount
payable hereunder, or the occurrence of any other Event of Default
hereunder, shall give rise to a separate cause of action hereunder, and
separate suits may be brought hereunder as each cause of action arises.
The Bank, or its successors or assigns, in its sole discretion, shall have
the right to proceed first and directly against the Guarantor and its
successors and assigns.
(c) The Guarantor hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the
obligations of the Borrower under this Agreement or any requirement that
the Bank protect, secure, perfect or insure any security interest or lien
or any property subject hereto or to the Security Instruments or exhaust
any right or take any action against the Borrower or any other Person.
(d) The Guarantor will not exercise any rights that it may
acquire by way of subrogation under this Agreement, by any payment made
hereunder or otherwise, until all the obligations of the Borrower shall
have been paid or performed in full. If any amount shall be paid to the
Guarantor on account of such subrogation rights at any time when all the
obligations of the Borrower hereunder shall not have been paid or performed
in full, such amount shall be held in trust for the benefit of the Bank and
shall forthwith be paid to the Bank to be credited and applied upon the
obligations of the Borrower hereunder, whether matured or unmatured, in
accordance with the terms hereof.
(e) This guaranty shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the
obligations of the Borrower hereunder is rescinded or is otherwise returned
by the Bank upon the insolvency, bankruptcy or reorganization of the
Borrower or otherwise, all as though such payment had not been made.
4.12. Obligations Absolute. The obligations of each of the
Borrower and the Guarantor under this Agreement shall be absolute,
unconditional and irrevocable, and shall be paid strictly in accordance
with the terms of this Agreement, under all circumstances whatsoever,
including, without limitation, the following circumstances:
(a) any lack of validity or enforceability of the
Letter of Credit, the Bonds, any of the other Bond
Documents, any of the Security Instruments or any other
agreement or instrument related thereto;
(b) any amendment or waiver of or any consent to
departure from the terms of the Letter of Credit, the Bonds,
any of the other Bond Documents, any of the Security
Instruments or any other agreement or instrument related
thereto;
(c) the existence of any claim, setoff, defense or
other right which any of the Borrower, the Guarantor or the
Issuer may have at any time against the Trustee, any
beneficiary or any transferee of the Letter of Credit (or
any Person for whom the Trustee, any such beneficiary or any
such transferee may be acting), the Bank or any other
Person, whether in connection with this Agreement, the other
Security Instruments, the Letter of Credit, the Bond
Documents, the Project or any unrelated transaction;
(d) any statement, draft or other document presented
under the Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect, or any statement
therein being untrue or inaccurate in any respect
whatsoever;
(e) the surrender, exchange or impairment of any
security for the performance or observance of any of the
terms of this Agreement; or
(f) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, the
Borrower or a Guarantor, except subject to the qualification
that obligations may be reinstated upon bankruptcy,
notwithstanding payment in full of the Borrower's
obligations to the Bank.
Notwithstanding the absolute obligations of the Borrower and the Guarantor
as provided above, the Bank shall be liable to the Borrower and the
Guarantor as provided in Section 10.4 hereof.
4.13. Waiver of Guarantor's Rights. The Guarantor hereby
waives to the fullest extent possible as and against the Borrower and its
assets any and all rights, whether at law, in equity, by agreement or
otherwise, to subrogation, indemnity, reimbursement, contribution, or any
other similar claim, cause of action or remedy that otherwise would arise
out of the Guarantor's performance of its obligations to the Bank under
this Agreement. The preceding waiver is intended by both the Guarantor and
the Bank to be for the benefit of the Borrower, and the waiver shall be
enforceable by the Borrower or any of its successors or assigns as an
absolute defense to any action by the Guarantor against the Borrower or its
assets which arises out of the Guarantor's having made any payment to the
Bank with respect to any of the Borrower's liabilities guaranteed
hereunder.
ARTICLE V
Security; Insurance
5.1. Security. As security for the full and timely payment
and performance by the Borrower and the Guarantor of their respective
obligations hereunder, the Borrower shall on the date hereof deliver the
Pledge Agreement to the Bank.
5.2. Casualty and Liability Insurance Required. The
Borrower will keep the Project and its Properties continuously insured
against such risks as are customarily insured against by businesses of like
size and type engaged in the same or similar operations (other than
business interruption insurance) including, without limiting the generality
of any other covenant contained herein or in the Bond Documents, casualty
insurance and general comprehensive liability insurance against claims for
bodily injury, death or property damage; provided, however, that the
insurance so required may be provided by blanket policies now or hereafter
maintained by the Borrower or the Guarantor.
5.3. Notice of Casualty or Taking. In case of any material
damage to or destruction of all or any part of the Project, the Borrower
shall give prompt notice thereof to the Bank. In case of a taking or
proposed taking of all or any material part of the Project or any right
therein by Eminent Domain, the Borrower shall give prompt notice thereof to
the Bank. Each such notice shall describe generally the nature and extent
of such damage, destruction, taking, loss, proceeding or negotiations.
ARTICLE VI
Affirmative Covenants
Until all the Obligations to be performed and paid shall
have been performed and paid in full, and for so long as the Letter of
Credit shall be outstanding, unless the Bank shall otherwise consent in
writing, the Borrower and the Guarantor will perform and observe all
covenants and agreements contained on its respective part in this
Article VI.
6.1. Financial Reports and Other Data and Information.
(a) Quarterly Statements. Within forty-five (45) days
after the end of each fiscal quarter, a balance sheet of the Guarantor and
its Consolidated Subsidiaries at the end of that period and an income
statement for that period and for the portion of the fiscal year ending
with such period on a consolidated and consolidating basis, setting forth
in comparative form the figures for the same period of the preceding fiscal
year, and certified by the Chief Financial Officer or Controller of the
Guarantor as complete and correct in all material respects and prepared in
accordance with GAAP, except without footnotes and subject to normal
year-end audit adjustments.
(b) Annual Statements. Within ninety (90) days after the
end of each fiscal year, a detailed audited financial report of the
Guarantor and its Consolidated Subsidiaries on a consolidated and
consolidating basis, containing a balance sheet at the end of that period
and an income statement and statement of cash flows for that period,
setting forth in comparative form the figures for the preceding fiscal
year, and containing an unqualified opinion of independent certified public
accountants acceptable to the Bank that the financial statements were
prepared in accordance with GAAP, and that the examination in connection
with the financial statements was made in accordance with generally
accepted auditing standards and accordingly included tests of the
accounting records and other auditing procedures that were considered
necessary in the circumstances.
(c) SEC and Other Reports; Orders, Judgments, Etc.
Promptly upon its becoming available, one copy of each regular or periodic
report, registration statement or prospectus filed by the Guarantor with
any securities exchange or the Securities and Exchange Commission or any
successor agency, and of any material order, judgment, decree, decision or
ruling issued by any governmental authority in any proceeding to which the
Guarantor is a party;
(d) Accountants' Statements. Within the period provided in
paragraph (b) above, a letter of the accountants who render the opinion on
the financial statements, stating that they reviewed this Agreement and
that in performing the examination necessary to render an opinion on the
annual financial statements they obtained no knowledge of any such Default
or Event of Default resulting from the Guarantor's failure to observe the
financial ratios under Sections 7.5 through 7.8, or, if the accountants
have knowledge of a Default or Event of Default, a statement specifying to
the best of their knowledge the nature and period of existence of the
Default or Event of Default;
(e) Certificates. At the time of the delivery of the
financial statements provided for in Section 6.1(a) and (b), an Officers'
Certificate of the Guarantor to the effect that to the best of his
knowledge, no Default or Event of Default has occurred and is continuing;
(f) Notice of Default or Litigation. Promptly, and in any
event within three Business Days after the Chief Financial Officer or
Controller of the Guarantor obtains knowledge thereof, notice of (1) the
occurrence of any event which constitutes a Default or Event of Default,
(2) any litigation or governmental proceeding pending against the Guarantor
which is likely to materially and adversely affect the business,
operations, property, assets, condition (financial or otherwise) or
prospects of the Guarantor and its Subsidiaries on a consolidated basis;
(g) Environmental Matters. Promptly upon obtaining
knowledge thereof, notice of any facts or circumstances known to the
Borrower that the Guarantor reasonably believes is likely to form the basis
for the assertion of any material claim against the Guarantor relating to
environmental matters including, but not limited to, any claim arising from
past or present environmental practices asserted under CERCLA, RCRA, or any
other federal, state or local environmental statute;
(h) Other Information. From time to time, such other
information or documents (financial or otherwise) as the Bank may
reasonably request.
6.2. Books, Records and Inspections. The Borrower and the
Guarantor will keep proper books of record and account in which full, true
and correct entries in conformity with GAAP and all requirements of law
shall be made of all dealings and transactions in relation to their
businesses and activities. The Borrower and the Guarantor will permit
officers and designated representatives of the Bank to visit and inspect,
under guidance of officers of the Borrower and the Guarantor as applicable,
any of the properties of the Borrower and the Guarantor and to examine the
books of account of the Borrower and the Guarantor and discuss the affairs,
finances and accounts of the Borrower and the Guarantor with, and be
advised as to the same by, its and their officers, as applicable, all at
such reasonable times and intervals and to such reasonable extent as the
Bank may request.
6.3. Maintenance of Property, Insurance. Exhibit D sets
forth a true and complete listing of all material insurance maintained by
the Guarantor and the Borrower as of the date hereof, with the amounts
insured on the date hereof set forth therein. Each of the Borrower and the
Guarantor shall (i) keep all property useful and necessary in their
business in good working order and condition, except for property which has
become obsolete or is no longer useful, (ii) maintain with financially
sound and reputable insurance companies insurance which provides
substantially the same (or greater) coverage and, as to the Borrower,
against at least such risks as are described in Exhibit D, and
(iii) furnish to the Bank, upon written request, full information as to the
insurance carried.
6.4. Corporate Franchises. The Borrower and the Guarantor
will do or cause to be done, all things necessary to preserve and keep in
full force and effect their existence and their material rights,
franchises, licenses and patents; provided, however, that nothing in this
Section 6.4 shall prevent the withdrawal by the Borrower or the Guarantor
of any qualification as a foreign corporation in any jurisdiction where
such withdrawal could not have a material adverse effect on the business,
operations, property, assets, condition (financial or otherwise) or
prospects of the Borrower or the Guarantor and nothing in this Section 6.4
shall prevent the merger of the Borrower into the Guarantor or into a
Consolidated Subsidiary of the Guarantor.
6.5. Compliance with Statutes, etc. The Borrower and the
Guarantor will comply with all applicable statutes, regulations and orders
of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of their businesses and
their ownership of property (including applicable statutes, regulations,
orders and restrictions relating to environmental standards and controls),
except such noncompliances as could not, in the aggregate, have a material
adverse effect on the business, operations, property, assets, condition
(financial or otherwise) or prospects of the Borrower and the Guarantor or
of the Borrower and the Guarantor taken as a whole.
6.6. ERISA. As soon as possible and in any event within 10
days after the Borrower or the Guarantor knows that a Reportable Event has
occurred with respect to a Plan established or maintained by the Borrower,
the Guarantor or any ERISA Affiliate, that a material accumulated funding
deficiency has been incurred or an application is to be or has been made to
the Secretary of the Treasury for a waiver or modification of the minimum
funding standard (including any required installment payments) or an
extension of any amortization period under Section 412 of the Code with
respect to such a Plan, that a Plan has been or will be terminated,
reorganized, petitioned or declared insolvent under Title IV of ERISA in a
manner that has a Material Adverse Effect, that such a Plan has an Unfunded
Current Liability within the meaning of Title IV of ERISA giving rise to a
lien under ERISA, that proceedings will be or have been instituted to
terminate such a Plan under circumstances that will have a Material Adverse
Effect, or that the Borrower or the Guarantor or an ERISA Affiliate will
incur any material liability to or on account of such a Plan under
Section 4062, 4063 or 4064, or which is a multiemployer plan under
Section 515, 4201 or 4203 of ERISA, the Borrower and the Guarantor will
deliver to the Bank a certificate of a financial officer thereof, setting
forth details as to such occurrence and action, if any, which the Borrower,
the Guarantor or ERISA Affiliate is required or proposes to take, together
with any notices required or proposed to be given to or filed with or by
the Borrower, the Guarantor, the ERISA Affiliate, the PBGC, a Plan
participant or the Plan administrator with respect thereto. The Borrower
and the Guarantor will deliver to the Bank a complete copy of the annual
report (Form 5500) of each Plan required to be filed with the Internal
Revenue Service or the PBGC, given to Plan participants or received by
either the Borrower or the Guarantor.
6.7. Performance of Obligations. The Borrower and the
Guarantor will perform all of their obligations under the terms of each
mortgage, indenture, security agreement and other agreement by which they
are bound, except such non-performances as could not in the aggregate, have
a material adverse effect on the business, operations, property, assets,
condition (financial or otherwise) or prospects of the Borrower and the
Guarantor or of the Borrower and the Guarantor taken as a whole.
6.8. Taxes and Liens. The Borrower and the Guarantor will
promptly pay, or cause to be paid, all material taxes, assessments or other
governmental charges which may lawfully be levied or assessed upon the
income or profits of Borrower or the Guarantor or upon any Property, real,
personal or mixed, belonging to Borrower or the Guarantor, or upon any part
thereof, and also any lawful claims for labor, material and supplies which,
if unpaid, might become a lien or charge against any such property;
provided, however, neither Borrower nor the Guarantor shall be required to
pay any such tax, assessment, charge, levy or claim so long as the validity
thereof shall be actively contested in good faith by proper proceedings
and, against which the Borrower or the Guarantor, as the case may be, shall
have established reserves which are in amounts satisfactory to the
Borrower's or the Guarantor's, as the case may be, independent certified
public accountants.
6.9. Payment of Obligations. The Borrower and the
Guarantor will pay, when due, all its material obligations and liabilities,
except where the same (other than Indebtedness) are being contested in good
faith by appropriate proceedings diligently prosecuted and appropriate
reserves for the accrual of same are maintained and, in the case of
judgments, enforcement thereof has been stayed pending such contest.
6.10. Environmental Matters. The Borrower and the
Guarantor will obtain and maintain all licenses, permits, and approvals
required in connection with the Project with respect to Hazardous Materials
(which shall mean all materials defined as "hazardous substances,"
"hazardous waste" or "solid waste" in the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, the Resource
Conservation and Recovery Act or any similar environmental statute) and the
Borrower or the Guarantor, as applicable, will remain in full compliance
with such licenses, permits and approvals, except to the extent that
failure to so comply would not have a Material Adverse Effect. The
Borrower and the Guarantor will give the Bank copies of any citations,
orders, notices or other communications received with respect to violations
or alleged violations of any environmental laws in connection with the
Project if such violation or alleged violation is likely to have a Material
Adverse Effect. The Borrower and the Guarantor shall indemnify and hold
the Bank and its directors, officers, shareholders and employees harmless
from and against any and all damages, penalties, fines, claims, liens,
suits, liabilities, costs (including clean-up costs) judgments and expenses
(including attorneys', consultants' or experts' fees and expenses) of every
kind and nature suffered by or asserted against the Bank as a direct or
indirect result of any warranty or representation made by the Borrower and
the Guarantor in this Section 6.11 being false or untrue in any material
respect or any requirement under any environmental law, which requires the
elimination or removal of any Hazardous Materials at the Project Site by
the Bank, the Borrower, the Guarantor or any transferee of the Borrower,
the Guarantor or the Bank, except to the extent that any such damages,
penalties, fines, claims, liens, suits, liabilities, costs, judgments, or
expenses result directly or indirectly from the actions of the Bank or any
of its directors, officers, shareholders or employees.
ARTICLE VII
Negative Covenants
Until all the Obligations to be performed and paid shall
have been performed and paid in full, and for so long as the Letter of
Credit shall be outstanding, unless the Bank shall otherwise consent in
writing, the Borrower and the Guarantor covenant and agree as follows:
7.1. Negative Pledge; Liens. The Borrower and the
Guarantor will not create, incur, assume or suffer to exist any Lien upon
or with respect to any property or assets (real or personal, tangible or
intangible) constituting the Project or sell any such property or assets
subject to an understanding or agreement, contingent or otherwise, to
repurchase such property or assets (including sales of accounts receivable
with recourse to the Borrower or any of the Guarantor), or assign any right
to receive income or permit the filing of any financing statement under the
Uniform Commercial Code of any state or any other similar notice of Lien
under any similar recording or notice statute; provided that the provisions
of this Section 7.1 shall not prevent the creation, incurrence, assumption
or existence of:
(i) Liens in favor of the Bank;
(ii) Liens for taxes not yet due, or Liens for
taxes being contested in good faith and by appropriate
proceedings for which adequate reserves have been
established;
(iii) Except as hereinafter set forth, Liens in
respect of property or assets of the Borrower or the
Guarantor imposed by law, which were incurred in the
ordinary course of business, such as carriers',
warehousemen's and mechanics' liens and other similar
Liens arising in the ordinary course of business, not
to exceed $10,000,000 in the aggregate, and (x) which
do not in the aggregate materially detract from the
value of such property or assets or materially impair
the use thereof in the operation of the business of the
Borrower or the Guarantor or (y) which are being
contested in good faith by appropriate proceedings,
which proceedings have the effect of preventing the
forfeiture or sale of the property or assets subject to
any such Lien;
(iv) Liens in existence on the date hereof which
are listed, and the property subject thereto described
in Exhibit C, with an indication therein that such
Liens are "Permitted Liens" hereunder, provided that if
in Exhibit C any Lien is listed as being a Permitted
Lien only for a designated time period, such Lien shall
cease to be a Permitted Lien after the expiration of
such time period;
(v) Permitted Encumbrances;
(vi) Liens created pursuant to the Security
Instruments; and
(vii) Utility deposits and pledges or deposits in
connection with worker's compensation, unemployment
insurance and other social security legislation;
7.2. Consolidation or Merger. The Guarantor will not enter
into any transaction of merger or consolidation, except for mergers in
which the Guarantor is the surviving entity.
7.3. Sale of Assets, Dissolution, Etc. Subject to Section
7.2 hereof, the Guarantor will not (a) transfer, sell, assign, lease or
otherwise dispose of properties or assets including notes, franchises or
contract rights, or any stock (valued at book value) or any Indebtedness of
any Subsidiary in any fiscal year which taken together have an aggregate
book value in excess of thirty percent (30%) of Consolidated Net Worth,
except in the ordinary course of business, or (b) change the nature of its
business, or wind up, liquidate or dissolve, or agree to do any of the
foregoing.
7.4. Loans and Investments. The Guarantor will not make or
permit to remain outstanding any loan or advance to, or own, purchase or
acquire any stock or securities of, or any interest in, or make any capital
contribution to or investment in, any other Person, except that the
Guarantor or any Subsidiary may
(i) make or permit to remain outstanding loans,
advances and capital contributions to and investments in,
and acquire any stock or securities of any wholly-owned
Subsidiary;
(ii) own, purchase or acquire (a) Government
Obligations (as defined in the Indenture), (b) deposit
accounts with and certificates of deposit of commercial
banks with a capital and surplus in excess of Fifty Million
Dollars ($50,000,000), (c) banker's acceptances drawn on or
accepted by commercial banks with a capital and surplus in
excess of Fifty Million Dollars ($50,000,000), (d)
repurchase agreements secured by
obligations of the type specified
in (a) above due not more than one
year from the date of acquisition
thereof, and (e) commercial paper
rated A-2 or better by Moody's and
variable rate preferred stock rated
A or better by Standard & Poor's;
(iii) acquire any amount of stock or securities of, or
any interest in, or make any capital contribution to or
investment in, any other Person in connection with an
acquisition of more than 50% of the voting stock of or other
controlling interest in such Person provided the acquired
Person becomes a Subsidiary of the Guarantor included in the
Guarantor's balance sheet as a Consolidated Subsidiary;
(iv) make loans and advances to employees of the
Guarantor and its Subsidiaries in the ordinary course of
business; and
(v) make or permit to remain outstanding other loans
and advances to, and purchase and acquire stock and
securities of, and make capital contributions to or
investments in other Persons (including without limitation
Persons which are not Subsidiaries of the Guarantor), in an
aggregate amount not to exceed forty percent (40%) of
Consolidated Net Worth.
7.5. Consolidated Total Liabilities to Consolidated
Tangible Net Worth. The Guarantor will not at any time permit the ratio of
its Consolidated Total Liabilities to its Consolidated Tangible Net Worth
to be greater than 1.25 to 1.0.
7.6. Coverage Ratio. The Guarantor will not at any time
permit the ratio of EBIT for any period of four consecutive fiscal quarters
to Interest Expense, for the same period, to be less than 2.50 to 1.0.
7.7. Current Ratio. The Guarantor will not permit the
ratio of Consolidated Current Assets to Consolidated Current Liabilities,
at any time, to be less than 2.50 to 1.0.
7.8. Consolidated Net Worth. The Guarantor will not permit
Consolidated Net Worth to be less than $250,000,000 at December 31, 1993 or
such higher amount as hereinafter set forth. The Consolidated Net Worth of
the Guarantor shall increase quarterly, beginning with the fiscal quarter
ended December 31, 1993, by an amount equal to 50% of the Consolidated Net
Income (if positive) of the Guarantor for such fiscal quarter.
ARTICLE VIII
Conditions to Issuance of Letter of Credit
8.1. Conditions of Issuance. On or prior to the date of
issuance of the Letter of Credit, the Borrower and the Guarantor shall have
furnished to the Bank, in form satisfactory to the Bank, the following:
(a) two executed counterparts of this Agreement and
executed counterparts of each of the Security
Instruments;
(b) executed counterparts of each of the Bond
Documents (except for the Bonds, as to which a
specimen copy may be furnished);
(c) evidence of compliance with the insurance
requirements contained in Article VI hereof;
(d) an opinion dated the date hereof addressed to, and
in form and substance acceptable to, the Bank from
the Issuer's counsel, as to such matters as the
Bank may require;
(e) opinion(s) of counsel for the Borrower and the
Guarantor dated the date hereof addressed to, and
substantially in the form attached hereto as
Exhibit E and otherwise in form and substance
acceptable to, the Bank;
(f) certificates of the Borrower and the Guarantor, as
applicable, including references to (i) Articles
of Incorporation, By-laws and other charter
documents as applicable, (ii) resolutions of the
Board of Directors, authorizing the execution,
delivery and performance of the appropriate Bond
Documents, this Agreement and the Security
Instruments to which the Borrower or the
Guarantor, as the case may be, is a party,
(iii) incumbency and specimen signatures of
officers, and (iv) such other matters as the Bank
may require;
(g) (a) copies of the Articles of Incorporation, By-
laws or other charter documents, as applicable, of
the Guarantor, certified as true and correct by an
authorized officer as of the date of issuance of
the Bonds; and (b) as to any corporations,
certificates dated no earlier than 20 days prior
to the date of issuance of the Bonds of the
Secretary of State of the applicable states as to
the good standing of the Borrower and the
Guarantor;
(h) an opinion of Bond Counsel, in substantially the
form of Exhibit F hereto in form and substance
satisfactory to the Bank and its counsel, and as
to such other matters as the Bank may reasonably
request;
(i) copies of all governmental approvals required in
connection with this transaction, including the
resolution of the Issuer authorizing the
authentication and issuance of the Bonds;
(j) evidence of payment to the Bank of the commission
pursuant to Section 4.4 of this Agreement;
(k) such other documents, instruments and
certifications as the Bank may reasonably require.
8.2 Additional Conditions Precedent to Issuance of the
Letter of Credit. (a) The obligation of the Bank to issue the Letter of
Credit shall be subject to the further conditions precedent that on the
date of issuance the following statements shall be true and the Bank shall
have received a certificate signed by the Chief Financial Officer or
Controller of the Borrower and by the Guarantor, dated the date of
issuance, stating that:
(i) The representations and warranties contained in
Article II and Article III of this Agreement, Section 5 of
the Pledge Agreement Section 2.2 of the Sale Agreement are
correct on and as of the date of issuance of the Letter of
Credit as though made on and as of such date; and
(ii) No event has occurred or would result from the
issuance of the Letter of Credit, which constitutes an Event
of Default or would constitute an Event of Default but for
the requirement that notice be given or time elapse or both;
and (b) there shall have been no introduction of or change in, or in the
interpretation of, any law or regulation that would make it unlawful or
unduly burdensome for the Bank to issue the Letter of Credit, no outbreak
or escalation of hostilities or other calamity or crisis, no suspension of
or material limitation on trading on the New York Stock Exchange or any
other national securities exchange, no declaration of a general banking
moratorium by United States or North Carolina banking authorities, and no
establishment of any new restrictions on transactions in securities or on
banks materially affecting the free market for securities or the extension
of credit by banks.
8.3. Conditions Precedent to Each Tender Advance. Each
payment made by the Bank under the Letter of Credit pursuant to a Tender
Draft shall constitute a Tender Advance hereunder only if on the date of
such payment no event has occurred or would result from such Tender
Advance, which constitutes an Event of Default or would constitute an Event
of Default but for the requirement that notice be given or time elapse or
both.
Unless the Borrower or the Guarantor shall have previously advised the Bank
in writing or the Bank has actual knowledge that the above statement is no
longer true, the Borrower and the Guarantor shall be deemed to have
represented and warranted, on the date of payment by the Bank under the
Letter of Credit pursuant to a Tender Draft, that on the date of such
payment the above statement is true and correct.
ARTICLE IX
Default
9.1. Events of Default. Each of the following shall
constitute an Event of Default under this Agreement, whereupon all
obligations, whether then owing or contingently owing, will, at the option
of the Bank or its successors or assigns, immediately become due and
payable by the Borrower without presentation, demand, protest or notice of
any kind, all of which are hereby expressly waived, and the Borrower will
pay the reasonable attorneys' fees incurred by the Bank, or its successors
or assigns, in connection with such Event of Default:
(a) Failure of the Borrower or the Guarantor to pay
within five (5) days of the date when due any payment of
principal, interest, commission, charge or expense referred
to in Article IV hereof; or
(b) The occurrence of an "Event of Default" under any
of the Security Instruments or any of the Bond Documents; or
(c) If the Borrower or the Guarantor default in the
payment of principal when due, whether by acceleration or
otherwise, or interest on any other Indebtedness in excess
of $15 million beyond any period of grace provided with
respect thereto, or in the performance of any other
agreement, term or condition contained in any agreement
under which any such obligation is created, if the effect of
such default is to cause, or permit the holder or holders of
such obligation (or a trustee for such holder or holders) to
cause, such obligation to become due prior to its stated
maturity; or
(d) If any representation, warranty, certification or
statement made by the Borrower or the Guarantor herein, or
in any writing furnished by or on behalf of the Borrower or
any of the Guarantor in connection with the loan by the
Issuer under the Sale Agreement or pursuant to this
Agreement, or any of the Security Instruments shall have
been false, misleading or incomplete in any material respect
on the date as of which made; or
(e) If the Borrower or the Guarantor default in the
performance or observance of any agreement or covenant
contained in Article VII hereof; or
(f) If the Borrower or the Guarantor default in the
performance or observance of any other agreement, covenant,
term or condition contained herein, and such default shall
not have been remedied thirty (30) days after written notice
thereof shall have been received by it from the Bank; or
(g) The Borrower or the Guarantor shall make an
assignment for the benefit of creditors, file a petition in
bankruptcy, have entered against or in favor of it an order
for relief under the Federal Bankruptcy Code or similar law
of any foreign jurisdiction, generally fail to pay its debts
as they come due (either as to number or amount), admit in
writing its inability to pay its debts generally as they
mature, make a voluntary assignment for the benefit of
creditors, commence any voluntary assignment for the benefit
of creditors, commence any proceeding relating to it under
any reorganization, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect, or by any
act, indicate its consent to, approval of or acquiescence in
any such proceeding for the appointment of any receiver of,
or trustee or custodian (as defined in the Federal
Bankruptcy Code) for itself, or any substantial part of its
property, or a trustee or a receiver shall be appointed for
the Borrower or for a substantial part of the property of
the Borrower or the Guarantor and such appointment remains
in effect for more than sixty (60) days, or a petition in
bankruptcy or for reorganization shall be filed against the
Borrower or the Guarantor and such petition shall not be
dismissed within sixty (60) days after such filing;
(h) If a final judgment, which with other outstanding
final judgments against the Borrower or the Guarantor
exceeds an aggregate of Eight Million Dollars ($8,000,000),
in excess of insurance, shall be rendered against the
Borrower or the Guarantor and if within 30 days after entry
thereof such judgment shall not have been discharged or
execution thereof stayed pending appeal, or if within 30
days after the expiration of any such stay such judgment
shall not have been discharged;
then at any time thereafter, the Bank may (a) pursuant to Section 902 of
the Indenture, advise the Trustee that an Event of Default has occurred and
instruct the Trustee to declare the principal of all Bonds then outstanding
and interest thereon to be immediately due and payable, and (b) proceed
hereunder, and under the Security Instruments and, to the extent therein
provided, under the Bond Documents, in such order as it may elect and the
Bank shall have no obligation to proceed against any Person or exhaust any
other remedy or remedies which it may have and without resorting to any
other security, whether held by or available to the Bank.
9.2. No Remedy Exclusive. No remedy herein conferred upon
or reserved to the Bank is intended to be exclusive of any other available
remedy or remedies, but each and every such remedy shall be cumulative and
shall be in addition to every other remedy given hereunder and the Security
Instruments or now or hereafter existing at law or in equity or by statute.
ARTICLE X
Miscellaneous
10.1. Indemnification. (a) Each of the Borrower and the
Guarantor, jointly and severally, hereby indemnifies and holds the Bank
harmless from and against any and all claims, damages, losses, liabilities,
costs or expenses whatsoever which the Bank may incur (or which may be
claimed against the Bank by any Person) (i) by reason of or in connection
with the execution and delivery or transfer of, or payment or failure to
pay under, the Letter of Credit, provided that the Borrower and the
Guarantor shall not be required to indemnify the Bank for any claims,
damages, losses, liabilities, costs or expenses to the extent, but only to
the extent, caused by (a) the gross negligence or willful misconduct of the
Bank in connection with paying drafts presented under the Letter of Credit
or (b) the Bank's willful failure to pay under the Letter of Credit (other
than in connection with a court order) after the presentation to it by the
Trustee or a successor corporate fiduciary under the Indenture of a sight
draft and certificate strictly complying with the terms and conditions of
the Letter of Credit or (c) any other failure of the Bank to conform to the
Uniform Customs and Practice; or (ii) by reason of or in connection with
the execution, delivery or performance of any of this Agreement, the
Security Instruments or any transaction contemplated by any thereof.
(b) Each of the Borrower and the Guarantor, jointly and
severally, hereby indemnifies and holds the Bank harmless from and against
any and all damages, penalties, fines, claims, liens, suits, liabilities,
costs (including clean-up costs), judgments and expenses (including
attorneys', consultants' or experts' fees and expenses) of every kind and
nature suffered by or asserted against the Bank as a direct or indirect
result of any warranty or representation made by the Borrower and the
Guarantor in Sections 2.11 hereof, respectively, being false or untrue in
any material respect or any requirement under any law, regulation or
ordinance, local, state, or federal, which requires the elimination or
removal of any hazardous materials, substances, wastes or other
environmentally regulated substances at the Project Site, except to the
extent that any such damages, penalties, fines, claims, liens, suits,
liabilities, costs, judgments or expenses result directly or indirectly
from the actions of the Bank or any of its directors, officers,
shareholders or employees. The Borrower's and the Guarantor's obligations
hereunder to the Bank shall not be limited to any extent by the term of
this Agreement, and, as to any act or occurrence prior to the termination
of this Agreement which gives rise to liability hereunder, shall continue,
survive and remain in full force and effect notwithstanding the termination
of the Bank's obligations hereunder.
Anything herein to the contrary notwithstanding, nothing in this
Section 10.1 is intended or shall be construed to limit the Borrower's
reimbursement obligation or the Guarantor's guaranty obligation contained
in Article IV hereof. Without prejudice to the survival of any other
obligation of the Borrower or the Guarantor, the indemnities and
obligations of the Borrower and the Guarantor contained in this
Section 10.1 shall survive the payment in full of amounts payable pursuant
to Article IV and the Termination Date.
10.2. Transfer of Letter of Credit. The Letter of Credit
may be transferred and assigned in accordance with the terms of the Letter
of Credit.
10.3. Reduction of Letter of Credit. (a) The Letter of
Credit is subject to reduction pursuant to its terms.
(b) If the amount available to be drawn under the
Letter of Credit shall be permanently reduced in accordance with the terms
thereof, then the Bank shall have the right to require the Trustee to
surrender the Letter of Credit to the Bank and to issue on such date, in
substitution for such outstanding Letter of Credit, a substitute
irrevocable letter of credit, substantially in the form of the Letter of
Credit but with such changes therein as shall be appropriate to give effect
to such reduction, dated such date, for the amount to which the amount
available to be drawn under the Letter of Credit shall have been reduced.
10.4. Liability of the Bank. Neither the Bank nor any of
its officers, directors, employees, agents or consultants shall be liable
or responsible for:
(a) the use which may be made of the Letter of Credit
or for any acts or omissions of the Trustee or any
beneficiary or transferee in connection therewith;
(b) the validity, sufficiency or genuineness of
documents, or of any endorsement(s) thereon, even if such
documents should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged;
(c) payment by the Bank against presentation of
documents which do not comply with the terms of the Letter
of Credit, including failure of any documents to bear any
reference or adequate reference to the Letter of Credit; or
(d) any other circumstances whatsoever in any way
related to the making or failure to make payment under the
Letter of Credit;
except only that the Borrower and the Guarantor shall have a claim against
the Bank, and the Bank shall be liable to the Borrower and the Guarantor,
to the extent but only to the extent, of any direct, as opposed to
consequential, damages suffered by the Borrower or the Guarantor which were
caused by (i) the gross negligence or willful misconduct of the Bank in
determining whether documents presented under the Letter of Credit complied
with the terms of the Letter of Credit or (ii) wrongful failure of the Bank
to pay under the Letter of Credit after the presentation to it by the
Trustee or a successor trustee under the Indenture of a sight draft and
certificate strictly complying with the terms and conditions of the Letter
of Credit or (iii) any other failure of the Bank to conform to the
requirements of the Uniform Customs and Practice. In furtherance and not
in limitation of the foregoing, the Bank may accept documents that appear
on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary.
10.5. Successors and Assigns. This Agreement shall be
binding upon the Borrower, the Guarantor and the Bank, their respective
successors and assigns and all rights against the Borrower or the Guarantor
arising under this Agreement shall be for the sole benefit of the Bank, its
successors and assigns, all of whom shall be entitled to enforce
performance and observance of this Agreement to the same extent as if they
were parties hereto.
10.6. Notices. All notices, requests and demands to or
upon the respective parties hereto shall be deemed to have been given or
made when hand delivered or mailed first class, certified or registered
mail, postage prepaid, or by overnight courier service, addressed as
follows or to such other address as the parties hereto shall have been
notified pursuant to this Section 10.6:
The Bank: The First Union National Bank
of North Carolina
Two First Union Center, 7th Floor
Charlotte, North Carolina 28288-0742
Attention: International Operations
with a copy to: The First Union National Bank
of North Carolina
One First Union Plaza, 19th Floor
Charlotte, North Carolina 28288
Attention: Capital Markets
The Borrower: Spence Engineering Company, Inc.
c/o Watts Regulator Co.
815 Chestnut Street
North Andover, Massachusetts 01845
Attention: Corporate Controller
The Guarantor: Watts Industries, Inc.
Route 114 and Chestnut Street
North Andover, MA 01845
except in cases where it is expressly herein provided that such notice,
request or demand is not effective until received by the party to whom it
is addressed, in which event said notice, request or demand shall be
effective only upon receipt by the addressee.
10.7 Amendment. This Agreement may be amended, modified or
discharged only upon an agreement in writing of the Borrower, the Guarantor
and the Bank.
10.8. Effect of Delay and Waivers. No delay or omission to
exercise any right or power accruing upon any default, omission or failure
of performance hereunder shall impair any such right or power or shall be
construed to be a waiver thereof, but any such right and power may be
exercised from time to time and as often as may be deemed expedient. In
order to entitle the Bank to exercise any remedy now or hereafter existing
at law or in equity or by statute, it shall not be necessary to give any
notice, other than such notice as may be herein expressly required. In the
event any provision contained in this Agreement should be breached by any
party and thereafter waived by the other party so empowered to act, such
waiver shall be limited to the particular breach hereunder. No waiver,
amendment, release or modification of this Agreement shall be established
by conduct, custom or course of dealing, but solely by an instrument in
writing duly executed by the parties thereunto duly authorized by this
Agreement.
10.9. Counterparts. This Agreement may be executed
simultaneously in several counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
10.10. Severability. The invalidity or unenforceability of
any one or more phrases, sentences, clauses or Sections contained in this
Agreement shall not affect the validity or enforceability of the remaining
portions of this Agreement, or any part thereof.
10.11. Cost of Collection. Each of the Borrower and the
Guarantor shall be liable for the payment of all reasonable fees and
expenses, including reasonable attorneys' fees (computed without regard to
any statutory presumption), incurred in connection with the enforcement of
this Agreement.
10.12. Set Off. Upon the occurrence of an Event of Default
hereunder, the Bank is hereby authorized, without notice to the Borrower or
the Guarantor, to set off, appropriate and apply any and all monies,
securities and other properties of the Borrower or the Guarantor hereafter
held or received by or in transit to the Bank from or for the Borrower or
the Guarantor, against the obligations of the Borrower or the Guarantor
irrespective of whether the Bank shall have made any demand hereunder or
any other Credit Security Instrument under and although such obligations
may be contingent or unmatured.
10.13. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York. The
Guarantor hereby acknowledge that the Letter of Credit shall be governed by
and construed in accordance with Uniform Customs and Practice.
10.14. References. The words "herein", "hereof",
"hereunder" and other words of similar import when used in this Agreement
refer to this Agreement as a whole, and not to any particular article,
section or subsection.
10.15. Consent to Jurisdiction, Venue. In the event that
any action, suit or other proceeding is brought against the Borrower or the
Guarantor by or on behalf of the Bank to enforce the observance or
performance of any of the provisions of this Agreement or of any of the
Security Instruments, including without limitation the collection of any
amounts owing thereunder, each of the Borrower and the Guarantor hereby
(i) irrevocably consents to the exercise of jurisdiction over the Borrower
and the Guarantor and to the extent permitted by applicable laws, their
property, by the United States District Court, Southern District of North
Carolina, and by Supreme Court of North Carolina or the State Court and
(ii) irrevocably waives any objection it might now or hereafter have or
assert to the venue of any such proceeding in any court described in
clause (i) above.
IN WITNESS WHEREOF, the Borrower, the Guarantor and the Bank
have caused this Agreement to be executed in their respective names, as a
sealed instrument all as of the date first above written.
THE BORROWER:
SPENCE ENGINEERING COMPANY, INC.
By: /s/ William C. McCartney
-------------------------
Title: Assistant Treasurer
THE GUARANTOR:
WATTS INDUSTRIES, INC.
By: /s/ Kenneth J. McAvoy
-----------------------
Title: Vice President of Finance
THE BANK:
THE FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By: /s/ Douglas Shaw
--------------------------
Title: AVP
ATTEST:
/s/ (Signature)
_______________________
Title: Ass't Sec'ty
(Corporate Seal)